IOSG: Frontier Bets, the 4 Best Crypto Investment Directions in a Bear Market

Author: Jocy Lin, Founding Partner of IOSG

This article is adapted from Jocy's keynote speech at Money Frontier 2026 in Hong Kong. For ease of reading, we have made moderate edits while staying true to the original meaning, and corrected any verbal slips and abbreviations from the live event.

1. Opening: Know the White, Keep to the Black

Hello everyone, I'm glad to be invited by the Benmo community to gather with you here in a bear market.

The topic I want to share today is very interesting—contrarian investing, frontier bets: why investments made in a bear market often bring the greatest returns.

Let me start with some background. This should be the fourth bear market I've experienced. This time, many people feel it acutely, but it is also very different from previous ones. I really like a line from the Tao Te Ching: "Know the white, keep to the black"—know what is bright, yet be willing to stay in the darkness and persevere. This in itself is a virtue.

Before coming on stage, many friends asked me: Is IOSG still investing?

We are still investing. The feeling now is very similar to 2018 and 2019—many people don't know how to invest. IOSG will continue to invest in the crypto market, and we don't want to become "the last defender of Asian crypto VCs." We hope more investors will join Web3 and help more Asian entrepreneurs move toward a better future.

Today I will first use three "appetizers"—Bitcoin, stablecoins, and Ethereum—to lay out the big picture, and then I will discuss four directions, talking about the businesses we see from the front lines that are actually making money.

2. Bitcoin: The Four-Year Cycle Overrides All Narratives

Let's start with Bitcoin.

This recovery from the 2022 low was driven by several Bitcoin-specific catalysts: the collapse of Silicon Valley Bank in 2022, spot ETF hype pushing the price to $60,000, and Trump's election pushing it to around $120,000. By the end of 2025, most of these catalysts had been fully priced in.

After that, the situation changed. After 2025, the AI cycle began, and AI-related assets, gold, and Nvidia all strengthened. Logically, these conditions should have been favorable for Bitcoin, but Bitcoin no longer responded to them, falling 29% year-to-date.

Why is this happening? Borrowing a phrase from the Benmo community's "Bitcoin Divine Power," it's very interesting: the four-year Bitcoin cycle has once again overridden all more complex narratives. The cycle framework had clearly pointed to Bitcoin peaking in October 2025, and that is exactly what happened. The subsequent bear market also began in October 2025.

Many people will argue that the four-year cycle may just be a coincidence. But we see that many crypto OGs reinforce this four-year cycle: as long as enough investors expect the market to peak at a certain stage of the cycle, they will reduce their positions at roughly the same time—collective behavior in turn creates the very cycle they expected. This also explains why Bitcoin still turned downward despite favorable macro conditions. Fewer and fewer people believe that "AI, gold, and the broader market" can support Bitcoin.

So I believe the cycle still holds. In the coming months, the focus is no longer on explaining "why Bitcoin is underperforming," but on identifying whether the next accumulation phase has already begun.

Here I'd also like to share some internal data research from IOSG. We counted the duration of each cycle, and the results are strikingly consistent: since 2015, each has been roughly 1,060 days of upward movement. Based on this, we have outlined several possible scenarios for this cycle:

• Scenario 1: Bitcoin bottoms in the $45,000–$60,000 range, possibly by the end of October this year (2026);
• Scenario 2: Lower, falling to $40,000–$55,000 in Q1–Q2 2027;
• Scenario 3: Various other versions.

Honestly, there are many versions of cycle predictions, but our internal data research points to the version above.

Four-Year Cycle and Bottoming Scenarios

3. Stablecoins: A Year as Important as 1975 and 2001

The second "appetizer" is stablecoins. This year is a big year for stablecoins, a very influential year.

I want to make two analogies.

On May 1, 1975, the U.S. SEC abolished the fixed commission system that had been in place on Wall Street for 183 years, turning stock trading from a rich man's game into one that ordinary people could participate in, ultimately giving rise to a $140 trillion asset management industry. Fidelity and Vanguard were both born after that. In 2001, China joined the WTO, which was also one of the most important events that changed the entire Chinese economy.

I believe that today we are witnessing the same thing happening again, except this time the stage is stablecoins in the crypto industry. The GENIUS Act becoming law means banks can now legally issue dollars on-chain. I believe that after this bill passes, crypto will reach a turning point, transforming from a "high-risk asset" into "legitimate financial infrastructure." Looking back, 2026 will be remembered by history just like 2001.

4. Ethereum: Moat, Challenges, and the Question of Future Leadership

Now let's talk about Ethereum. This topic is hard to summarize in a few words. I've made two lists: one of its strengths and one of its problems.

There are four strengths: as a settlement layer, it carries the largest amount of stablecoins and RWAs; security and yield—most DeFi security and yield are on Ethereum; scaling through Layer 2, with the finality of an entire Rollup ecosystem settling back to Ethereum; and it has developer infrastructure that surpasses any other L1.

The problems are also very real: L2s have diverted the fees that originally went to L1; the ETH/BTC ratio has clearly underperformed this cycle; and there is competition from new Layer 1 blockchains like Hyperliquid, as well as off-chain competition.

But I think the core issue is not these. Recently I've written a lot about Ethereum on Twitter. My core view is this: if you compare Vitalik and Elon Musk, many things Vitalik says often take 10 years before you can truly understand why he said them and why they can be achieved. What we look forward to most is for Vitalik to be on the front lines like Elon.

Vitalik now also says he wants to turn Ethereum into a "smaller boat." But honestly, from Tomasz's departure to the establishment of new Ethereum organizations, these all ultimately point to one core question: Who will provide leadership for Ethereum? Who will govern? Who will manage? Which founder can stand on the front lines and make this decentralized, open organization great again? I think this is a very big challenge.

As for stablecoins themselves, everyone is familiar: on Ethereum, it is mainly institutional funds and developed markets; on Tron, it is mainly USDT, serving developing markets and cross-border dollar liquidity.

Ethereum: Strengths and Weaknesses

Stablecoin Distribution by Chain

5. How We Invest in a Bear Market: Redefining Allocation Ratios

Next, let's talk about how IOSG executes investments in a bear market—this is also very interesting, because in a bear market, we have redefined our investment allocation ratios.

We have reduced the proportion of private market investments; while the proportions of OTC, secondary market, and incubation have increased.

At the same time, we see a clear trend: Crypto is evolving from a trading market into internet-native financial infrastructure.

Layer 1, Better Money, Better Rails: Stablecoins have proven that better money and better settlement rails can achieve internet-native status before traditional systems.

Layer 2, Internet Capital Markets: RWA and tokenization can provide clearer real yields and collateral for on-chain dollars.

Layer 3, Mass Adoption: I believe the crypto industry will, like the internet industry, produce the next ByteDance and the next Pinduoduo.

Layer 4, AI Agent × Crypto: As financial infrastructure becomes internet-native, the ultimate users will no longer be only humans—agents also need wallets, payments, identity, and programmable ownership.

So ultimately, money goes on-chain, assets go on-chain, value concentrates in the application and interface layers, and AI agents will share the same infrastructure as humans.

6. Why the Best Investments Are in a Bear Market

Back to the present. Why are there the best deals and the best investments in this bear market? Because in a bear market, quality is often mispriced, and real revenue can prove itself. Here are three cards:

First, valuation mispricing. When sentiment is at its worst, truly valuable projects get pushed below their intrinsic value—the best entry prices only appear when everyone else has left.

Second, real revenue survives. We prefer businesses that can verify cash flow, not just narratives. If a project can survive a bear market—with clear customers and clear products—it will be amplified by compounding in a bull market.

Third, withstands scrutiny. We only invest in projects whose models can be explained from start to finish: who pays, why they pay, and how much. Revenue that can be externally verified is real revenue.

In this cycle, we see projects in crypto that are actually making money, with scales ranging from hundreds of millions of dollars to about $5.8 billion, distributed across DeFi and various infrastructure. Below, I will discuss four directions and talk about the real situations we see from the front lines.

Direction 1 · Stablecoins and Payments: Circle, fun.xyz, RedotPay

At IOSG, we still hold 4-hour IC (investment committee) meetings every week. Some say it's a bear market, what projects are worth discussing? Actually, there are many.

Circle: Three Revenue Streams, One DCF

Many people ask about Circle. Let me explain its model. It makes money mainly from three sources:

First, reserve income. About $73 billion in reserves are used to buy short-term bonds. At a 3.5% annualized rate, that's about $2.6 billion a year, which fluctuates with Federal Reserve policy.

Second, distribution costs. Circle distributes its main revenue—about 62%—to partners like Binance and Coinbase, so its gross margin is only 38%.

Third, underlying long-term equity value. Circle has built its own public chain, CCTP cross-chain, and developer APIs, which currently account for only about 6% of revenue.

We built a DCF valuation model for Circle: from stablecoin float → (yield rate) reserve income → (38% gross margin) stablecoin gross profit → (15x multiple in year three, discounted at 20%) per-share present value.

Fun.xyz: The Stripe Checkout of the Crypto World

fun.xyz can be understood as the Stripe checkout of the crypto world—a universal deposit address (UDA). All money entering Polymarket goes through it, and IOSG is also an investor.

RedotPay: A Crypto Card You Can Spend Anywhere

RedotPay is currently the most popular crypto payment card on the market. A crypto card that can be used anywhere Visa and Mastercard are accepted, truly bringing crypto into real-world applications.

A few numbers: cumulative card issuance of over 5 million, available globally, TPV of about $3 billion, a market-leading position by 4x, and annualized revenue of about $150 million. So our underlying judgment is: products that combine payments and stablecoins, like RedotPay, are migrating to the mass market and have already gained recognition.

RedotPay Scale and Capital

Direction 2 · Prediction Markets: The Future of the Niche Is the Future of the Masses

The second direction is prediction markets, which are moving toward the mainstream. Niche products will migrate to mass products. The future of the niche is the future of the masses. This is the cold-start phase that helps crypto achieve mass adoption.

Look at the scale of two industry leaders: Polymarket's Q1 2026 trading volume was $26.2 billion, up 90% quarter-over-quarter; during the World Cup (June 11 to July 19), trading volume exceeded $15 billion. Its differentiation lies in being global and non-custodial, making it one of the best representatives of next-generation crypto applications. Kalshi has taken the compliance route, obtaining a federal license. Its Q1 2026 trading volume was about $32.1 billion, and it distributes through Robinhood and Interactive Brokers. Founded in 2018 and questioned for years, it survived the bear market, obtained its license, and produced the steepest revenue curve we have seen in U.S. fintech.

Polymarket · On-Chain Route

Kalshi · Compliance Route

Direction 3 · AI × Crypto: How Compute, Data, and Money Flow

The third direction is AI and crypto.

Over the past five years, everyone has focused on model quality: whose Transformer is better, whose RLHF is smarter. But now we need to think about a more fundamental logic: Where does compute come from? Where does data come from? How does AI money flow?

First, compute. Crypto has already proven one thing: open networks can coordinate hardware resources globally. During Ethereum's PoW era (before The Merge in 2022), the GPU compute aggregated by the entire network was on the scale of a frontier training cluster. This doesn't mean miners' GPUs could be directly used to train frontier models—the metrics are different—but it proves that with token incentives, you can aggregate globally dispersed idle hardware. If this mechanism is correctly applied to the AI compute market, it is a real opportunity.

Second is data, and third is how AI money flows, which is the agent banking model. Let me give a few specific cases.

Grass has about 8.5 million users who share unused bandwidth through browser extensions and apps to earn points. Its network layer distributes scraping tasks from AI labs to these nodes, then cleans and structures web pages into enterprise-grade data. The key architecture is that it can distribute the needs of AI demand-side parties (such as OpenAI, Anthropic, and other enterprises willing to pay for training data) to on-chain users, incentivizing them with tokens or revenue. Currently, its data volume has exceeded 250 PB. The economic model is also very real: revenue in 2025 was about $17 million, and it is expected to exceed $70 million in 2026. So you see, projects in crypto that issue tokens are already very real—they have revenue, cash flow, and people willing to pay for them. B2B first, then B2C, is also one of our investment approaches.

Hyperbolic is another IOSG portfolio company, doing inference and GPU compute markets. More than 250,000 developers are building on the platform, and customers include some frontier AI labs.

The third is a typical crypto-to-AI project, Nous Research, which is the Hermes ("Lobster") that everyone uses. Due to time constraints, I won't go into the entire tech stack.

Grass Economic Model and Data Flywheel

Hyperbolic Compute Market

Direction 4 · On-Chain Trading and Credit: Collector Crypt, Hyperliquid

The fourth direction is on-chain trading and on-chain credit. This area is very interesting.

Collector Crypt is essentially a "pawnshop + card shop," except it runs on-chain. By revenue, it is now a top-two application on Solana. The model is simple, in three steps: Step 1, supply side—buy and custody physical cards, storing them in vaults; Step 2, tokenize on-chain, turning each card into a tradable token that can be redeemed at any time; Step 3, monetization and exit. Currently, its cumulative trading volume exceeds $1 billion, with 4 million monthly active users. By daily revenue, it is one of the largest applications on Solana; protocol revenue was about $7.2 million in April, about $9 million in May, about $15 million in June, and about $12 million in July. At this scale, its revenue this year has a chance to exceed $200 million. This is a project with real revenue, a token, and clear demand.

Hyperliquid is also very interesting. Why do people say it is "eating Binance"? In plain terms, it is a self-compounding buyback flywheel, which can be understood as a decentralized Binance for futures: every trade pays fees, and about 97% of the fees are used to buy back tokens; more trading brings more fees, and more fees buy back more tokens, and so on.

Collector Crypt · On-Chain Cards

Hyperliquid · Buyback Flywheel

7. IOSG's Confidence: East-West Reach + Research Moat

Why us? Because IOSG has the best reach into global opportunities—most of our portfolio spans East and West, North America and Asia; and we can identify the core paradigm of each cycle very early. What underpins all of this is our very solid research—deep research is our investment moat.

8. Conclusion: A Bear Market Is the Starting Point for Positioning

I've taken up a lot of your time. Let me wrap up.

The best investment opportunities are often hidden in the worst sentiment. Key point: according to the judgment of "Bitcoin Divine Power," by the end of October this year, Bitcoin has a chance to reach a low point. So those friends who have turned to AI or U.S. stocks can also look back and re-examine the new opportunities in the crypto market.

So what will we seize?

First, projects with real revenue. Stablecoins, payments, and AI-crypto related directions are all generating new, verifiable cash flow.

Second, businesses wrongly killed by this winter. Many projects have good fundamentals but are priced as if a bear market that is already about 90% complete—this price dislocation is itself an opportunity.

Third, IOSG identified them very early. Three rounds of contrarian, research-driven investments have one goal: to identify the winners before the bull market arrives.

A bear market is the starting point for positioning. Thank you all.