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April 2024: Real World Assets (RWA) & Stablecoin Recap

April 2024: Real World Assets (RWA) & Stablecoin Recap

The broader cryptoasset market's seven-month winning streak may have ended in April, but RWA and stablecoin innovation and demand held firm.

May 06, 2024

Crypto Overview: What Happened Last Month?

After virtually seven months of “up-only”, the broader crypto asset market closed April as its worst monthly performance since June 2022 when Celsius Network, a major US cryptocurrency lending company, froze customer withdrawals and transfers amid “extreme” market conditions. Although the drop has caused many market participants to question whether or not further pain is around the corner and, dare we say, a crypto crash is imminent, seasoned market veterans merely finished the month viewing the retrace as simply “business as usual.” That is to say, recent market weakness is simply a reflection of crypto’s highly volatile nature and a correction after a multi-month, relentless rally. When all was said and done, all of the top 10 largest cryptoassets by market capitalization finished April in the red. Be that as it may, TON and BNB were the month’s outperformers with a modest decline of -4.1% and -4.6%, respectively, which was notably better than the group’s average and median return of roughly -23%.

Fig. 1: Apr. 2024 Returns - Top 10 Cryptoassets by Market Capitalization

It was anticipated that the crypto markets would cool off after a remarkable rally in recent months. However, this cooling coincided with significant events that prompted market participants to derisk. One such event was U.S. Fed chair Jerome Powell stating that the Fed's restrictive rates policy needs more time to work after a higher-than-expected inflation print (CPI +3.5% YoY vs +3.4% YoY expected). This statement notably impacted market sentiment, contributing to the derisking. Additionally, news of the SEC sending a Wells Notice to UniSwap labs over DEX regulations further weighed on sentiment. Lastly, the completion of BTC's fourth halving on April 19, 2024, played a role in the derisking, as signs emerged that the near-term tailwinds associated with BTC's block rewards getting cut in half had been fully realized.

As with past months, many signs indicate that momentum relating to the Real World Assets (RWA) and stablecoin sectors remain alive and well. Furthermore, several developments signaled to the market that both stand as the most innovative amongst their peers, and capital is likely to continue to flow into both as their usefulness becomes more apparent amongst crypto-natives and non-crypto natives. Said differently, innovation and adoption in the world of RWA and stablecoins have yet to slow. They will, if anything, continue to see outsized demand and capital while other sectors fight to find true product-market fit. With that said, next, we'll cover April's biggest milestones and most notable developments to help readers better understand why the party is just getting started for both sectors.

RWA: April 2024 Milestones & Developments

Fig. 2: RWA TVL vs. Total Tokenized Products

RWA total value locked (TVL) roared to an all-time high of $5.56B earlier in the month before retreating to a month-end reading of $5.28B, marking a jaw-dropping +22.2% increase from a reading of $4.3B in March. The jump can largely be attributed to the continued adoption of Ethena’s synthetic dollar protocol and a subsequent +$816M increase in the protocol’s TVL. While various pockets of RWA saw a meaningful rise in TVL, the number of tokenized products on Ethereum, Avalanche, Base, Optimism, Arbitrum, Polygon, and Gnosis, or what we believe to be a proxy for broader RWA protocol growth, was unchanged month-over-month at 83.

Fig. 3: RWA TVL by Category

As of month-end, the synthetic dollar, government securities, and commodities made up the lion’s share of growth in RWA TVL. Month-over-month, the synthetic dollar vertical grew +50% (+$771M) while government securities and commodities grew by +5.78% (+$69M) and +3.54% ($34M), respectively. Meanwhile, corporate bonds and equities saw virtually nil growth amid minuscule demand amongst market participants.

Fig. 4: RWA TVL by Blockchain

Thanks to the rise of Ethena, Ethereum emerged last month as the leader when looking at month-over-month RWA TVL change. Second and third to Ethereum were Solana and Stellar, which saw RWA TVL rise by a relatively menial +$10.2M and +$7.5M, respectively. Nonetheless, while it stands to reason that RWA TVL growth will likely continue to outpace peers, other blockchains are destined to see adoption ramp up as innovation persists.

Fig. 5: RWA-to-DeFi TVL Ratio vs. Crypto-TradFi Risk-Free Yield Spread

Given last month’s broader market weakness, it was no surprise to market participants that DeFi’s TVL slumped into month-end and hit a 2-month low. Similarly, the Crypto-TradFi Risk-Free Yield Spread, which is the difference between the 10-year U.S. Treasury and the average USDC supply rate on Aave and Compound, sank to a reading of 2.26% amid a plunge in borrow/lending activity in DeFi - causing yields to compress and trend towards the 10-year U.S. Treasury yield. Notwithstanding the largest cryptoassets having slumped more than -20% and borrow/lending activity falling off a cliff, the sector’s TVL fell a relatively modest -6%. However, the climb in RWA TVL resulted in our RWA-to-DeFi TVL Ratio hitting an all-time high of 0.0338x amid RWA TVL surging to an all-time high in mid-April - which came off the back of the ratio sinking to a 17-month low in March 2024. As we’ve mentioned time and time again, while we expect DeFi innovation to persist, we also expect RWA TVL to continue to make up a greater share of the DeFi pie in the years ahead as both crypto natives and TradFi continue to dabble in the sector and build new RWA products.

Fig. 6: Number of RWA Token Holders

The number of RWA token holders across a select number of tokens, or what we see as a proxy for broader RWA adoption, finished at over 500,000 holders in April. As seen in Figure 6, April brought a notable jump in the number of RWA token holders, rising by more than 25,000 wallets (+4.6%) to a month-end reading of precisely 506,324. The remarkable +15% increase in RWA token holders so far this year, not to mention April’s jump, continues to support the notion that market participants are developing an increasingly greater interest in RWA, and the next wave of adoption is on the horizon.

Fig. 7: Apr. 2024 Performance

Although April was a stellar month for the RWA sector, our RWA Index posted a -32% decline month-over-month, considerably worse than BTC and ETH’s monthly returns of -15% and -17%, respectively. However, it ought to be noted that despite underperforming BTC and ETH, our RWA Index performed better than our DeFi Index - or what could be interpreted as relatively nascent RWA tokens still retaining more robust demand than well-established DeFi tokens even in a risk-off market environment.

Notable RWA Developments:

In collaboration with OpenTrade, Woo X crypto exchange introduced RWA Earn Vaults, allowing retail customers to invest in tokenized U.S. Treasury bills.
Centrifuge revealed intentions to develop an RWA lending protocol for institutions on Base in response to institutional demand for easier access to tokenization solutions on-chain. Centrifuge also announced a successful $15M venture capital investment round led by ParaFi Capital and Greenfield.
PV01, led by the founders of crypto market maker B2C2, completed its inaugural tokenized bond sale of $5M worth of U.S. Treasury bills under English law.
Homium, a real estate equity mortgage lender and securitization platform, launched its first home equity loans on Avalanche, thereby allowing homeowners in Colorado to access tokenized loans by committing a portion of their home's appreciation. Additionally, Homium secured $10 million in Series A funding led by Sorenson Impact Group and Blizzard, Avalanche's ecosystem fund.
Moody's Investors Service published a report detailing the potential of blockchain-powered secondary markets to broaden the scope of tokenized assets. The report underscored the significant improvements blockchain and tokenization bring to secondary market structures, including enhanced liquidity management, market data accessibility, and faster settlements.
Franklin Templeton enabled peer-to-peer token transfers for its $380M million tokenized money market fund, the Franklin OnChain U.S. Government Money Fund (FOBXX), allowing investors to exchange the BENJI token without intermediaries.
The Bank for International Settlements (BIS) announced "Project Agorá," involving seven central banks and private financial firms, to explore tokenization's potential in improving financial systems. The project is aimed at integrating tokenized commercial bank deposits with tokenized wholesale central bank money.
GK8, acquired by Galaxy Digital, launched Tokenization Wizard to facilitate the creation of blockchain-based versions of RWA and manage stablecoins and Web3 applications securely.
HSBC's CEO, Noel Quinn, expressed plans to expand the bank's offerings of tokenized assets, emphasizing the benefits of tokenization, such as cost-effectiveness and improved trading efficiency.
Chainlink researchers suggested in a report that asset managers have a significant opportunity to embrace tokenization as financial infrastructures become increasingly digital. Their report outlined the potential benefits of tokenization for asset managers, including unlocking dormant capital, enhancing asset availability, and enabling novel revenue models.
Sarah Breeden, Deputy Governor of the Bank of England, highlighted the central bank's efforts to support innovation, particularly in wholesale settlement of tokenized assets using central bank money. She stressed the importance of banks promptly embracing innovation, noting the participation of major UK banks in tokenization trials. She also expressed concerns about the dominance of card-based retail payments compared to direct bank deposit systems like those in India, Sweden, and Brazil.

Stablecoins: April 2024 Milestones & Developments

Fig. 8: Stablecoin Total Market Capitalization

For a sixth consecutive month, the total stablecoin market cap advanced higher and notched a +5.5% increase in April - a level last seen in June 2022. The relentless rally witnessed since hitting a multi-year low in August 2023 continues to signal to the market that stablecoin adoption has yet to run out of steam, and the current bull market is still going strong.

Fig. 9: Top Stablecoin Market Capitalizations

Rankings amongst the largest stablecoins by market cap were unchanged in April, though several stablecoins saw notable shifts in market capitalization. Most notably, the market cap of Tether's USDT stablecoin surged +$6B while Circle's USDC grew a comparatively unimpressive +$745M, thus furthering the gap between the two largest stablecoins. Additionally, DAI, the third largest stablecoin by market cap, grew by nearly $350M to $5.3B - yet remains on the cusp of getting passed by First Digital's FDUSD after the stablecoin grew by $1.6B last month. But while the two are on the brink of being equal of size, Ethena's USDe stablecoin looks to also be a potential contender for 3rd place, especially after growing by more than $770M in April and remaining on a relentless uptrend since launching in January.

Fig. 10: Change in Stablecoin Supply by Chain

When looking at the change in stablecoin supply across many of the largest Layer-1 and Layer-2 blockchains, one will find that Tron (+$3B), Ethereum (+$2.5B), and Base (+$1.5B) experienced billion-dollar net issuances - thereby separating themselves from peers. Of the 10 largest chains by total stablecoins issued, the average and median change came in at +$914M and $408M, respectively.

Fig. 11: Total Stablecoin Transactions by Chain

When segmenting out all stablecoin transactions by blockchain, one will find that Solana, BSC, and Tron stood out in April with the most number of stablecoin transactions at 128M, 70M, and 58M, respectively. When diving into transaction sizes, Solana was far and away the most commonly used chain for transactions smaller than $100 (64M transactions) and transactions ranging between $100K - $1M (5.5M transactions). Interestingly enough, while Ethereum was third to last in terms of total transactions, it dominated in terms of transactions exceeding $1M, with more than 87,000 transactions. In comparison, Tron and BSC were runners-up with only 30,890 and 4,811 transactions of similar size.

Figure 12: Stablecoin Transaction Size By Blockchain, By Amount

Notable Stablecoin Developments:

OpenDelta secured $2.15M in a pre-seed round led by 6th Man Ventures as part of an effort to utilize Bitcoin to create a stable fiat-denominated stablecoin by way of Runes, a novel DeFi trend built atop Bitcoin. OpenDelta's stablecoin, USDO, will retain its dollar value by hedging Bitcoin deposits as collateral, offering yield-bearing benefits to holders while utilizing institutional-grade custodians for wallet management.
Stripe announced plans to support crypto stablecoin payments this summer, nearly six years after disabling support, beginning with Circle's USDC stablecoin. Co-founder John Collison announced the move at the company's Global Internet Economy conference, highlighting the improved user experience and the growing utility of crypto, citing increased transaction speeds and reduced costs. Payments will initially be available on Solana, Ethereum, and Polygon blockchains.

Crypto is back. @stripe will start supporting global stablecoin payments this summer. Transactions instantly settle on-chain and automatically convert to fiat. Join the waitlist stripe.com/use-cases/cryp… and watch the demo (h/t @solana) from Sessions.
— John Collison (@collision)
6:12 PM • Apr 25, 2024

U.S. House Representative Maxine Waters suggested that the final version of the stablecoin bill could be imminent, aiming to ensure investor protection and asset backing for stablecoins. Negotiations between Waters and House Financial Services Committee Chairman Patrick McHenry reportedly include plans to tie the legislation to a must-pass Federal Aviation Administration reauthorization next month.
Tether announced the expansion of its dollar-pegged stablecoin and gold-backed XAUT on Telegram’s The Open Network (TON). With $10M worth of USDT authorized on TON and $3M already issued, Tether aims to facilitate borderless payments among Telegram's 900M users and boost activity and liquidity in the TON ecosystem, enabling users to participate in decentralized finance (DeFi) applications.
Usual Labs secured $7M in funding and garnered a TVL commitment of $75M for the launch of its stablecoin, USD0. Backed by over a hundred firms, including IOSG Ventures and Kraken Ventures, the raise will support preparations for USD0's launch on Ethereum in 2Q24. USD0 is a permissionless stablecoin backed by RWA and aims to provide holders with yields generated by these assets amidst a competitive stablecoin market dominated by USDT, USDC, and DAI.
Senators Cynthia Lummis and Kirsten Gillibrand introduced a stablecoin bill aimed at regulating how stablecoins operate in the U.S., requiring issuers to meet reserve and operational standards and deal exclusively in dollar-backed tokens. The bill defines payment stablecoins as dollar-pegged digital assets for payment or settlement, mandating issuers to convert to dollars and ensuring regulatory oversight by both state and federal authorities.
First Digital Trust announced the expansion of its FDUSD stablecoin on the Sui blockchain. CEO Vincent Chok highlighted the token's compliance with Hong Kong's digital asset regulations and its backing by U.S. Treasury bills and bank deposits.
U.S. Rep. Patrick McHenry said he is confident that Congress can pass stablecoin regulation before his retirement, despite recent political hurdles. McHenry emphasized the potential for bipartisan cooperation in regulating digital assets, although Senate action on stablecoin legislation is pending, and challenges remain regarding the role of federal oversight and resistance from certain quarters.
According to a research report by broker Bernstein, the stablecoin market is expanding rapidly, particularly for cross-border settlements with early users, including payment firms and fintech companies. The report highlights Solana's growing prominence in blockchain payments and potential for mainstream consumer and business-to-business transactions, as evidenced by ongoing pilots with Visa and Shopify.
Ripple announced it plans to launch its own stablecoin pegged to the U.S. dollar, citing the significant growth of the stablecoin market and demand for reliable, utility-driven options. The token, scheduled for release later this year, will be fully backed by U.S. dollar deposits and short-term U.S. government Treasuries, initially deployed on Ripple's XRP Ledger and Ethereum.
Frax Finance announced its intent to integrate FRAX, a crypto-collateralized stablecoin pegged to the U.S. dollar, into the Cosmos ecosystem through Noble. The move aims to enhance FRAX adoption across various applications within Cosmos, providing users with a decentralized alternative to USDC while fostering innovative use cases and incentives within the community.

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Disclaimer: The information contained herein is general information, intended for educational purposes only, and is not intended to constitute legal, tax, accounting, or investment advice. Information, opinions, and views are solely of Fortunafi, and none of the information contained should be used as the basis for any investment decisions. To ensure suitability, contact a licensed investment professional when making any investment decisions and do your own research.A