The Castle Chronicle: Privacy Coins are Ripping, BTC is Back, and It's Cool To Be In Crypto Again?
PLUS: Investable DeFi, are buybacks good or bad, and trading Pokemon Perpetuals
Welcome to Edition 154 of The Castle Chronicle!
Gm all!
Welcome to the newest edition of the Chronicle: in a brand new format!
You’ll get a curated list of the most important macro news and DeFi news, along with insightful posts from guests and more! Actionable intel done the Castle way 🤝
Without further ado, let’s get into it, shall we?
Where Are We Now?
Welcome guys and gals to another week in the markets for crypto.
We seem to be teetering on a knife’s edge, waiting for news to break and headlines to abate. The Supreme Court’s decision on Trump’s Tariffs is still hanging over the market, and crypto seems to be more correlated to macro events and Trump headlines than ever.
Because of this, both BTC and ETH have been rangebound, chopping up anyone looking to trade this cancerous price action. The silver lining here is that some alts have started to run, and even memes have come back with the White Whale token seemingly only going up.
Not to mention, privacy coins are still having their renaissance moment!
Luckily for us, US CPI came in looking in line with expectations, and crypto is starting to respond, with BTC/ETH both up 2-3% respectively. Hopefully, we can keep this up and really light a fire under our sleepy market!
So that being said, let’s dive into the newsletter!
Altcoins
We talked about how some altcoins are having their day in the sun, so let’s take a look at some of the best-performing ones!
POL - Polygon is up on the back of their ‘Open Money Stack’ announcement, as well as their acquisition news that can be found here.
XMR - Monero is riding that privacy narrative higher and taking all the momentum from ZEC.
IP - They have a new network upgrade coming, which may have had something to do with this move, but the majority of demand came from Upbit, accounting for almost half of the day’s volume.
Crypto Round-Up
On Buybacks in Crypto: Good or Bad?
Token buybacks are the hot topic on X and for good reason. The more that crypto becomes like tradfi, the more that we have to re-evaluate how teams run and utilise their cashflow for investors. The downside here is that we’re such a new industry (relatively) that buybacks, in a lot of ways, are ineffective or harmful. This article by Fejau does a great job of diving into these nuances and deserves a read.
The Demand for New DeFi Primitives
Yield Basis saw their new ETH vault fill up $25M in just a few minutes, showcasing increasing demand for their IL-free LPs. While this may not seem like big news on the surface, it indicates that there is an appetite for innovative DeFi products, especially when it comes to LPing. Historically, the biggest issues with LPs have been the impermanent loss factor, but Yield Basis has stripped that away. While they can’t scale super fast (due to crvUSD and the relationship there), the product is highly rated. For those looking to research a new DeFi bag, this may be where you want to look.
Trading the Hottest Narratives: Collectables/Prediction Markets
Trove announced Perpetuals on Prediction Markets with Polymarket, fresh off the heels of their raise. The world is getting hyper-financialized and Trove seems to be capitalising on this movement. They’ve hitched their wagon to some of the biggest trends/narratives right now in collectables, and they’re also moving into the next one: Prediction Markets. The collectables side is incredibly interesting as Pokémon/One Piece cards are in an incredible bull market, but are hard to get into if you’re not outright buying cards at your local store. Offering perpetuals for these types of markets is a huge plus.
Arbitrum Corner
Welcome to the first Arbitrum Corner of 2026!
Last year has been instrumental in contributing to the broader shift that Arbitrum initiated a while ago. On the one hand, the sector’s increased regulatory compliance has spurred renewed involvement by the Arbitrum Foundation with the Arbitrum-Aligned-Entity model. On the other hand, Arbitrum itself has faced an identity crisis, similar to most other L2s.
Initially deployed to provide cheap block space, L2s such as Arbitrum, have had to pivot and reinvent their core business as block space has become more abundant.
Others, like Mantle, have done so by focusing on acting as a bridge between Web2 and Web3, bringing many partnerships, for example, within RWA. For Arbitrum, 2025 was the year of the partnership with Robinhood, which has already tokenised thousands of stocks onchain.
Focusing on its core value proposition of credible neutrality, Arbitrum aims to become the financial network of the future.
The Foundation-led partnerships with big names are complemented by other developments.
This year in particular, we have seen the emergence of USDai and Ostium.
This has been much welcomed as both AI, stablecoins, and RWAs were somewhat neglected verticals. After some time, USDai is now one of the biggest stablecoins on Arbitrum with over $680m in TVL, and Ostium is one of the biggest trading venues for commodities onchain.
We expect 2026 to further solidify these projects. For USDai, greater differentiation with GPUs is warranted, provided most of the stablecoin’s backing is actually US Treasuries. 2025 has been focused on scouting supply chains, pushing partnerships.
The same goes for Ostium: in the year when crypto has been de facto adopted by TradFi, avenues offering the best pricing for commodities become key to attracting a whole new niche of traders. Fresh from their latest $20m fundraising round in December 2025, Ostium is ready for 2026.
Another initiative we’ll continue following is DRIP. With season 1 set to pause at the end of January, we’ll monitor results and their onchain impact. While we have already shared an analysis of incentives and their impact, DRIP has been instrumental in getting Morpho and Euler (two of the largest lending markets) to launch on Arbitrum.
Last but not least, a mention of honour is dedicated to Fluid, which launched this year on Arbitrum and has already accrued almost $200m in TVL, with volumes consistently rivalling those of its more established competitors.
Here are the top 10 protocols on Arbitrum right now: how will this change in 2026?
Share your thoughts in the comments.
Stay tuned for our DRIP report at the end of the month as we continue analysing the onchain and ecosystem impact of incentives.
Schizo’s Solitary Confinement
Come one, come all to Schizo’s cozy cell in the insane asylum!
This section of the newsletter is going to be rambling about any and all of the things that I’m interested in in crypto at the moment.
For me, I’m looking to capitalize on this “TradFi-ification” of the crypto markets. Essentially, I want to acquire tokens that I think are attractive to the suits and are on the right track to becoming an investable business. Most tokens that are in this category are going to be DeFi-related, as very few other things fit this mould for me right now.
I know what you’re thinking, that means no Fartcoin right?
And you’d be correct, no Fartcoin allocation here, sorry Dip Wheeler.
For me, I’m looking at these projects/tickers:
Maple Finance ($SYRUP)
Convex Finance ($CVX, not to be confused with Chevron)
Aerodrome ($AERO)
Yield Basis ($YB)
f(x) Protocol ($FXN)
Inverse Finance ($INV)
Aave Protocol ($AAVE)
Now, most of these also fit the revenue narrative that’s been floating around on CT, and that’s part of the plan as well. I want my assets to not only appreciate in value, but I also want them to pay me.
These projects pass along revenue either through fee sharing, bribes, or buybacks. I think that if you were to pitch any crypto to normies and get them to invest in something that’s not BTC or ETH, you want to be able to show them teams that generate cashflow for holders – and that’s this list in my humble schizophrenic opinion.
Then I also want exposure to another narrative that will always have a use case: privacy.
This is fairly cut-and-dry, but privacy is a necessary part of a healthy society and world. So it stands to reason that financial privacy is just as important in an onchain world.
I want exposure to it wherever I can, so here are the ones I’m looking at:
Railgun ($RAIL)
Zcash ($ZEC)
Monero ($XMR)
MONEROCHAN ($MONEROCHAN)
Umbra ($UMBRA)
It’s a relatively smaller list in comparison to the other one, but in reality, privacy is just underdeveloped in crypto nowadays. Now, it would be nice if we could change that going into 2026, but who knows if we actually will.
Privacy and investable crypto businesses are my main focus going forward in 2026, as I don’t really see any other narrative hijacking my focus as of now.
Thus ends the 1st shift of my solitary confinement, hopefully I’m not shoved back in for awhile eh?
Go out, get some sunlight, and acquire more assets.
Schizo out!
In The Know: News and Headlines
Morgan Stanley files for registration for an ETH trust, giving shareholders exposure without them having to hold the asset. Potentially more ETH bid?
Some interesting economic releases coming out this week, including December CPI and the Supreme Court’s ruling on Trump’s Tariffs, that may lead to volatility in the markets.
Great tidbit from the Forward Guidance folks about how AI Capex is the rising tide lifting all ships right now, driving this acceleration in the stock market. It’s gotta flow to crypto soon right…right?
Potential interference from Trump in Iran could again cause uneasiness for markets. They don’t like uncertainty, and the possibility of more military action/war is a recipe for exactly that.
The Department of Justice has subpoenaed the Fed and Jerome Powell over renovation costs to the Federal Reserve buildings. While this seems fairly dry, Jerome Powell is taking a stance on this being a personal attack over not cutting rates. The markets shrugged this off for now, but this is another piece of news that could derail things if it gets ugly.
A16z’s crypto arm published 3 upcoming trends for AI in 2026, read this to position yourself in the right direction for an AI x crypto intersection.
What To Watch This Week
Here are the biggest things to be aware of this week:
The CLARITY Bill has been delayed! Lawmakers are aiming for a late-Jan vote, but it remains to be seen when the bill can actually get passed.
This bill is important for creating the rules and regulations for the crypto sector, as well as determining when a project is decentralised or centralised, thus deciding who their handler is – the CFTC or the SEC.
The US Supreme Court has again delayed rulings on Trump’s Tariffs, which only extends the market's uncertainty, potentially causing a huge ripple effect in the event of an unfavourable ruling.
Football(dot)fun is releasing its $FUN token.
Optimism DAO is currently voting on buybacks for the $OP token.
Solana Mobile’s $SKR token is set to go live with an airdrop going out to users of the phone.
Between invasions, potential wars, and macro goings-on, crypto is in a state of flux. This brings opportunities for the observant, however, so keep your eyes out!
Don’t forget to join our Telegram channel for the latest updates from Castle and all our research: Link here
In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.
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