May ‘26: Ethereum’s Ballmer Era
Welcome to the May Deal Flow Digest.
The thesis part runs (a bit) longer this month, so I’m leading with it and putting all the funding rounds, fund raises, and hackathon results below.
Ethereum’s Ballmer Era
Last month David Hoffman sold all his ETH at $2,070 and wrote a thoughtful essay explaining why. It was all over x (twitter).
David then joined the Chopping Block Podcast and I really enjoyed that conversation. Tarun said Ethereum is “ossifying” because no 19-year-old wants to build there. Max Resnick called the Ethereum Foundation “risk-off.” Haseeb, who is bullish, gave the whole bear case a name: this is Ethereum’s Ballmer era. This resonated for me.
That frame is too good to leave alone.
Yes, I’m long “crypto”, I’m long BTC, I’m long ETH…. I’m long the trend. But pretending the bear case is weak is just hopium, so I wanted to lay out a bit more on where I stand. These are my views, not necessarily the views of BanklessVC and certainly not investment advice.
The bear case has a name, and it’s not wrong
The substance is real. In fact, since that post we’ve slid another -10%.
David’s argument: ETH-as-money was always a long shot, and the rollup-centric roadmap made it longer. Ethereum is a “giver, not a taker”… it’s engineered to hand out blockspace at cost. L2 margins run at 98% of blob revenue. Gas limit ramps toward 100M+. BPO forks aggressively expand blob supply. The $3B → $163B stablecoin surge on Ethereum is value created for Circle and Tether, not for ETH. Meanwhile SOL, NEAR, BNB, and TRX already reset their valuations to fee-driven comps. He’s right on the mechanics. The protocol is engineered for blockspace abundance, which is the exact opposite of what you want for fee-driven value capture.
Tarun’s “ossification” point is the cultural version of the same thing. Talent follows founder energy, and right now that energy is on Solana, Monad, Hyperliquid, whatever’s next (perhaps not Ethereum, not Crypto). Resnick’s “risk-off EF” is the institutional version. The Foundation got religious about preserving network integrity at precisely the moment it also needed to be competitive.
Hossib nailed it IMO. A “Ballmer era”. Slow product cadence. Fumbled transitions. Sharper competitors with killer instinct. Loud critics with good points.
What Ballmer-era Microsoft actually paid
Ballmer ran Microsoft from 2000 to 2014. The meme: 14 wasted years. Missed mobile, missed search, missed social, shipped Vista, threw some chairs.
This meme is what I remembered, but here’s what the meme leaves out. Microsoft stock went roughly sideways for over a decade while the enterprise franchise compounded relentlessly underneath. Dividends did most of the work. Office and Windows licensing kept printing cash the entire time the narrative was “Microsoft is dead.” Then Satya took over and MSFT 10x’d.
The lesson (at least in MSFT version) is that deeply integrated, enterprise-beloved, lindy infrastructure tends to compound straight through its own bear narrative. The bear narrative is usually right on the surface. It’s just not enough to short.
Ethereum is still the largest credibly-neutral public chain for tokenized assets. BUIDL launched there. USDC has roughly 66% of its supply there. The deepest DeFi liquidity sits there.
But the lead is narrowing, fast. BUIDL not just on Ethereum (40% of it), down from ~85% a year ago. USDC lives on 34 chains. Western Union picked Solana, not Ethereum, for USDPT. The institutional default is shifting from “Ethereum” singular to “public chains” plural.
Still bullish for the incumbent. Just not a monopoly anymore. Whether 19-year-olds want to build there is a real long-term worry. It’s not the question that decides the next two years.
Under the noise: float is collapsing
Here’s the part the bear case mostly ignores.
Roughly 30% of all ETH is staked. Treasury companies hold another 6%+ and growing. BitMine alone is at 4.47% of supply and openly gunning for 5%. Spot ETFs keep absorbing more. The SEC/CFTC March 17 ruling classified staking rewards as non-securities, which unblocks the entire staking-ETF pipeline. Five more issuers (Fidelity, Franklin, Invesco, 21Shares, VanEck) have staking amendments pending Q2 decisions.
Every ETH staked through an ETF is ETH that can’t be dumped on a price impulse. Net issuance is ~0.23% annually. Liquid float is shrinking faster than that on most days these sinks are bidding. The math doesn’t care whether ETH is lame.
So David is right that ETH won’t reprice off fee burn, The roadmap chose abundance. But ETH can reprice off float compression, staking-yield demand, and the institutional Schelling-point premium without ever winning the fee fight. At least in the near term.
Crypto’s TAM keeps going up
Zoom out from ETH for a second. The real story of the last 12 months is that crypto regulation went from existential threat to statutory framework.
The GENIUS Act is law. Payment stablecoins now have a federal regime. The CLARITY Act passed the House last July, cleared Senate Banking on May 14, and looks structurally likely to pass before midterms. Stablecoin float is past $280B and compounding. Tokenized treasuries are scaling. Spot ETFs exist for a growing list of assets.
This is not the part where crypto dies. This is the part where crypto becomes a regulated, trillion-dollar slice of the financial system that boring institutions are required to plug into.
Previous bear markets we were literally worried the ecosystem wouldn’t exist in the future. But. There are some caveats, and they matter.
One: crypto wins is not the same as decentralized crypto wins. The genuinely scary bear case isn’t David’s fee math. It’s that “blockchain wins” ends up looking like Canton, JPM Onyx, the DTCC’s permissioned ledger, and a few Avalanche subnets, with basically none of the public crypto asset complex capturing real value.
That worlds exists (and is worrisome), however I’d take the public-chain side of that bet, for a few reasons. Pure permissioned chains have been pitched as the institutional answer for a decade and keep losing adoption (maybe this time it’s different?). The architecture actually winning is permissioned assets on public-chain rails: BUIDL, BENJI, Ondo’s USDY. The token enforces KYC and transfer restrictions; the settlement runs on Ethereum, Solana, and other public infrastructure. The empirical record on KYC’d pools sitting next to open public pools (Aave Arc, Compound Treasury) is that they fail.
That’s still bullish for public chains as the settlement layer, ETH included. But it’s weaker than full DeFi composability. Permissioned assets can’t freely compose with open pools, but the gate-access version is the pattern that’s winning.
Two: the question is no longer will crypto adoption happen. It’s which crypto captures it. And the honest answer is, not all of it goes to ETH, but a huge fraction of the institutional, regulated, “needs to be credibly neutral” slice almost certainly does. Because the alternative is asking a Tier-1 bank to settle tokenized assets on a chain run like a startup… unlikely.
This is where the Ballmer frame undersells the bull. It only works if the underlying market keeps growing. Crypto’s underlying market is growing fast, in the most regulator-blessed, institutional way imaginable.
The barbell: long the trend, not the maximalism
The bear case I take seriously isn’t the fee analysis. It’s leadership and competition. The EF probably does need its Satya moment. The killer-instinct vacuum is real. Solana, Monad, and Hyperliquid are not slowing down. ETH/BTC and ETH/SOL could grind sideways or lower for a while yet before they turn.
The way you position around that is simple: stop being a maximalist.
Own ETH for the lindy / institutional / float-compression trade. Own SOL for the consumer / throughput / distribution trade. Own BTC for the macro hedge. Own a small basket of next-gen L1s and app-layer winners where the cultural energy is actually going.
I know. ETH is a $250B asset, subject to macro trends and there’s always a trade off on where you can invest your money. I’m not a maximalist, but I’m still long ETH. In summary because:
Liquid float is shrinking faster than issuance.
The Q2 staking-ETF approvals are a live, dated catalyst.
CLARITY passage unlocks institutional crypto broadly. Clearer rules let regulated capital deploy at scale across the whole asset class. ETH’s moat is incumbent network effects plus credible neutrality, the things that keep it the default public-chain settlement layer for tokenized assets, even as the lead narrows.
The bear case is so loud it’s now consensus. Consensus bears at $2K after a 60% drawdown have a bad historical hit rate.
The “Satya moment” optionality is unpriced. If the EF gets reorganized, or a hungrier entity emerges to lead protocol development, that’s pure upside no bear model includes.
The trade IMO is “David is partly right and ETH still works.” Microsoft worked under Ballmer. Crypto adoption is winning. The asset you most want to own is the one most embedded in the part of crypto the U.S. government just spent two years writing the rules for.
Step back and look at what the regulators are actually saying. The SEC and the CFTC are telling you they want to rebuild finance on-chain. Move dollars on-chain. What world is that, where that’s not wildly bullish? Maybe if you’re a cypherpunk it’s not the world you envisioned….gated assets, KYC’d rails, permissioned everything. But for public chains as settlement infrastructure? Undeniably bullish.
And here’s the thing about where we are in the cycle. AI is the center of attention, full stop. It’s hot, it’s parabolic, and as an early-stage investor that’s exactly the problem. You want to be deploying where it’s not hot. When a sector is this overheated it’s very hard to put capital to work at anything but the earliest pre-seed stage without overpaying for the privilege.
Crypto, right now, is not hot. The bear case is consensus. The energy is elsewhere. That’s the setup you want, not the one you run from.
On a long enough time horizon, everything becomes AI, and everything becomes blockchain. One of those two is priced like it already happened. The other one just got a two-year head start written into law while everybody looked away.
Strap in. Now on to the rest of the crypto / web3 fundraising :)
Top 10 Crypto Funding Rounds
Kalshi | Series F | Prediction Markets | $1B | 2026-05-07
Coatue led, with Sequoia, a16z, IVP, Paradigm, Morgan Stanley, and ARK Invest. The $1B raise values Kalshi at $22B, double its $11B mark from just five months earlier. Annualized trading volume tripled to $178B over six months and institutional volume is up 800%. Kalshi is CFTC-regulated rather than crypto-native, so call it the asterisk on this list, but it now owns 90%+ of US prediction-market activity, and prediction markets are one of the cleanest onramp stories crypto has right now.
Dunamu (Upbit) | Strategic | Centralized Exchange | $408M | 2026-05-28
Three Samsung affiliates (Samsung Securities, Samsung SDS, Samsung Card) agreed to buy 4% of Dunamu, operator of Korea’s largest crypto exchange Upbit, from Kakao for ~$408M (612.8B won). Each buyer cited positioning for won-pegged stablecoins, tokenized securities, and on-chain settlement ahead of Korea’s Digital Asset Basic Act. Part of a May rush that moved ~14% of Dunamu to Korean giants like Hana and Hanwha. Closes June 19.
Circle (Arc) | Token Presale | Infrastructure / Stablecoin | $222M | 2026-05-11
Circle raised $222M (at a $3B FDV) for Arc, its institutional L1 for stablecoin settlement and tokenized assets. a16z crypto put in $75M, with BlackRock, Apollo, ICE, Standard Chartered Ventures, SBI, Janus Henderson, General Catalyst, Marshall Wace, ARK, Haun, and Bullish participating. The clearest “TradFi is picking the rails” signal of 2026. A regulated stablecoin issuer building its own chain with the biggest asset managers on the cap table.
Ripple (Ripple Prime) | Debt Facility | Infrastructure / Prime Brokerage | $200M | 2026-05-11
Ripple closed a $200M debt facility from funds managed by Neuberger Specialty Finance to expand lending capacity at Ripple Prime, its multi-asset prime brokerage. Existing institutional loans serve as collateral. Ripple Prime has tripled revenue YoY since Ripple acquired the platform in 2025. TradFi credit underwriting a crypto prime broker’s loan book.
Elliptic | Series D | Compliance / AI x Crypto | $120M | 2026-05-12
One Peak led the $120M round (at a $670M valuation), with Nasdaq Ventures, Deutsche Bank, and the British Business Bank participating. The largest pure-equity venture round of the month. Elliptic is building agentic AML/compliance tooling. Read it through the post-April lens: this is the ops-and-compliance layer DeFi keeps getting reminded it needs, now with TradFi capital behind it.
Fun | Series A | Payments / Consumer | $72M | 2026-05-01
Multicoin Capital and SignalFire co-led, with Infinity Ventures, Pharsalus Capital, and Justin Mateen. Fun is a crypto/fiat on-off ramp powering finance platforms like Polymarket. Biggest consumer/payments venture round of the month, and a clean bet on rails for the prediction-market and consumer-crypto boom.
Fasset | Series B | Stablecoin / Payments | $51M | 2026-05-14
SBI Group led the $51M round, with Investcorp and Arz Portföy. Fasset is a stablecoin-powered neobank for emerging markets, doing ~$32B in annualized volume. Real proof of the stablecoin-as-payments thesis playing out where it matters most: the parts of the world where the dollar rail actually changes lives.
Variational | Series A | DeFi / Derivatives / RWA | $50M | 2026-05-20
Dragonfly led, with Bain Capital Crypto and Coinbase Ventures. Variational runs an RFQ-model platform for onchain perpetuals on real-world assets: oil, gold, silver, copper. The team’s call is that RWA perps could be bigger than BTC + ETH perps within a year. The most thesis-rich smaller deal of the month.
OpenTrade | Strategic / Growth | Stablecoin / RWA | $17M | 2026-05-06
Mercury Fund and Notion Capital backed OpenTrade’s $17M raise to expand its stablecoin-yield infrastructure, backed by real-world assets. Another data point in the month’s dominant theme: yield-bearing stablecoin rails with RWA collateral underneath.
Cycles | Seed | Infrastructure / Clearing | $6.4M | 2026-05-21
Blockchange Ventures led, with Coinbase Ventures, Compound VC, and Primitive Ventures. Cycles is building a privacy-preserving multilateral clearing network for onchain finance and stablecoins. Small, but it’s exactly the kind of institutional plumbing that has to exist before the “next $10T flows in” story is real.
Click to see all of May’s funding rounds here
May Crypto VC Fund fundraise Announcements
A quiet month for new fund announcements after a busy April, but two big ones...
Haun Ventures | Fund II $1B | May 2026
Katie Haun’s firm raised $1B across an early-stage fund and a later-stage companion fund, pushing AUM past $2B. Three priority themes: next-gen financial infrastructure, tokenized assets and new markets, and the “agentic economy” where AI systems transact on behalf of humans. Capital to be deployed over the next 2-3 years.a16z crypto | Crypto Fund 5 $2.2B | May 2026
The fund we flagged as a ~$2B target in March formally closed at $2.2B. All-stage, 10-year horizon, focused on practical applications: stablecoins, payments, financial services, perps, lending, prediction markets, tokenized assets. a16z’s framing is that crypto fundamentals are “at an all-time high.”
As a reminder, if you are interested in learning more about Bankless Ventures Fund II, please fill out this form and we will be in touch!
Hackathons
Upcoming
ETHGlobal New York 2026 | June 12-14, 2026
New York City, in-person. Preceded by ETHConf NYC (June 8-10) and Pragma NYC.
Base Onchain Summer Buildathon | ~June 2026 (dates TBC)
Online. Base’s flagship onchain buildathon; the prior edition drew 7,500+ builders with sponsors including Stripe, Shopify, Farcaster, and Zora. (2026 dates not yet confirmed, verify on Devfolio.)
ETHGlobal Lisbon 2026 | July 24-26, 2026
Lisbon, Portugal, in-person. Pragma Lisbon July 25.
Finished
Solana Frontier Hackathon | April 6 to May 11, 2026
Online. Crypto’s largest startup competition, ~2,857 submissions over five weeks. Prizes: $30K Grand Champion, $10K each for 20 standout teams, plus $2.5M in venture funding from Colosseum and acceptance into its accelerator. Winners not yet announced as of month-end; judging is ongoing, so watch blog.colosseum.com in early-to-mid June.
ETHPrague 2026 | May 8-10, 2026
Prague, Czech Republic (Municipal House). Fifth edition; conference plus hackathon focused on Ethereum’s “solarpunk” future.
Solana Mobile Hackathon | April 2026
Online. Concluded with 400+ app submissions from builders across 66 countries.
Demo Days
Upcoming
Solana Frontier Demo Day | June 2026 (date TBC)
Online. Final demos from the Frontier Hackathon cohort, expected once winners are named.
ETHGlobal New York Showcase | June 14, 2026
New York City. Final-day project judging and showcase at the hackathon.
Finished
ETHPrague 2026 Closing Showcase | May 10, 2026
Prague. Final-day demos and judging at the ETHPrague hackathon.
Open Accelerator Applications
Solana Incubator (Cohort 5) | Open / Early deadline ~June 5, 2026
New York City. 3-month program starting September 2026; rolling review with early-applicant priority. Seeks 4-6 teams (existing Solana teams, web3 teams considering Solana, or web2 teams adding web3).
Alliance DAO (ALL18) | Open / Rolling
Virtual plus IRL retreats. ALL18 cohort starts Sept 7, 2026; interview decisions within ~2 weeks of application. ~5% acceptance rate; median graduate raises $3.5M at $25M post.
a16z Crypto Startup Accelerator (CSX) | Open (verify next cohort)
In-person, 9-week program, two cohorts per year in rotating cities. $500K for 7% equity; ~3% acceptance rate.
Outlier Ventures Base Camp | Rolling
Virtual plus in-person. 12-week accelerator accepting early applications for 2026 cohorts across DeAI, DeFi, RWA, and DePIN.
Techstars Web3 | Open
Virtual plus in-person. 2026 applications reported open.
That’s a wrap for May!
Thank you and good luck out there!
Ben Lakoff, CFA
https://twitter.com/benlakoff