ON–170: Stablecoins 💰
Coverage on Stablecoin Overview, crvUSD, Dai, and USD+.
Jun 2, 2023
- The $120B+ stablecoin market has undergone significant changes in 2023, catalyzed by a bumpy regulatory environment and new challenges brought on by the US banking sector. Since the beginning of the year, the market cap of Tether (USDT) has risen $17B from $64B to $81B—an all-time high—pushing USDT’s market share to 67%. Meanwhile, USDC supply has fallen from 40B to 27B since the collapse of SVB, while BUSD supply is down to just 5B, falling from 16B at year-start.
- Looking at total supply by address size shows that the lion’s share of stablecoins (92B) are still held by large addresses (exchanges, DeFi protocols, bridges, whales) with >1M in supply. Most of the supply being shed this year has come from the top, with this segment of the market falling by 12B.
- At the same time, the amount of daily burnt and issued supply has fallen recently, with an average of 250M units being burnt/redeemed daily, and 170M units being issued daily. The decrease in turnover comes amid ongoing challenges in crypto on/off-ramps to the fiat banking system.
👥 nagaking
- Curve Finance recently launched crvUSD, a crypto-backed stablecoin that offers "soft" liquidation and de-liquidation to borrowers. In contrast to typical crypto-backed stablecoins, crvUSD uses a novel AMM mechanism to gradually trade between crvUSD and crypto collateral, allowing for smooth transitions between liquidated and "de-liquidated" states. Over ~1 week, crvUSD approached its initial "debt ceiling" of 10M crvUSD (left), and amassed significant liquidity in its stabilizer pools (right).
- Over the initial ~1 week since launch, crvUSD has adhered closely to its $1 peg. Prices have largely remained within a narrow range between $0.996 and $1.004. (Left) Timeseries of hourly prices since contract launch; (Right) Histogram of hourly prices (bin size = $0.001).
- Example liquidity distribution for the LLAMMA (lending-liquidating AMM algorithm) market-maker underlying the crvUSD/sfrxETH lending market (block 17388685). As the price traverses each band, LLAMMA shifts its holdings between sfrxETH and crvUSD, allowing for smooth liquidation and de-liquidation.
📈 Dai is now 38% backed by RWA vaults
- Dai supply has fallen below $4.8B. Of this, ~$1B comes from ETH & staked ETH vaults, ~$1.6B from PSM/Stablecoins, ~$1.8B from Real World Asset vaults, including the recently added $500M Dai coinbase custody vault. There is additionally ~$43M from CRV stETH/ETH, ~$95.6 from WBTC, $20M from RETH, and 5M from the recently launched Spark protocol. This means that ~$63M of Maker's ~$92M annual projected fees come from RWA vaults, $10M from PSM-GUSD, ~$19M from onchain collateral.
- MakerDAO signaled its desire (99.9% Yes) to change a number of risk parameters, including large increases in the fees for onchain collateral-backed vaults (ETH,stETH,rETH,WBTC, etc) ranging from ~3.5% to ~6%. Conversely, MakerDAO has also signaled a desire to increase the Dai Savings Rate to 3.49%.
- Over the past 3 months, according to makerburn.com, the average monthly protocol expenses for MakerDAO have risen to ~$5M (~$4M in Dai and ~$1M in MKR). Using makerburn's projected revenue estimate of ~$92M, minus the current rate of expenditure, would yield ~$32M in annual protocol profit.
- Overnight, the protocol behind yield-bearing stablecoin USD+. The protocol is currently live on Arbitrum, Optimism, BNB Chain, zkSync, and Polygon, and has exceeded 50M TVL organically (i.e. pre-TGE, with no rewards). USD+ is fully collateralized backed mostly by delta-neutral strategies. The yield comes from collateral that's deployed onchain in fully transparent contracts. The protocol’s collateral value is marked-to-market with Chainlink oracles daily and its profit is passed to users via rebase daily as well.
- Per TokenTerminal, Overnight's 30-day revenue has exceeded 180K USD (~2.2M annualized). Overnight's revenue comes from a fee retained from the yield generated by its delta-neutral strategies and skimming rebase from USD+ liquidity pools.
- Finally, relative to peers, Overnight has also seen strong growth in terms of revenue (both 30d and 90d). Note: this revenue is organic, i.e. achieved prior to issuing a token that could be used for incentives.
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