Web3 Investor Briefing | December 2025

Welcome to this month’s investor briefing featuring our latest analysis, findings, and strategic insights from the Web3 ecosystem.

TL;DR:

• Julius from w3.wave talks about Bitcoin’s recent sell-off and it’s potential signal structural shifts and revisits how investors should think about valuing blockchains in a maturing market.

• Henrik from w3.ventures explores how prediction markets are becoming core infrastructure for truth discovery, driven by regulatory clarity and Web3-enabled transparency.

Market Reflections

A structural sell-off or just “4-year cycle” profit taking?

The recent price action in crypto markets, particularly the sharp sell-off in Bitcoin, in November has sparked renewed debate about whether this is a standard 4-year cycle correction or a reflection of deeper, more structural shifts in the market.

The 4-year halving cycle has long been a narrative backbone for Bitcoin investors and while this framework has broadly held up over the past decade, it has also turned into a self-fulfilling prophecy, as market participants anticipate the end of a cycle.

However, we do not want to discuss if this cycle logic makes sense going forward in today’s newsletter, but rather focus on a question that came to mind while we were seeing massive selling for multiple weeks in November: is this is just the regular profit taking from cycle “believers” accompanied by late buyers panicking, or can we point to other real structural reasons behind the market’s fragility, which deserve more attention.

Interestingly, several things have changed this year, that could explain sustained selling and a change in the holder base of Bitcoin:

• Quantum Computing Concerns: Recent developments in quantum computing have sparked serious conversations within the broader crypto community. While a network upgrade to ensure quantum resilience is not yet urgent, the writing is on the wall. Such a change would require broad consensus and could challenge Bitcoin’s developers to find social consensus, something they have been historically very bad at.

• Cultural Shift and Institutionalization: Wall Street’s growing influence over Bitcoin (via ETFs, structured products, and public company treasuries) is a major break from the original ethos of Bitcoin as a hedge against the traditional financial system. Some early investors, especially those with cypherpunk leanings, are likely re-evaluating their long-term thesis as the asset is increasingly co-opted by the very institutions it once sought to replace.

• Political Fractures and Power Dynamics: The politicization of Bitcoin, especially in the U.S., where the Trump family has publicly aligned itself with crypto, is another new layer of complexity. Whether one views this as bullish or troubling, it undoubtedly represents a shift in who controls the narrative and potentially the direction of the network.

These developments could point to something more than short-term derisking. Unlike cycle-based sellers who will return once price or time invalidates their thesis, structural sellers are harder to bring back. They are exiting not because of volatility, but because of a perceived change in what Bitcoin is.

The Strategy Conundrum

Has MicroStrategy opened Pandora’s box?

For years, Michael Saylor has been one of Bitcoin’s most visible champions. His ultra-bullish stance, capped off by his now infamous “There is no second best” speech, positioned Strategy (formerly MicroStrategy) as a publicly traded proxy for Bitcoin itself.

But last week, Strategy made a surprising announcement: If the company trades at a discount to its net asset value (mNAV < 1), it is prepared to sell Bitcoin to fund a newly created USD reserve. This came as a shock to many, given Saylor’s repeated statements that the company would never sell.

To understand this shift, we need to look at how Strategy changed its financing model. Up until 2024, the company raised capital by issuing equity. In 2024, however, it switched to issuing convertible notes, which come with fixed interest obligations. These obligations now total hundreds of millions in interest payments over the coming years.

This means Strategy is no longer insulated from Bitcoin price volatility. It has recurring financing needs, and the ability to meet them depends on market conditions — particularly the value of its BTC holdings.

To manage this, the company has built a USD reserve intended to cover at least two years of interest payments, so it is very unlikely we will see any selling of coins in the nearterm. But this situation marks a psychological shift: one of the most vocal “never sellers” now has an official mechanism for doing just that.

Valuing Blockchains: Still a Casino or the Future of Finance?

The crypto soul-searching continues

As the market cools and speculative momentum fades, the industry is once again asking the difficult question: What are these things actually worth?

A recent debate between crypto VC Haseeb Qureshi and investor Santiago Santos captured the current split in thinking around Layer 1 blockchain valuations, particularly Ethereum.

At its core, the argument centers around whether blockchains like Ethereum are being valued like businesses, or like foundational infrastructure:

The Bull Case: Blockchains as Exponential Platforms

1. You can’t apply traditional metrics to exponential technologies.

Haseeb argues that using classic valuation models like price-to-sales (P/S) ratios misunderstands what blockchains are. Ethereum may look expensive at ~380x P/S (vs. ~28x for Amazon at the dot-com peak), but that’s the wrong lens. Instead, Ethereum should be viewed like the underlying infrastructure of an entirely new financial internet, and valuing that based on today’s transaction fees misses the point.

2. Blockchains are like digital nations, not companies.

This analogy shifts the valuation lens: early-stage nations (or networks) intentionally suppress revenue (i.e., keep fees low) to bootstrap growth. Ethereum isn’t trying to maximize profit — it’s building a base-layer economy. The bull case sees massive long-term value accrual once this digital nation matures and becomes the default settlement layer for meaningful economic activity.

3. Speculation is just the onboarding phase.

From this view, crypto’s “casino phase” is not a flaw but a feature, a stress test for blockchains. The infrastructure has proven it can handle global-scale throughput and volatility. Now, it’s ready for real-world use cases to migrate on-chain. Speculation is simply how early users arrive and how liquidity forms. The real activity comes next.

The Bear Case: Blockchains Are Overvalued Infrastructure

1. Crypto revenues don’t justify the valuations.

Santiago’s key argument is simple: revenue matters. Ethereum generates ~$1B in annual fees. At a $380B valuation, it trades at 380x P/S, which is hard to justify even with exponential expectations. In his view, this is reminiscent of the dot-com bubble, and valuations need to reset before sustainable growth can begin.

2. The value is leaking to the application layer.

Santiago points out that while Ethereum holds 90%+ of L1 market cap, it captures only ~12% of total crypto fees. In contrast, DeFi protocols generate ~73% of fees but are under 10% of the total valuation. His point: the value is increasingly accruing above the base layer — and that’s where investors should be focused.

3. On-chain activity is still just gambling.

Much of today’s crypto usage, trading, memecoins, leveraged speculation, is not what long-term investors would call “real” or recurring activity. Santiago sees current usage as non-sticky, highly cyclical, and overly reliant on loose macro conditions. Without real-world use cases or consistent economic utility, he argues valuations are inflated.

We believe both arguments have merit and that investor frameworks are evolving. Just as the internet went from speculation to value creation, crypto is undergoing its own recalibration. We have had a strong thesis around tokens with a strong fundamental backing since the inception of w3.wave and continue to believe that revenues and value accrual for tokens will matter going forward. However, we do not see market valuations following this trend yet and still see unreasonable valuations for some infrastructure protocols as of today.

The Prediction Market Revolution: Where Real-World Truth Meets On-Chain Infrastructure

The prediction market sector just had its breakout moment, and we're witnessing something bigger than a trend, as we're seeing the emergence of a new tool for discovering truth in the Information Age.

The Numbers Tell the Story

November 2025 was a significant milestone: Kalshi and Polymarket combined for nearly $10 billion in trading volume in a single month, surpassing the 2024 U.S. election volumes by far. Kalshi alone posted $5.8 billion, a 32% month-over-month surge, while Polymarket hit $3.74 billion, up 23.8%. This is serious capital formation happening in real-time, with Kalshi recently securing $1 billion in funding at an $11 billion valuation and Polymarket raising $2 billion from ICE (the NYSE operator) at an $8 billion pre-money valuation.

But here's what's really interesting: this growth isn't happening in spite of regulatory uncertainty, it's happening because regulatory clarity is finally emerging.

The Real Problem Being Solved: Information Aggregation at Scale

Traditional prediction mechanisms like polls, expert forecasts, and analyst models are fundamentally broken. They're slow, centralized, and easily manipulated by those who control the narrative. The 2024 U.S. election proved this spectacularly: while legacy polls showed a tight race, prediction markets accurately priced in the outcome weeks in advance. As Polymarket CEO Shayne Coplan told 60 Minutes: "It's the most accurate thing we have as mankind right now, until someone else creates some sort of a super crystal ball".

What prediction markets solve is the aggregation problem: How do you collect, weigh, and synthesize information from thousands of participants with real skin in the game? Money talks, and when people put capital behind their beliefs, you get probability signals that are far more reliable than any poll or pundit.

Who is already using this data? Google Finance and Yahoo Finance now include Polymarket and Kalshi data in their search results. The UFC has signed a multi-year deal with the two prediction market platforms. These deals are infrastructure plays by major companies recognizing that prediction markets have become essential information utilities.

Another example is the recent partnership between Kalshi and CNN, which utilizes prediction market odds in news reports. Watch the video below starting at the 0:50 mark:

Why Web3 Technology Is Superior

Here's where the crypto architecture becomes mission-critical:

1. Censorship Resistance & Permissionless Access

Polymarket operates on Polygon, a Layer 2 blockchain, which means no single entity can shut down markets or exclude participants. This matters enormously. When centralized platforms face political pressure (remember when betting markets got banned in the U.S.?), decentralized alternatives keep running. The ability to create and trade on any event, from anywhere, without asking permission, is the killer feature.

2. Transparent Settlement & Trust Minimization

Every trade on Polymarket is settled on-chain with cryptographic proof. No disputes about who won, no custodial risk, no "trust us" from a centralized exchange. The smart contract is the final judge, and everyone can verify the outcome. This is the blockchain thesis in its purest form: replace trust with math.

3. Global Liquidity & Composability

Web3 prediction markets can tap into global liquidity pools instantly. Anyone with a wallet can participate. There is no need for a bank account, no KYC friction (for decentralized platforms), and no geographic restrictions. And because it's built on open protocols, these markets can compose with other DeFi primitives: imagine collateralizing your prediction market positions, or creating complex derivative structures on top of outcome tokens.

4. The Group Chat Revolution

Perhaps the most under-appreciated innovation is happening at the UX layer. As Shane Mac articulates in his recent piece, prediction markets are moving into group chats. Tools like Bracky (a prediction market agent on Base) allow you to place bets directly within messaging apps via the XMTP protocol. There's no need to switch apps or experience any friction; it's a seamless way to transfer value within the context where predictions naturally occur: conversations with friends. This is the "super app" thesis for Web3: native money + secure chat + permissionless mini-apps = entirely new behaviors.

The Regulatory Turning Point

A big catalyst for growth has been regulatory clarity. After years of hostile positioning, the CFTC's stance shifted dramatically in 2025:

• September 2024: A federal court ruled in Kalshi's favor, finding that the CFTC exceeded its authority in blocking election contracts

• February 2025: The CFTC held its first Prediction Markets Roundtable to establish "a holistic regulatory framework" for the sector

• September 2025: The CFTC issued Polymarket's U.S. subsidiary (QCX) a no-action letter, essentially greenlighting operations

This is the regulatory tailwind Web3 has been waiting for. Rather than fighting innovation, the CFTC is now actively working to create proper guardrails.

The Insider Trading Paradox

As prediction markets scale, one of the more complex challenges emerging is the question of insider trading and as Julius Nagel, fund manager at w3.wave, recently pointed out, the answer isn't as straightforward as it is for equities.

In traditional financial markets, trading on material non-public information is strictly prohibited. But prediction markets flip the script: their core value isn't just financial gain for traders, but the information they surface to the world. If the goal is to produce the most accurate, real-time reflection of reality, you can make a strong case that insiders should participate. Their information enhances the signal, thereby increasing the public utility of these markets.

But where are the limits? This week illustrated the tension perfectly. An alleged Google employee reportedly made six figures on Polymarket by betting on the "most searched person of the year", which is a clear parallel to insider trading, yet on a topic with minimal societal relevance. Contrast that with Brian Armstrong's recent earnings call, where he was aware traders were betting on which words he would say. Near the end, he opened Polymarket live and deliberately said every word on the list. He didn't trade the market himself, but he directly influenced it.

Prediction markets introduce an entirely new dimension to the insider trading debate. The tension between fairness for participants and informational value for society will only become more important as these markets scale and it's a question regulators, platforms, and participants will need to grapple with as this sector matures.

Did You Know?

Polymarket founder Shayne Coplan's obsession with markets started way before crypto was cool. At just 14 years old, while most teens were figuring out high school, Coplan was emailing the regional SEC office asking how to create new marketplaces. That same year, he participated in the Ethereum presale, acquiring ETH when it was priced at a fraction of its later value.

Fast forward to 2025: the kid who wrote letters to regulators is now the world's youngest self-made billionaire at 27, with an $8 billion+ company that just took a $2 billion investment from the NYSE operator. Sometimes the most powerful prediction isn't on a market, it's spotting a founder's conviction early. When a teenager is cold-emailing the SEC about market design, you know they're building for the long game.

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