This is a segment from the Empire newsletter. To read full editions, subscribe.I know I’m not alone in thinking that this is one of the weirdest market environments I’ve encountered.The selling on the equities side makes sense, and there are a few reasons for that, from a disappointing US consumer confidence reading to the tariff overhang. The crypto side of things is a whole different can of worms. So we can agree that memecoins are a big part of the negative shift. I hesitate to label all of the most recent token launches — i.e. MELANIA, TRUMP and LIBRA — memecoins, but I do think they all contributed to the larger exhaustion. While they were meant to be a fun, smaller part of crypto, their dominance in the narrative has clearly led to burnout. We’re seeing that in the data, with CME traders pulling back and acting wary. Perp traders, on the other hand, have been slightly more active, adding some BTC longs though, notably, longs are getting punished right now.“CME traders remain defensive. Open interest remains flat while premiums have stayed in deep single digit territory and the February contract currently trades below spot. Annualized March futures premiums are subdued at 5.7%, with the daily next month premium declining to lows not seen since the early July Mt. Gox driven market downturn,” K33 wrote.K33’s look into CME exposureFor perp traders, buying the dip didn’t quite pay off. “Perps have traded at discounts to spot for several weeks, but this discount narrowed amidst the open interest spike [since Monday]. Further, funding rates on Binance reached neutral terrain as leverage climbed, pointing toward traders entering longs with leverage. This behavior was quickly punished in the market, with long liquidations amplifying the move lower.”From K33’s reportBut it really isn’t all doom and gloom, as Bitwise’s Matt Hougan noted. What crypto is digesting right now is the end of the memecoin boom. The combination of Melania, Libra, and the Lazarus Group using memecoins to launder stolen ETH will kill it dead. Maybe not today, but within 6 months.The good news is there are already things ready to replace…— Matt Hougan (@Matt_Hougan) February 25, 2025The institutional adoption notably hasn’t stopped, and everyone I’ve spoken to is still rather bullish on the overall environment noting how favorable it is once we get away from crime szn. That’s not to say we shouldn’t tread carefully, but there are some potential winners out there to keep a close eye on. K33 noted, in a separate report this morning, that Aave is an example to watch, given its growth.Source: K33“A constructive regulatory regime gives DeFi a new lease on life. Leading platforms such as Aave are now free to pursue innovative avenues that may have previously carried more questionable risk, such as revenue-sharing tokenomics,” K33 analysts wrote. To add to that, the idea is that DeFi could also gain from actual regulatory clarity (which we still haven’t seen). Institutional players, for example, could integrate various DeFi products into portfolios — especially if spot ETH ETFs add staking. I rarely opine, but I do think that this painful shift away from the memecoin narrative is a necessary one. There are pockets of opportunities within the current market if̶ ̶y̶o̶u̶ ̶f̶o̶l̶l̶o̶w̶ ̶y̶o̶u̶r̶ ̶h̶e̶a̶r̶t̶. No, but really, the take that there’s still demand for projects that properly show crypto’s use cases is one I personally believe. And that’s not just reserved for stablecoins and RWAs.Get the news in your inbox. Explore Blockworks newsletters:Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.Empire: Start your day with top crypto insights from David Canellis and Katherine Ross.Forward Guidance: Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin.0xResearch: Get alpha directly in your inbox — market highlights, charts, degen trade ideas, governance updates, and more.Lightspeed: All things Solana, in your inbox, every day from Jack Kubinec and Jeff Albus.The Drop: The newsletter for crypto collectors and traders, covering games, tokens, apps, memes and more.