The Institutional Risk Analyst

Margin credit in the US reached a new peak last week, FINRA reports. As of the second quarter of 2025, total margin loans in the United States reached a record high of $1.008 trillion vs just $850 billion in April. 

Owners of crypto tokens hold nothing except an option to sell their flutter to a greater fool. The real worry for the future is that another financial debacle — à la FTX — where crypto was revealed to be pure fraud will surprise the markets as burned punters flee their speculations. The fact that crypto prices are increasingly being supported by stock issuance and schemes like perpetual futures contracts (Perps) suggests the end of the game is nigh.

The public mania around stable coins is the latest evidence that humans are incapable of making rational decisions when they are part of a crowd. Long-term, we should view stable coins as marketing tools for large advertisers to acquire and retain customers.

Smaller issuers of stable coins will soon be competing with Verizon (VZN) and JPMorgan (JPM), while platforms offering turnkey coin solutions will multiply like Lantern Flies. 

The intriguing thing about private coin empires is that they are obviously not a positive for existing payment systems, yet neither are they dependent upon crypto. Larger sponsors may be able to create exclusive coin ecosystems without actually touching crypto assets at all. Fiat to AMZN coin, “ZON,” is really all that the sponsor needs.

Researchers at Apple just released a paper that throws cold water on the "reasoning" capabilities of the latest, most powerful large language AI models. In the paper, a team of machine learning experts makes the case that the AI industry is grossly overstating the ability of its top AI models, including OpenAI's o3, Anthropic's Claude 3.7, and Google's Gemini.

The proliferation of low- or no-cost coin systems is ultimately negative for established players in nonbank finance and payments, including the major card issuers, as we discuss below.  Still worried about interchange fees?

The common penny stocks of these two appendages of the state, Fannie Mae and Freddie Mac, are up over 600% in the past year, generating huge gains for the likes of Bill Ackman and John Paulson. Bitcoin is up a paltry 50% LTM. Indeed, much like old fintech stocks such as PayPal (PYPL) and Block Inc (XTZ), bitcoin seems to be losing the special novelty that always seems to drive these manic stories. Is bitcoin now just another boring Wall Street ETF?

So yes, we think that every major bank is going to be integrating crypto at some point. Like I said, we think it’s a technology to update the financial system. And we’ve had conversations with a number of them.

When you buy a crypto currency, you buy an option on finding a greater fool, but nothing more, a transaction that would have provoked contempt in Lincoln’s day.