- Fortunafi's Real World Insights
- June 2023: RWA & Stablecoin Recap
June 2023: RWA & Stablecoin Recap
One of RWA's biggest months EVER?! We think yes.
Crypto Overview: What Happened Last Month?
An unsettling start to the month following unprecedented, albeit long-awaited, actions from the U.S. Securities & Exchange Commission (SEC) was calmed as the second half of the month came around. On June 5, 2023, the SEC charged Binance Holdings Ltd., its U.S.-based affiliate BAM Trading Services Inc., and their founder Changpeng Zhao with securities law violations. The lawsuit alleges that Binance and Zhao made false claims about restricting U.S. customers from trading Binance.com while secretly allowing high-value U.S. customers to continue trading. Additionally, the SEC accused Binance of operating as an unregistered exchange, broker-dealer, and clearing agency and conducting unregistered offerings of cryptoassets. The next day, the SEC filed charges against Coinbase, accusing the company of operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency, while also failing to register the offer and sale of its crypto asset staking-as-a-service program. Much like the Binance lawsuit, the SEC listed a plethora of cryptoassets that the platform has available for trading that the SEC believes to be securities - BTC and ETH not included.
While many had expected the SEC to take such actions for quite some time, the news sent the broader market lower over the following weeks. However, appetite from the bulls returned later in the month after asset management behemoth Blackrock filed for a bitcoin ETF on June 15, 2023. Days later, a handful of asset managers followed suit with a bitcoin ETF filing, including Fidelity, WisdomTree, VanEck, ARK Invest, and Invesco. Animal spirits were also lifted that week after EDX Markets (EDX), a crypto-focused exchange backed by Fidelity Digital Assets, Charles Schwab, and Citadel Securities, announced that it has officially launched in the U.S. - thereby serving as yet another testament to the emerging industry narrative that “institutions are coming.” The institutional push seen in June and the regulatory crackdown left some market participants believing that the sequence of events was all too coincidental and was perhaps instead coordinated.
Fig. 1: June 2023 Returns - Top 10 Cryptoassets by Market Capitalization
Although not all corners of crypto saw the same level of renewed interest, the month ended on a high note. Market participants are beginning to believe again that crypto's future will consist of retail and institutional market players. Not only that, but the hope of a favorable regulatory regime in the U.S. has started to get industry players excited and optimistic for what’s ahead, especially after news broke late June that the U.S. House Financial Services Committee is set to vote on legislation in July 2023 that is aimed at creating a clearer pathway for digital assets to move from a security to a commodity. The month ended with less than half of the top 10 cryptoassets by market cap trading higher, with LTC, BTC, and ETH the biggest winners after posting a +19.3%, +12%, and +3.1% gain, respectively.
RWA: June 2023 Milestones & Developments
June was another eventful and promising month for the broader Real World Asset (RWA) sector, as evidenced by several key developments and indicators hitting head-turning levels. Some of the more notable developments include the following:
Bank of America said that while tokenization is only one application of blockchain technology, it has the potential to reshape financial and non-financial infrastructure and financial markets in the next 5 - 15 years.
Bernstein said it believes the tokenization industry could reach $5T by 2028, with the growth spearheaded by stablecoins, central bank digital currencies (CBDCs), securities, private market funds, and real estate.
Fig. 2: RWA TVL (30D MA) vs. Tokenized Securities on Ethereum (30D MA)
The 30-day moving average of RWA total value locked (TVL) roared to a new year-to-date high of nearly $790M, up +4.6% from $755M at the start of the month. Much of the gain can be attributed to the rise of tokenized securities on Ethereum, which hit an all-time high TVL of $262M at month-end and made up more than 1/3 of RWA TVL.
The number of RWA token holders advanced by +3% to an all-time high of nearly 86,500, further confirming that market participants are ramping up their RWA exposure.
Fig. 3: RWA-to-DeFi TVL Ratio (30D MA) vs. Crypto-TradFi Risk-Free Yield Spread
Fortunafi’s RWA-to-DeFi TVL Ratio (30-day moving average) finished the month at a year-to-date high of 0.0105x, a level last seen in November 2022, amid newfound interest in RWA but not necessarily the broader DeFi ecosystem. The outperformance of RWA relative to DeFi could also be explained as RWA-related token accumulation and narrative expansion frontrunning the resurgence of DeFi 1.0.
Fig 4: Lending Type as a Percentage of RWA TVL (30D MA)
Collateralized lending continued dominating the RWA ecosystem as uncollateralized lending struggled to gain momentum. As of month-end, collateralized lending made up 87% of RWA TVL, up from 85.7% at the start of the month.
Fig 5: RWA Yields vs. U.S. 10-Year Treasury
RWA-related yields, as well as the 10-Year U.S. Treasury, were largely unchanged month-over-month. Be that as it may, the average lending yield on DAI and USDC on key DeFi platforms, such as Compound and Aave, rose a modest +50 and +30 bps, further narrowing the gap with the 10-Year U.S. Treasury. The rise in DAI’s yield can largely be attributed to the Maker community unanimously voting to increase the Dai Stability Rate (DSR) from 1% to 3.49%, meaning those who lock their DAI into MakerDAO’s DSR smart contracts will earn a yield of 3.49%.
Fig. 6: RWA, DeFi, BTC, & ETH Monthly Performance
Fortunafi’s RWA Index (+11.3%) outperformed the Fortunafi DeFi Index (+2.8%) and ETH (+3.1%) following a surge in newfound interest for the sector, the rise of tokenized securities, and market participants rotating to higher quality, albeit riskier, cryptoassets.
Centrifuge announced its inaugural Real-World Asset Summit in New York on September 19, 2023. More than 250 of the brightest minds from DeFi and TradFi will be attending to discuss the future of tokenization, credit, and crypto.
Stablecoins: June 2023 Milestones & Developments
Last June ended up being one of the sector’s quieter months, that is, on a relative basis. While nothing compares to what went down in the stablecoin ecosystem towards the start of the year and into 2Q2023, several developments did take place that further proved that the stablecoin sector is on the cusp of forever changing not only the broader cryptoasset industry, but finance as we know it. Here’s what went down last month and what you should know:
As part of a larger effort to profit from higher interest rates and push towards being RWA-centric, the MakerDAOcommunity voted to remove Paxos’ USDP stablecoin and remove $390M of $500M worth of Gemini’s GUSD stablecoin from MakerDAO’s reserves. Shortly thereafter, the community agreed to purchase $700M worth of U.S. treasuries, bringing MakerDAO’s U.S. treasury exposure to $1.2B.
-DSR increase causes tons of stables to swap to dai via psm, increase stablecoin balance in the psm
- wbtc and ETH vault rate increases will cause dai borrowers to close vaults and shift to money markets (aave, comp), decreasing dai supply and increasing… twitter.com/i/web/status/1…
— Nick Garcia (@thecurious_gark)
May 31, 2023
Maker’s Dai Stability Ratio (DSR), or the interest earned by holding the DAI stablecoin, rose from 1% to 3.49% - marking the biggest and most notable rate change ever in DeFi. Although too early to tell, many, including Fortunafi’s CEO Nick Garcia, believe that the DSR rate change will have ripple effects across the DeFi ecosystem, given the sheer size of the Maker protocol and DAI’s deep integration across all of DeFi.
The U.S. House Financial Services Committee released a third bipartisan stablecoin bill draft that proposes, amongst other things, that the Fed act as the primary regulator and grants state regulators industry oversight.
Fig. 8: Stablecoin Total Market Capitalization
Further USDC and BUSD redemptions dragged the stablecoin total market capitalization to a new 18-month low of $137.5B into month-end.
Fig 9: Stablecoin Market Capitalization by Coin
Maker’s overcollateralized stablecoin DAI surpassed Binance’s BUSD stablecoin in market capitalization, making it the 3rd biggest stablecoin. Also, the market capitalization of TrustToken’s TUSD stablecoin surpassed $3B for the first time despite depegging and trading as low as $0.80 on fears of TUSD’s backing amid the collapse of TUSD’s custodian Prime Trust.
Fig. 10: Stablecoin Daily Active Addresses
Stablecoin active addresses slipped lower in the first week of June before regaining momentum after the bulls reclaimed the broader cryptoasset market later in the month. However, active addresses for the largest stablecoins have yet to return to levels seen in 1Q2023 and continue to support the notion that the broader cryptoasset industry is in an “accumulation phase” of sorts, and summer doldrums are finally here.
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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 investment decisions. To ensure suitability, contact a licensed investment professional when making any investment decisions and do your own research.RWA