I keep coming back to one number in Bitcoin Strategy's Stacks analysis: the amount of bonded Bitcoin it would take to absorb a year of new STX. Stacks is a Bitcoin layer 2, which here means a smart contract chain anchored to Bitcoin with its own token, STX, and a mechanism that pays the people who lock that token in Bitcoin rather than in more STX. The creator's case rests on that difference and on whether a new Bitcoin staking bond can grow fast enough to soak up the tokens the chain keeps issuing.
What a Bitcoin layer 2 is
Bitcoin's base chain is narrow by design. It moves coins and secures them with proof of work, and it does not run applications like Ethereum or Solana. A layer 2 is the usual answer: a separate network that handles its own transactions and leans on Bitcoin for settlement, security or both. Designs differ: some use payment channels, others sidechains with their own block producers, so ask what ties a project back to Bitcoin.
Stacks is one of the older attempts. The creator calls it a smart contract layer anchored to Bitcoin. Miners spend Bitcoin to produce Stacks blocks and receive new STX in return. That makes STX both the reward for securing the chain and the asset users lock up, which is where the yield story begins.
sBTC is Bitcoin moved onto Stacks one to one, in the creator's description, so it can be used in lending and trading apps. If you hold Bitcoin and want to borrow against it without selling, that is the door you walk through. The peg is the part that matters: sBTC is a claim on Bitcoin held somewhere, and it is only as strong as the arrangement behind it.
Stacks has a market cap of about $695 million, and Babylon, a Bitcoin staking network, about $67 million, roughly a tenth. Babylon holds around $3.4 billion of Bitcoin against about $210 million in sBTC on Stacks, roughly sixteen times more. The market pays far more for the smaller pile. The creator's answer is yield: Babylon pays in a token printed at 8% a year, Stacks pays in Bitcoin.
How Stacks pays its stakers in Bitcoin
Stacking, spelled with a k on this network, means locking STX for a period to earn a share of the Bitcoin that miners spend. Miners bid Bitcoin for the right to produce blocks, and that Bitcoin is not burned. It goes to the stackers. The reward arrives in the hardest asset on the chain.
StakingRewards put the rate at about 7.4% a year, paid in Bitcoin. Against that, new STX is created with every block, and the creator puts the dilution at close to 3% a year. Net, a stacker keeps roughly 4.5% in Bitcoin terms. The yield is bigger than the inflation that funds it.
Rates move with how much capital is locked and how much miners are willing to spend, so 7.4% is a snapshot. The token price used to size the dilution moves too.
The comparison the creator keeps returning to is Babylon, where the reward comes out of an 8% token inflation. Participants are paid in the same token that is being printed. What that is worth depends on what you think of each token, and the creator's view is clear: paying in Bitcoin is the better deal, and most people have not noticed the difference yet.
Stackers have received more than 4,000 Bitcoin since January 2021, the creator says. That record shows the mechanism has paid out for years.
The two networks side by side:
| Measure | Stacks | Babylon |
|---|---|---|
| Market cap | About $695 million | About $67 million |
| Bitcoin held | About $210 million in sBTC | About $3.4 billion |
| Reward paid in | Bitcoin | A token printed at 8% a year |
The creator's explanation for the gap sits in the last row.
The Bitcoin staking bond, explained
Since September there has been a second way to earn, and it is the one the market has been pricing. A Bitcoin holder can timelock Bitcoin on the Bitcoin chain itself, under their own keys, and target 3% a year paid in Bitcoin. To take part they also have to lock STX worth 5% of the Bitcoin they commit. That package is the Bitcoin staking bond.
Timelock means the coins are locked for a set period. "Under their own keys" means the holder keeps custody, so the Bitcoin is not sitting with a company that can move it. If you ever do something like this, check you are on the official site before you connect a wallet and start with an amount you can afford to have locked. That habit matters more than any yield figure.
The first bond went live in September with about 250 Bitcoin from four institutions. Among them were 21Shares, HashKey Cloud and UTXO Management, and Anchorage Digital was working on custody support. The second bonding period was set to open on October 10 with capacity for 500 Bitcoin, double the first.
| Bond period | Bitcoin | Detail |
|---|---|---|
| First | About 250 BTC | Live in September with four institutions |
| Second | 500 BTC | Capacity when the period was set to open on October 10 |
| Needed to absorb a year of new STX | About 4,600 BTC | The creator's estimate |
The 5% STX leg is where the bond touches the token. The 500 Bitcoin in the second period are worth roughly $42 million, so the STX that participants must lock is worth about $2.1 million, which at the recent price is roughly 5.7 million tokens. Against 52 million new tokens a year, that is about 40 days of new supply. The bond is real, and in token terms it is still small.
What drove the STX rally
STX went from about 12 cents on August 19 to 37 cents, roughly 210% in 45 days. Measured against Bitcoin it more than doubled over 60 days, up about 109%, so the gain came against Bitcoin as well as in dollars. For a token 90% below its old high, that is the kind of move that gets attention.
Three things landed close together. The bond launched with institutions attached. Muneeb Ali returned as CEO of Stacks Labs, and the creator says STX rose 28.8% in the 24 hours after that announcement. The yield comparison with Babylon also started to circulate.
The creator also charts STX against the rest of the altcoin market by dividing the STX price by the market cap of the other coins, and the long-term line underperforms. If STX returned to what the creator calls an equilibrium line, it could outperform the rest of the altcoin market by 237% from here. That is a chart reading with an assumption behind it: it needs a relationship from the past few years to still hold.
The bear case: 52 million new tokens a year
The Bitcoin stacking upgrade put the block reward back up to 1,000 STX per Bitcoin block. The creator puts the result at about 52 million new tokens a year, which at the current price is roughly $53,000 of new STX every day that somebody has to buy. A whole year of new tokens is worth about $19.5 million.
That sets the size of the problem. Bonds lock STX worth 5% of the Bitcoin committed, so soaking up $19.5 million of new supply would take about $390 million of bonded Bitcoin. At those prices, that is roughly 4,600 Bitcoin. About 250 is live, and the second period adds 500.
I would keep two things in mind about that 4,600. It moves with the Bitcoin price, because the dollar value of a year of new STX is set by the STX price while the collateral is set in Bitcoin. The figures here imply Bitcoin near $84,000, which is what 500 Bitcoin for about $42 million works out to. If Bitcoin doubles, the same dollar amount of bonds comes from half as many coins and the target falls to about 2,300. If the STX price falls, the supply to absorb shrinks too. Treat the number as a moving target.
Participation and usage moved the other way
The amount of STX being stacked fell about 19%, from 556 million tokens at the start of the year to 448 million. The creator says it is hard to tell why for sure, and guesses that some stackers sold into the rally. Whatever the cause, fewer tokens locked means less supply taken off the market, which cuts against the yield story.
Usage is softer too. Total value locked on Stacks, the capital sitting in its apps, is about $91 million, down from $134 million a year ago. The sBTC supply has more than halved from above $430 million in the first quarter. In dollars the chain is down about 40% over the year, and STX trades about 90% below its 2024 all-time high of $3.86.
Volume is thin as well: roughly $30 million in 24 hours.
The dollar figures, in millions, show how much of the story sits in Bitcoin and how little in the chain's own activity:
This divergence is the part I would weigh most. A token can rally while usage falls; the two do not have to move together in the same month. Over a year or two they usually have to meet, and right now the gap is wide.
Who is betting, and with how much leverage
Open interest on perpetual futures, the total value of open bets on the STX price, is about $21 million across the big exchanges. That is roughly 3% of the market cap, which is very little leverage for a token that just tripled.
Funding is the small recurring payment between long and short traders that keeps a perpetual contract near the spot price. It sits close to zero. Over the last 30 days it was slightly positive, and about a third of the daily prints were negative. Perpetual volume is roughly the same as spot volume.
The creator reads this as a spot-driven rally, and argues that rallies carried by spot buyers hold up better than ones carried by short-term traders using borrowed money. I think that argument is right as far as it goes, and it assumes the spot buyers stay. Low leverage removes one source of forced selling on the way down. It does not tell us how much of the recent buying came from traders rotating in for a few weeks.
What the creator expects from here
The creator's verdict is to hold, with accumulation on dips. The reasoning: Stacks is "the only Bitcoin layer where the yield arrives in Bitcoin itself", the rally came from spot buyers, and leverage is low. On the old high the creator is blunt: "I don't think we get back to the all-time high, though, but relative to Bitcoin, I think this one can potentially keep outperforming."
Two developments would change the call from hold to buy, in the creator's words. If the second bond fills its 500 Bitcoin and each following period keeps doubling, the total could approach the target inside about two years, and the bond would absorb the token inflation. If the number of stacked tokens turns up, holders are locking rather than selling. Either one could turn a hold into a real buy.
I would treat both as predictions with conditions attached. The doubling is an assumption about demand from institutions, and the bond target moves with the Bitcoin price.
What to watch before you rely on the Stacks thesis
Four numbers carry most of the argument, and each is published regularly:
- Whether the second bond period fills and the one after doubles again.
- Whether stacked STX turns up from its current level. Up means holders are locking; down means they are selling.
- TVL and sBTC supply. Until those turn, the price is running ahead of usage.
- The Bitcoin price, because the bond target moves with it.
The video does not explain what happens if the STX locked as collateral falls in value, so read the bond's collateral and exit rules before locking any coins.
About 250 Bitcoin is live in bonds, and the second period adds 500, so roughly 750, a sixth of the way to the 4,600 the thesis needs. The next bond period is the nearest test of whether the demand behind the rally is real.
