Looking for Gains Right Now? Crypto Isn’t the Trade — This Is: Bits + Bips

In the current financial landscape, a peculiar anomaly has emerged: traditional assets like gold and equities are seeing massive volatility and rallies, while the historically volatile cryptocurrency market remains surprisingly rangebound. For investors accustomed to crypto being the wildest trade in the room, this role reversal is both confusing and frustrating. To navigate this shifting terrain, Steve Erlic sat down with Aenni Gyo, CEO and founder of the crypto market maker Winter, to discuss market structure, liquidity, and where the "smart money" is actually flowing in 2025.

Gyo’s firm, which operates across centralized exchanges, DeFi protocols, and OTC desks, offers a unique vantage point on global liquidity. From the collapse of the meme coin frenzy to the rise of tokenized real-world assets (RWAs), the data suggests a fundamental maturation in how market participants are positioning themselves. This analysis explores the flight to quality, the hidden risks in prediction markets, and the outlook for regulatory frameworks in the coming year.

Key Takeaways

• Flight to Quality: Retail investors have largely abandoned long-tail altcoins and meme coins in favor of mega-caps like Bitcoin, Ethereum, and stablecoins following significant losses in speculative assets.
• Rise of Tokenized Commodities: With Bitcoin trading sideways, volume is shifting toward tokenized gold and equity derivatives, though weekend trading of these assets carries unique liquidity risks.
• Prediction Market Hazards: While popular, prediction markets pose severe risks for market makers due to information asymmetry and potential insider trading, which can deter deep liquidity provision.
• Derivatives Maturity: There is a distinct geographical split in derivatives usage, with Western markets employing sophisticated hedging strategies and Asian markets focusing on yield generation.
• Regulatory Outlook: The comprehensive market structure bill is unlikely to pass this year, but a shift in market "mindshare" back to crypto is expected by mid-year as other sectors cool off.

The Great Rotation: From Meme Coins to Mega Caps

One of the most defining trends of the past year has been the decoupling of "altcoin season" from the broader market performance. According to Gyo’s data, capital is no longer flowing freely into long-tail assets. Instead, there has been a decisive "flight to quality." This shift was precipitated by a saturation of new token issuances—specifically meme coins—which diluted retail capital to the point of unsustainability.

The Retail Exhaustion Point

The proliferation of platforms allowing instant token creation led to a market environment where retail traders were effectively gambling against venture capital unlocks and insider allocations. When retail investors realized they were entering trades too late to capture value, they pivoted to meme coins in hopes of early entry. However, the sheer volume of assets created a fragmented liquidity landscape where few could win.

"It became the same amount of retail money competing for millions and millions of meme coins... the capital became very diluted. It inevitably resulted in a market crash where both retail and liquid funds lost a lot of money because the system was too leveraged but the liquidity was too thin."

Post-crash, the behavior of the average crypto trader has changed. Rather than chasing the next 100x micro-cap, liquidity has consolidated into Bitcoin, Ethereum, Solana, and stablecoins. This consolidation has made the market more robust at the top end but has left the long tail of altcoins struggling for volume and relevance.

Tokenized Assets and the Search for Yield

With crypto-native assets trading in a tight range, traders are increasingly looking outward. This has fueled a surge in tokenized real-world assets (RWAs), specifically gold and equity derivatives. The narrative has flipped: where investors once looked to crypto for uncorrelated gains, they are now bringing traditional assets on-chain to capture the volatility lacking in digital assets.

The Risks of Weekend Trading

A burgeoning sector within this trend is tokenized equities—trading assets like Nvidia or Tesla on the blockchain. While this promises 24/7 access, it introduces significant "gap risk." Traditional stock markets close on weekends, meaning news that breaks on a Saturday cannot be hedged against the underlying asset until Monday morning.

For market makers, this creates a dangerous information asymmetry. If a geopolitical event or a corporate announcement occurs while the Nasdaq is closed, astute traders can arbitrage stale quotes on-chain before market makers can adjust their models. Consequently, liquidity for tokenized equities is often thinner during weekends to protect against these exploits.

"If you are just quoting Nvidia by trade on Friday evening and you ignore the news... you have an asymmetry of information and you can get exploited. I wouldn't expect there to be a lot of liquidity during the weekend in those tickers for quite some time."

The Hidden Dangers of Prediction Markets

Prediction markets like PolyMarket have exploded in popularity, allowing users to bet on real-world outcomes ranging from elections to sports. However, Gyo highlights a structural flaw that often goes unnoticed by retail participants: the presence of insider information.

In traditional finance, insider trading laws and surveillance are robust. In decentralized prediction markets, especially those without KYC (Know Your Customer) requirements, the risk of a participant trading on non-public material information is high. This dynamic creates a "Market Maker's Dilemma."

The Liquidity Trap

If a market maker provides deep liquidity on a prediction market, they effectively incentivize insiders to trade larger sizes. If an insider knows the outcome of an event with certainty, they will drain the liquidity provided by the market maker. This results in a scenario where providing honest liquidity is mathematically unprofitable.

Because of this, sophisticated market makers are becoming highly selective about which prediction pools they support. They are wary of markets where the outcome can be known by a select few before the public, as being on the other side of that trade is a guaranteed loss.

Derivatives: A Tale of Two Geographies

The derivatives market continues to mature, but usage patterns vary significantly by region. The divergence between Western and Asian trading behaviors highlights the different stages of market adoption globally.

• Western Markets: Institutional sophistication is driving the adoption of complex options strategies. Traders are using these instruments for hedging and structural yield enhancement, similar to traditional finance workflows.
• Asian Markets: The focus remains heavily on yield generation and leverage. While interest in options is growing, the dominant instrument for retail remains the perpetual swap (perp), utilized primarily for speculative leverage rather than hedging.

Despite the growth in options, perpetual swaps remain the "product of choice" for retail crypto traders globally due to their simplicity and direct exposure to price movements without the complexities of expiration dates and theta decay.

Market Outlook: Regulation and Mindshare

Looking ahead, the intersection of politics and market structure remains a critical variable. The industry is closely watching the potential passage of a market structure bill, though expectations for near-term success are tempered.

The Legislative Stall

Gyo predicts that major market structure legislation is unlikely to pass in the current year, largely due to the political gridlock associated with election cycles and midterms. However, the current regulatory environment at the SEC and CFTC is viewed as relatively stable, providing a safety net even in the absence of new laws.

The greater risk lies in the future: if administration changes occur without a legislative framework in place, the industry could face renewed regulatory hostility. Securing a bill would act as a constraining factor on future regulators, regardless of their political stance.

The Cycle of Attention

Ultimately, the cure for the current crypto stagnation may simply be the rotation of "mindshare." Markets operate in cycles of attention. Currently, commodities (gold/silver) and AI equities are commanding the spotlight. However, history suggests that attention spans are finite.

As the euphoria around these sectors cools, capital is likely to rotate back into digital assets. The expectation is not if, but when. If Bitcoin remains rangebound for another extended period, it paradoxically becomes more attractive as a value play relative to overheated traditional assets. The catalyst for the next bull run may not be a technological breakthrough, but simply the market's inevitable return to underpriced volatility.

Conclusion

The crypto market is currently in a transitional phase, marked by a flight to quality and the integration of traditional financial assets on-chain. While the explosive gains of the past are currently found in gold and equities rather than altcoins, the infrastructure for the next cycle is being built through deeper derivatives markets and RWA integration. For investors, patience and a focus on liquidity and fundamentals—rather than chasing the latest meme coin—appear to be the prudent strategy for 2025.