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

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

Notwithstanding signs that RWA & stablecoin momentum took a backseat last month, various data points and head-turning developments indicated both are incredibly well positioned to be key themes of 2024.

February 06, 2024

Crypto Overview: What Happened Last Month?

After advancing as much as +15% in the first few weeks of Jan. 2024, a broader market retrace following an explosive 4Q2023 drove the vast majority of the top 10 cryptoassets by market cap and sectors lower into month-end. The softness proved that despite 11 different BTC ETFs getting approved and heightened prospects of multiple central bank cuts in 2024, market participants largely opted to capitalize on last quarter’s stellar performance to take profit. Much of the second-half weakness experience can also be attributed to fears of potentially relentless sell pressure of Grayscale’s BTC Trust; on Jan. 12, 2024, it was reported that Grayscale, one of the largest BTC holders, had moved $41M worth of BTC To Coinbase Prime - with market participants suspecting that the movement of funds was to liquidate BTC and payout holders of the GBTC trust.

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

When all was said and done, the broader crypto market notched a monthly return of -1.5%, marking the worst monthly performance since Aug. 2023. Similarly, the average return of the top 10 cryptoassets by market cap was an underwhelming -5.5, with LINK (+5.3%), TRX (+4%), BTC (+0.9%), and ETH (+0.1%) as the month’s top performers. Said softness also coincided with the broader Real World Assets (RWA) sector cooling off following its best year ever in 2023.

But while there were signs that RWA momentum took a backseat last month, there were still many data points and head-turning developments indicative of RWA being incredibly well positioned to be one of the key themes of 2024 - as outlined by CoinGecko in their latest report, “Top 11 Narratives for 2024.” Similarly, Jan. 2024 showed several signs that after nearly two years of suppressed activity, the stablecoin market continues to heat up, and 2024 could very well be the sector’s best year, even with positive regulation, unprecedented adoption, and unexpected innovation leading the way. That said, next, we will cover the most significant milestones and notable developments of Jan. 2024 for RWA and stablecoins to help you better understand why this year could be the biggest ever for both sectors.

RWA: January 2024 Milestones & Developments

Fig. 2: RWA TVL vs. Total Tokenized Products

After hitting an all-time high of $2.43B in early Jan. 2024, RWA's total value locked retreated modestly lower and finished Jan. at a near-monthly low of $2.41B. The 1% decline in RWA TVL marked the first monthly decline since May 2023 and also coincided with the number of tokenized products on Ethereum, Avalanche, Base, Optimism, Arbitrum, Polygon, and Gnosis, or what we see as a proxy for the broader RWA industry, slipped from 82 to 81. The shift could be interpreted as the RWA sector cooling off after notching it's most significant year in 2023.

Fig. 3: RWA TVL by Category

Looking at RWA TVL by various verticals, one will find that last month’s softness was largely attributed to a drop in tokenized commodities and government securities, which fell -$20M and -$6.3M, respectively. As we highlighted in our report, 2024: 10 Predictions for RWA & Stablecoins, the softness in government securities comes as little surprise, as we expect growth in tokenized government securities to underperform new, emerging RWA verticals as tokenization innovation persists and market participants develop a greater tolerance for risk amid forthcoming central bank interest rate cuts. For instance, consider that Asset-Based Finance, a vertical that saw relatively menial growth last year, experienced a +$6.3M jump in TVL in Jan., making it the best performer.

Fig. 4: RWA TVL by Blockchain

Regarding month-over-month change in RWA TVL by chain, the most notable shifts were Gnosis and Ethereum, which shed nearly -$90M and -$120M in TVL, respectively. Despite the drop, Ethereum and Gnosis remain the largest and fourth largest chains by RWA TVL, standing at $1.9B and $96M, respectively.

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

Further proof that RWA momentum slowed in Jan. 2024 can be seen when our RWA-to-DeFi TVL ratio measures total TVL in RWA protocols relative to all of DeFi. Since hitting an all-time high of 0.034x in late Oct. 2023, the ratio has been in a downtrend and slipped to a 10-month low of 0.022x on Jan. 10 before rebounding later in the month and finishing Jan. at a reading of 0.0232x. However, while DeFi TVL rallied more than +$600M to $57.8B, supply yields on the largest DeFi protocols, like Aave and Compound, slipped more into month-end than compared to the 10-Year Treasury. The decline in DeFi supply rates resulted in the Crypto-TradFi Yield Spread dropping to 1.3% into the end of the month, a sign that the DeFi sector has started to attract market participants amid a broader crypto market revival. Nonetheless, the case could be made that as DeFi interest continues to pick up steam, a rotation into RWA and other sub-sectors of DeFi is merely a matter of time.

Fig. 6: Number of RWA Token Holders

Despite various signs that RWA momentum cooled in Jan. alongside the broader market, the number of RWA token holders of BST, CFG, FACTr, GFI, MPL, ONDO, RIO, TRADE, TRU, and wCFG (a proxy for the broader RWA sector) continued to press to new highs in Jan. The number of holders surpassed 110,000 to a month-end reading of 112,726, notching an +8% increase for the month. Be that as it may, it should be noted that last month’s increase was the lowest in three months.

Fig. 7: Jan. 2024 Performance

Our RWA Index, which serves as a proxy for the broader performance of RWA-based tokens, scored a remarkable +22% return last month. Not only did the index notably outperform both BTC (+2%) and ETH (+2%), but it blew away that of our DeFi Index (-8%). Much like the number of RWA token holders, the performance of our RWA Index indicates that RWA interest remains alive and well despite the sector’s growth taking a pause.

Notable RWA Developments:

Outlier Ventures released a report titled “Beyond the hype of Real World Assets” (RWA), whereby the firm discussed the future of tokenization and estimated that the total addressable market (TAM) for tokenization could hit a conservative $15 Trillion by 2030.
Injective, a Cosmos-based Layer 1 blockchain, launched its Volan mainnet upgrade, focusing on integrating RWA into its platform. The upgrade aims to provide both institutional and individual users with access to structured products like tokenized fiat currency pairs, treasury bills, and unique credit products.
The Swiss Financial Market Supervisory Authority (FINMA) authorized a retail trading platform for trading tokenized securities and digital assets. Developed by Taurus, a Deutsche Bank-backed fintech company, the platform provides digital asset infrastructure for banks and institutions and is now accessible to retail investors through its TDX trading platform.
The Bank for International Settlements (BIS) Innovation Hub said it is initiating a blockchain-based tokenization project in 2024. A key initiative, Project Promissa, in collaboration with the Swiss National Bank and the World Bank, aims to develop a digital platform for tokenized promissory notes, traditionally paper-based financial instruments. The project's proof-of-concept is expected to be completed by early 2025.
BlackRock CEO Larry Fink expressed support for an ether ETF, viewing it as a step towards the broader goal of tokenization. His comments followed the recent approval by the Securities and Exchange Commission of several spot bitcoin ETFs for trading in the US. Fink, in his remarks to CNBC, emphasized the significance of these developments as precursors to a future where tokenization is prevalent, highlighting the readiness of the technology required for this transition.
Libre, a joint venture between Alan Howard-backed WebN and Nomura’s Laser Digital, announced plans to launch a web3 fund tokenization protocol on a permissioned Polygon sidechain, with Brevan Howard as an initial asset manager partner. The move is part of future expectations of a shift to public blockchains for most activities, while maintaining permissioned infrastructure for specific functions.
Italian startup BlockInvest said it plans to tokenize non-performing loans (NPLs) in two projects, partnering with Milan-based 130 Servicing for a proof-of-concept to issue native digital asset-based securities notes directly onchain. Additionally, the startup said it is pursuing a second project involving the collaboration with credit management company Davis & Morgan to tokenize distressed real estate credits acquired by the firm, enabling tokenization of financing agreements and related instruments in the Italian NPL market.
Solana Labs unveiled the launch of token extensions to cater to a wide range of industries, including stablecoins, RWA, and payments. The newest extension enables tokens to have transfer hooks, transfer fees, confidential transfers, permanent delegate authority, and non-transferability.

Stablecoins: January 2024 Milestones & Developments

Fig. 8: Stablecoin Total Market Capitalization

The total stablecoin market cap finished last month higher for a fourth consecutive month. Jan. 2024 started with the stablecoin market cap sitting at $140B before pushing to more than $145B as of month-end, notching a 10-month high. The relentless grind higher comes amid renewed interest in crypto due to a plethora of tailwinds, including a BTC ETF, the BTC halving in Apr. 2024, and prospects of several interest rate cuts in 2024.

Fig. 9: Top Stablecoin Market Capitalizations

Aside from BUSD’s market cap shedding more than $990M in Jan. 2024 and becoming the 18th largest stablecoin by market cap after standing at the 6th ranked spot at the start of the month, there was virtually no change in the ranks of the largest stablecoins by market cap - aside from FDUSD flipping TUSD. Though it should be noted that USDT, USDC, and FDUSD did see a considerable jump in market cap in Jan., adding +$4.4B, +$2B, and $770M in market cap, respectively. USDT’s strength can be attributed to renewed faith in the stablecoin after Howard Lutnick, the chairman, CEO, and majority owner of Cantor Fitzgerald, a major financial services firm, confirmed that Tether possesses the funds it purports to have based on the firm’s role as USDT’s custodian. On the flip side, despite lackluster performance for USDC over the past year or so, Circle reported on Jan. 15, 204, that the number of wallets holding at least $10 in USD Coin (USDC) increased by 59%; Circle attributes USDC’s market cap decline from $45B to $25B in 2023 due to rising interest rates, regulatory actions, bankruptcies, and fraud within the crypto industry.

Fig. 10: Change in Stablecoin Supply by Chain

In terms of stablecoin issuances and redemptions, Ethereum (+$2.5B), Tron (+$1.9B), Solana (+$274M), and Base (+$136M) saw notable net issuances of stablecoins on their chains in Jan. 2024 amongst the top 10 chains by stablecoin supply. The abnormal jump in stablecoins issued on Base, as well as the Ethereum-based Layer 2 blockchain breaking into the top 10, came off the back of Coinbase partnering with Yellow Card to expand its services, including the USDC stablecoin, to 20 African countries. The partnership will integrate Yellow Card's payment systems, allowing African customers to easily convert fiat currency to Bitcoin and USDC on Coinbase's Ethereum layer-2 rollup Base.

Fig. 11: Stablecoin Daily Active Addresses (30D MA)

Proof that stablecoin demand and interest have started to ramp up, a broader sign of newfound crypto demand, can also be seen when looking at the 30-day moving average of stablecoin daily active addresses. More specifically, the number of daily active addresses hit a 7-month high of 125K, signaling to the market that we could be in the early innings of the next stablecoin renaissance. While stablecoin usage is expected to increase, as our most recent report noted, we anticipated new and innovative stablecoins with added utility (like interest yielding) to come to market and steal market share.

Fig. 12: PYUSD Total Supply vs. PYUSD Cumulative Transactions

Since launching in Sept. 2023, PayPal's PYUSD has struggled to gain momentum and become widely adopted in the crypto ecosystem like some of its peers. But last month, there was a revival in demand and usage that drove both the total supply and cumulative PYUSD transactions considerably higher. More specifically, the total supply of PYUSD advanced to 301M PYUSD from 264 PYUSD, a +14% increase. Similarly, the cumulative number of transactions roared nearly +39% to a new high of roughly 13,400. The revival of PYUSD can be explained by a late-Dec. integration into a liquidity pool on the automated market maker (AMM) platform Curve. The pool includes PYUSD and Frax Finance's FRAX, a collateralized algorithmic stablecoin, and has already amassed $135M in TVL, ranking third behind the notable 3pool. The FRAXPYUSD pool allows traders to swap FRAX for PYUSD, which can be used on the PayPal app for various transactions.

Notable Stablecoin Developments:

Over two years after implementing a broad crypto ban, Chinese authorities stated they're intensifying their crackdown on using cryptocurrencies like Tether (USDT) for foreign exchange trading. They have specifically targeted the use of USDT for trading between the Chinese yuan and other fiat currencies, declaring it illegal and calling for stricter enforcement measures. In contrast, Hong Kong regulators introduced a proposal in early Jan. to license stablecoins.
Circle Internet Financial, the issuer of the stablecoin USDC, announced on Jan. 11, 2024, its confidential submission for an initial public offering in the U.S., a step towards becoming a publicly listed company. The details regarding the number of shares to be offered and the expected price range for the IPO were not revealed by Circle.
In Fidelity's 2024 Digital Assets Look Ahead report, the institution suggested that a potential interest rate cut by the U.S. Federal Reserve could reignite institutional interest in DeFi and stablecoins in 2024. Fidelity noted that if DeFi yields become more appealing than TradFi yields in 2024, along with better infrastructure, institutions might fuel said interest.
TrueUSD (TUSD) introduced daily attestation services by accounting firm Moore Hong Kong to enhance transparency after the stablecoin depegged from $1 on Jan. 15, 2024, dropping to $0.984. The depeg came after significant trading activity on Binance, where over $339 million of TUSD was sold in 24 hours, resulting in a net outflow of $42.3 million from the exchange. TrueUSD attributed the depegging to "community mining activities associated with Binance Launchpool," which created short-term arbitrage opportunities, while others speculated that the depeg may be related to the stablecoin not being included as an asset on the Manta launch pool initiative by Binance.
During an interview at the World Economic Forum's annual meeting in Davos on Jan. 15, 2024, Circle CEO Jeremy Allaire expressed optimism about the United States passing a stablecoin law in 2024, citing strong momentum and a good chance of it becoming law within the year. Allaire emphasized the urgency for the U.S. to regulate digital dollar currencies, as other governments are already doing so, and highlighted the need for U.S. leadership in this area along with appropriate consumer protections.
Figure Technologies Inc., a blockchain and lending startup, proposed launching an interest-bearing stablecoin to the SEC. According to a Bloomberg report, the stablecoin will be registered as “face-amount certificates” and issued using blockchain technology by Figure Technologies' subsidiary, Figure Certificate Co. Meanwhile, Figure Markets, the company's digital asset branch, recently announced plans to raise $50M at a $250M valuation, in partnership with Jump Crypto, to bolster its operations.
GMO Trust launched GYEN, the first regulated Japanese yen (JPY) stablecoin, and ZUSD, a trusted U.S. dollar (USD) stablecoin, on Solana in late Jan. The impetus for launching both stablecoins was to leverage Solana's advanced blockchain technology and offer rapid transaction execution as part of a broader effort to connect the Japanese yen and U.S. dollars to the digital asset space to provide users easy access to GameFi and Web3 mobile applications.
Circle extended the issuance of its USDC stablecoin to the Celo network, a soon-to-be Ethereum-based Layer 2 blockchain. The move is part of Celo's broader strategy to become a key infrastructure for tokenized real-world assets (RWA), such as bonds and credit, by placing them on blockchains in token form and using stablecoins for settlements.
On Jan. 31, 2024, Tether Holdings Limited reported a record quarterly earnings of $2.85B for 4Q2023, driven by interests from U.S. Treasuries and gains from Gold and BTC reserves. Additionally, the year ended with outstanding secured loans of $4.8 billion, fully covered by $5.4 billion in excess reserves, as confirmed in the BDO attestation.
Deka Investment, one of Germany's largest fund providers, issued tokenized fund shares on SWIAT's decentralized financial market infrastructure, with plans to also trial redemption. This innovation is in line with Germany's regulations on digitalized securities, allowing for 'crypto' securities on decentralized networks.

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