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November 2023: Real World Assets (RWA) & Stablecoin Recap

November 2023: Real World Assets (RWA) & Stablecoin Recap

For the second consecutive month, all pockets of crypto saw a material jump in interest in demand. However, nothing compared to the excitement witnessed within the RWA sector.

Crypto Overview: What Happened Last Month?

After two years of down only, November marked another bull month for bitcoin (BTC) and the broader cryptoasset industry. While November wasn't nearly as bullish as October, as evidenced by the broader market advancing +19% vs. +11% in November, the month was undoubtedly one of the best this year. Not only that, but there were a plethora of industry-wide and sector-specific developments and announcements that proved that life is starting to return to all pockets of the industry, and 2024 is likely to consist of a sea of green.

Fig. 1: November 2023 Returns - Top 10 Cryptoassets by Market Capitalization

When looking at the top 10 cryptoassets by market cap, one will find that while all of the biggest cryptoassets finished the month higher, there was quite a disparity in performance relative to one another. Solana (SOL) was November's outperformer for a second consecutive month, posting a whopping +45% return compared to the average and median return amongst the bunch of +14.6% and +11.1%, respectively. SOL's outperformance can be partly attributed to newfound demand following notable announcements from their flagship Solana Breakpoint conference at the start of the month. Meanwhile, the broader market rally can be explained by a lower-than-expected inflation reading in the United States, growing expectations of interest rate cuts in 1Q2024, speculation that a BTC ETF is on the horizon, and a technical breakout that is suggestive of the tide officially having turned in favor of the bulls.

November was an incredibly bullish month for all crypto sectors; however, many might have missed the unprecedented adoption and developments unique to the Real World Assets (RWA)/tokenization and stablecoin sectors. Just when it looked as though both sectors couldn't look better positioned heading into the tail-end of the year, November proved otherwise. As with every monthly addition of the Fortunafi RWA & Stablecoin recap, after you've finished reading, you can expect to understand better all that went down in November and what's ahead!

RWA: November 2023 Milestones & Developments

Fig. 2: RWA TVL vs. Total Tokenized Products

RWA total value locked (TVL) roared to an all-time high of $2.4B, up +1% from $2.2B in October, amid strong inflow into a handful of key tokenization protocols. Notwithstanding the jump, the number of tokenized products on Ethereum, Avalanche, Base, Optimism, Arbitrum, Polygon, and Gnosis was unchanged month-over-month at 83.

Fig. 3: RWA TVL by Category

When all was said and done, commodities, which consist predominately of tokenized gold issued by Paxos and Tether, made up the lion’s share of all RWA TVL at $976M. Close behind was government securities at $760M, which continues to gain RWA TVL share as protocols across various Layer-1 and Layer-2 blockchains roll out tokenized U.S. treasuries. By the way, did you know Fortunafi supports tokenized U.S. treasuries for U.S. and non-U.S. users? Click here to learn more!

Fig. 4: RWA TVL by Blockchain

As of the month's end, Ethereum remained by far and away the biggest blockchain in terms of RWA TVL at a whopping $1.8B. However, over the past month, a few Layer-1 and Layer-2 blockchains have seen notable growth in RWA TVL - including Mantle ($30M), Solana ($13M), and Canto ($7.4M). We anticipate RWA TVL growth to continue to grow not only within the Ethereum ecosystem but also in the aforementioned blockchains and others as demands continue to ramp up and innovation persists.

Fig. 5: RWA Protocol TVL Change (MoM)

Of the largest RWA protocols, Matrixdock (+$26M), Aktionariat ($25M), Centrifuge ($12M), and Mountain Protocol (+8M) protocol saw the largest month-over-month change in terms of TVL. Despite most protocols seeing a positive change from October, Ondo Finance and Maple Finance experienced a -$5M and -$7M decline in TVL, placing them as November's underperformers.

Fig. 6: RWA-to-DeFi TVL Ratio vs. Crypto-TradFi Risk-Free Yield Spread

A market-wide rebound across all DeFi sectors was concurrent with DeFi TVL outpacing RWA TVL, as shown by our RWA-to-DeFI TVL ratio falling from 0.0305x in October to 0.0279x in November - the first monthly decline since February 2023. The same renewed taste for risk across global markets that propelled crypto higher in November was also the driving force in our Crypto-TradFi Risk-Free Yield Spread, which is the difference between the U.S. 10-year Treasury and the average USDC supply rate on Aave and Compound, compressing mid-month and finishing nearly flat month-over-month. This is because the jump in risk appetite drove the 10-year U.S. treasury to fall from 4.65% to 4.2% in November, as well as crypto borrowing demand to jump and subsequently lending/supply yields to fall.

Fig. 7: 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 demand, roared past 100,000 and notched an +8% gain. The increase came in well ahead of the +4% increase witnessed in October and September, marking the largest month-over-month change in 8 months. In short, the case could be made that market participants continue to develop an increasingly greater understanding of the RWA potential and are ramping up their exposure to the sector as we head into what many expect to be the next bull market.

Fig. 8: November 2023 Performance

As if it wasn't already obvious that RWA is top of mind for market participants, the outperformance of our RWA index (+24.5%) relative to our DeFi index (+21.7%), BTC (+9.5%) and ETH (+11.9%) demonstrates that the sector remains strong and is uniquely positioned to perform well in the months and year ahead.

Notable RWA Developments:

The Philippines government issued $180M worth of tokenized treasury bonds as part of a larger effort to digitize its domestic debt market through blockchain tech.
Fnality, a fintech firm building tokenized versions of major currencies collateralized by cash held at central banks, raised $95M in a Series B funding round that was led by Goldman Sachs and BNP Paribas and included investments from DTCC, Euroclear, Nomura, and WisdomTree. Fnality CEO Rhomaios Ram highlighted that the round underscores the financial sector's interest in a blockchain-based settlement solution that connects traditional finance with DeFi in wholesale markets.
Hong Kong’s Securities and Futures Commission (SFC) announced it is advancing its position as a virtual asset hub by allowing primary dealing of tokenized securities. The move is part of a broader strategy to integrate tokenized investment products into the market and comes off the back of Hong Kong's recent implementation of a new regulatory regime for crypto trading platforms - a significant shift from its previous cautious stance on crypto.
SC Ventures, a division of Standard Chartered, launched Libeara, a new tokenization platform that enables accredited investors to access a tokenized Singapore dollar government bond fund.
HSBC announced its intention to launch a digital assets custody service in 2024. The service will be aimed at institutional clients and is focused on tokenized securities.
Superstate, a blockchain-based asset-management firm, secured a $14M investment to develop U.S.-regulated investment funds on the blockchain. The use of proceeds includes team expansion, establishing private funds for institutional investors, and setting up a framework for tokenized public funds.
The Investment Association, a trade body representing +250 U.K. investment managers collectively managing over £7.7T in assets, announced that U.K. Financial Conduct Authority approved funds to create tokenized funds. The stipulation is that funds invest in conventional assets without altering valuation and settlement processes.
Executives from JPMorgan Chase and Apollo Global Management announced the development of a tokenized enterprise mainnet. The initiative, which involved 17 financial institutions, is focused on exploring asset tokenization and scaling tokenized markets to enhance liquidity, unlock investment opportunities, and improve market efficiency.
The International Monetary Fund, World Bank, Bank for International Settlements, and Switzerland's central bank disclosed that they’re collaborating on the exploration of tokenization in traditional finance. The initiative aims to transform financial assets into digital tokens, enhancing transaction efficiency and supporting economic development, especially in underdeveloped regions.
A survey by Calastone revealed that a significant portion of U.S. and Asian asset managers anticipate introducing tokenized products soon; amongst all else, 67% and 61% of participants based in the U.S. and Asia, respectively, said they expect to have tokenized products on the market within a year. The survey also highlights the primary motivations for tokenization among Asian asset managers, including cost savings, personalized investment experiences, and enhanced liquidity management.

Stablecoins: November 2023 Milestones & Developments

Fig. 9: Stablecoin Total Market Capitalization

After having been in a downtrend since May 2022, an influx of new capital into the cryptoasset industry drove the stablecoin total market cap to a 6-month high of $138B.

Fig. 10: Stablecoin Market Capitalizations

When looking at the top stablecoins by market cap, one will find that the only change in rankings month-over-month was First Digital USD (FDUSD) stablecoin surpassed USDD and FRAX, making it the 6th largest stablecoin by market cap. The change coincided with Binance announcing that BUSDin users’ accounts will be automatically converted to FDUSD on Dec. 31, 2023 - the latest move by Binance in winding down services for its native BUSD stablecoin. However, there were a few notable changes in November, including the market cap of USDT jumping +6% to $89.3B, as well as TrueUSD’s market cap slumping -12% - which was second to BUSD at -17%.

Fig. 11: Change in Stablecoin Supply by Chain

To the surprise of many, the Tron blockchain saw the largest increase in stablecoin supply in November at more than +$2.6B. The surge reflects an increasingly growing demand and usefulness for stablecoins in various parts of Asia. Similarly, a +$114M increase in stablecoins on Terra Classic caught the attention of market participants; the rise can be explained by Binance rolling out perpetual contracts for UST Classic (USTC), as well as the development team behind Bitcoin-focused payment project Mint Cash outlining a vision for a successor of Terra's failed stablecoin and plans of an airdrop to USDT holders.

Fig. 12: GHO Holders vs. Price

Aave's stablecoin, GHO, which has been below its desired $1 peg for nearly the entirety of its life, rallied to $0.98 in November for the first time since August. The grind to $1 proceeds a number of targeted efforts by TokenBrice, a pseudonymous DeFi engineer, to restore GHO's peg. In November, TokenBrice, took over the liquidity committee Aave tasked with restoring GHO's dollar peg. GHO’s rally was also accompanied by the number of GHO holders jumping +52% to 959.

Fig. 13: Stablecoin Daily Active Addresses (30D MA)

Crypto animal spirits were accompanied by the 30-day moving average of stablecoin daily active addresses hitting a 7-month high of more than 116,000 addresses.

Notable Stablecoin Developments:

Easy Crypto and Labrys launched a New Zealand dollar-pegged stablecoin, NZDD, backed on a 1:1 basis by cash. The New Zealand Financial Markets Authority also regulates the stablecoin, which is currently available on Ethereum.
Ginco Inc., Mitsubishi UFJ Trust and Banking Corporation, and Progmat, Inc. launched a joint study to introduce a stablecoin infrastructure to improve settlements in the crypto market. The project involves two stablecoins, XJPY (denominated in Japanese yen) and XUSD (denominated in U.S. dollars), designed to facilitate cross-border settlements.
Circle, the issuer of the USDC stablecoin, partnered with SBI Holdings to enhance its market presence in Japan. The partnership aims to promote USDC circulation and Japan's broader use of stablecoins. According to the announcement, SBI VC Trade is seeking regulatory approval to distribute USDC, while SBI Shinsei Bank will provide banking services to Circle, supporting USDC accessibility for Japanese entities.
The Bank of England and the Financial Conduct Authority in the U.K. proposed integrating stablecoins into the real economy as a legitimate payment option. The proposals involve the Bank of England directly supervising stablecoin entities and requiring stablecoins to be fully backed by central bank deposits.
Last week, Zodia Markets, a subsidiary of Standard Chartered, integrated Circle's EUROC stablecoin into its crypto brokerage and exchange.
Paxos was granted preliminary approval by the Monetary Authority of Singapore to provide digital payment token services in Singapore. Paxos plans to issue a U.S. dollar-backed stablecoin in collaboration with enterprise clients once it receives full approval and aims to meet the global demand for U.S. dollars, particularly in regions where it is difficult to access dollars safely and under regulatory compliance.
According to a quarterly earnings report, PayPal received a subpoena from the U.S. SEC regarding its U.S. dollar-pegged stablecoin, PYUSD.
CFX Labs, a U.S.-based fintech company, raised $9.5M in seed funding to expand its stablecoin payment and remittance network based on the Solana blockchain. The funding round included investors like Shima Capital, Decasonic, Antalpha, and others.

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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.}