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Crypto Falls Amidst War Escalation and Mythos Release
Two major macroeconomic events on Tuesday impacted cryptocurrency and broader markets.
A U.S. Army Apache helicopter went down near the Strait of Hormuz, an incident President Trump attributed to Iran, stating the U.S. “must respond.” Reports from the Associated Press and CBC indicate the military has already begun retaliatory strikes. Both crew members were rescued and are safe. The crash occurred a day after President Trump brokered a renewed Iran-Israel ceasefire and amidst ongoing U.S.-Iran talks. Axios reports the working theory is an Iranian drone of undetermined intent. The U.S. has initiated “defensive” retaliatory strikes.
On the same afternoon, Anthropic released Claude Fable 5, the public version of its Mythos model, which had been kept under a restricted security program since April. The model scores 78% on a vulnerability-discovery benchmark and is specifically designed to identify software bugs, a capability that could be concerning for a market still reeling from recent hacks. Requests related to cybersecurity, biology, or chemistry are rerouted to the older Opus 4.8, a safeguard Anthropic states is activated in under 5% of sessions. The uncapped Mythos 5 remains accessible only to vetted firms.
Cryptocurrency markets did not significantly react to these headlines but experienced a sell-off overnight ahead of this morning’s Consumer Price Index (CPI) print, which many anticipate will be high. The lack of a strong reaction to the Iran escalation is unsurprising, given market behavior in recent weeks. However, Mythos was expected to be a more significant development. Now, with users reporting that the model will not even review smart contracts and typically reverts to Opus 4.8, this highly anticipated Mythos release may prove to be inconsequential for the crypto sector. The CPI figures will be revealed shortly.
Crypto Tax Bills Hit a Wall in the House
A House Ways and Means Committee hearing intended to advance cryptocurrency tax reform instead exposed divisions within the committee.
The committee considered seven discussion drafts, each addressing a distinct aspect of tax code related to digital assets. Key proposals included [details to follow]. Other drafts covered stablecoin transactions and the integration of digital assets into existing securities tax frameworks.
However, political considerations intervened. Pro-crypto Democrats raised questions about exemptions for staking and mining, and party leadership suggested postponing the entire package until after the midterm elections. For an industry that has recently achieved notable legislative successes, this situation serves as a reminder that tax reform presents a more challenging battle. While the bills remain viable, their legislative timeline has now been extended.
Morpho Raises $175M to Move Credit Markets Onchain
Lending protocol Morpho has closed a $175 million funding round co-led by a16z crypto, Paradigm, and Ribbit Capital. The round also saw participation from a significant roster of strategic investors, including Apollo, VanEck, Circle Ventures, Ledger, SBI Group, and France’s Bpifrance.
The deal values Morpho at up to $2 billion, positioning it as one of the largest funding rounds in the history of decentralized finance (DeFi).
The Morpho protocol operates an open credit network that enables banks, fintech companies, and asset managers to establish their own on-chain lending markets, each with customizable risk parameters, without the need for extensive infrastructure development. The protocol currently holds over $11 billion in deposits and counts Coinbase, Kraken, Binance, Galaxy, Bitwise, and Anchorage among its users. Co-founder Paul Frambot, who initiated the project in Paris at the age of 20, originally built it on top of Aave and now promotes it as a platform for anyone to create their own Aave-like system.
The newly acquired capital will be allocated towards technical development and deeper integrations with institutional clients, with the objective of making Morpho the default credit layer as more of the financial industry transitions to blockchain technology.
The clear takeaway is that demand for institutional crypto products remains robust.
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