LD Track Insights Weekly [2023/05/22]
[Summary]
Stablecoins: The total market capitalization of the stablecoin sector continued to shrink, declining from $137.5 billion at the beginning of 2023 to $129.9 billion. Within the sector, the market capitalization of USDC has been consistently decreasing, falling below $30 billion and returning to September 2021 levels. On the other hand, USDT’s market share has continued to grow, reaching a market dominance of 63.85%. The introduction of crvUSD stablecoin had moderate interest, with collateral worth less than $10 million.
LSD: The staked ETH in the beacon chain grew by 0.51% compared to the previous week, approaching the next growth phase (where the staked ETH increases from 1,800 validators per day to 2,025 validators per day) when the number of validators reaches 589,824. The current staking rate for ETH stands at 17.29%.
Ethereum L2: There was no significant change in the overall TVL (Total Value Locked) of Layer 2 solutions in the past week, with a total locked amount of $8.74 billion. Among the Layer 2 solutions, Arbitrum TVL experienced a slight decline but still holds a 65.7% market share of Layer 2 TVL. However, when looking at the number of ETH bridged, the four major L2 solutions are closely matched, with starknet having the highest amount bridged, reaching 6,647 ETH, indicating funds gradually flowing into ZK-based Layer 2 solutions.
DEX: The overall trading volume in the crypto market has been declining since April, with DEX trading volume reaching its recent peak in March at $133.5 billion. In April, it dropped to $73.7 billion, and as of May 22nd, it reached $51 billion. However, the spot trading volume from DEX to CEX (centralized exchange) reached a historical high of 21.84%. Additionally, there has been notable growth in trading volume on some Layer 2 DEX platforms.
Derivatives DEX: Since May, the overall trading volume of derivatives DEX has been consistently declining. The daily trading volume of major protocols has dropped over 50% compared to April, and the open interest has decreased by around 20%. The decline in trading volume has led to reduced protocol revenue and decreased protocol yield, resulting in a slight 5% decline in TVL.
RWAs: The peak cumulative borrowing amount for RWAs (Real-World Assets) was reached in May 2022 at $1.4 billion. Since the beginning of May, there have been no significant changes in RWAs data, with the current active loan volume at $512 million.
【Stablecoin Track】
The total market capitalization of the stablecoin sector has been consistently shrinking, declining from $137.5 billion at the beginning of 2023 to $129.9 billion. Since the USDC anchoring incident on March 8th, the market capitalization of USDC has been on a downward trend, while the market share of USDT has continued to increase. According to defillama data, as of May 21st, the market capitalization of USDC has dropped to $29.41 billion, while USDT has exceeded $82.98 billion, with USDT holding a market share as high as 63.85%.
According to data from Circle’s official website, as of May 18th, the total supply of USDC was $29.6 billion, with a total reserve of $29.7 billion. The market capitalization has fallen back to the level seen in September 2021. In the past week, the issuance of USDC was $1 billion, while the redemption reached $1.4 billion, resulting in a decrease of $400 million in circulation.
Since the deployment of the mainnet on May 4th, the number of addresses holding the Curve stablecoin crvUSD is only 33. The net borrowing of crvUSD is approximately $4.7 million, with collateral value of around $6.52 million. On May 18th, the crvUSD UI was officially deployed, resulting in a 243% increase in collateral value compared to before the UI deployment. Currently, only sfrxETH is supported for collateral minting, with future support for stETH.
Since the official launch of the MakerDAO lending protocol Spark on May 9th, the total collateral value is $7.46 million, with net borrowed funds amounting to less than $1 million.
【LSD】
In the past week, the staking amount of ETH in the beacon chain has increased by 0.51% compared to the previous period, approaching the next growth range. The current staking rate of ETH has reached 17.29%*. The staking amount of ETH in the past week reached 18,514,148 coins, with a 0.51% increase compared to the previous period. The number of validators has reached 578,573, and when it reaches 589,824, the maximum daily increase in ETH staking validators will rise from 1,800 to 2,025 validators per day, entering the next growth range. This situation is expected to occur within the next 7 days, with an estimate of 9 days.
Image: Continuous Growth in Beacon Chain Validators
*The calculation is based on ETH Locked/ETH Supply; the numerator includes the staked ETH in the beacon chain, the ETH deposited in the beacon chain but not yet activated for validation, and the ETH rewarded by the beacon chain.
Image: ETH Staking Yield Falls Compared to Last Week
The three major LSD protocols have shown steady growth, with Lido experiencing a decline in staked ETH due to a large withdrawal by Celsius. This week, Lido’s ETH staking decreased by 2.82% (excluding the impact of the 428,000 stETH withdrawal by Celsius, Lido actually grew by 3.64%), Rocket Pool grew by 7.48%, and Frax grew by 11.70%, all surpassing the overall growth rate of ETH staking. Rocket Pool’s Minipool queue is at 1,631, and the dynamic deposit pool remains at zero balance, with TVL growth determined by the deposit side. Frax’s CR has increased to 94.75%.
There are discussions within the Lido community regarding staking dividends, and the execution of the proposal carries uncertainties. The proposal suggests allocating 20%-50% (subject to governance adjustment) of the protocol’s revenue for direct distribution or buyback of $LDO tokens to stakers. Currently, Lido’s annual revenue is approximately $30 million, assuming operating expenses of $15 million, leaving $15 million for dividends. The current market capitalization is around $1.866 billion, corresponding to a PE ratio of 124 times. This proposal is still in the discussion phase and has not entered the voting stage. Due to regulatory issues, reconciling various interests, and divergent community opinions on the introduction of DCF valuation for dividends at the current stage, the execution of this proposal carries significant uncertainties.
Lybra Finance has shown outstanding performance in LSDFi, but its sustainability remains uncertain. The Lybra protocol’s TVL has increased by 225% in the past 7 days, and the price has increased by 565%. However, it is important to note that the current surge in TVL is primarily driven by the price-TVL spiral caused by the speculative nature of the token and the underlying imbalance of risk and reward within the protocol. Additionally, the protocol’s single-asset staking is less than the emission, and the circulating supply is in an inflationary state.
It is also necessary to pay attention to the impact of the increasing “risk-free rate” brought by ETH staking on lending protocols. Traditional lending protocols using the deposit-and-lending model are experiencing a shrinkage in their deposit pools and an increase in borrowing rates. On the other hand, lending protocols based on CDP models are relatively less affected.
【Ethereum Layer 2】
The overall TVL (Total Value Locked) of Layer 2 solutions on Ethereum has remained relatively stable in the past week, with a total locked amount of $8.74 billion.
Arbitrum’s TVL has slightly declined but still holds a market share of 65.7% in the Layer 2 TVL. Optimism’s TVL has seen a minor increase, occupying a market share of 20%. zksync era’s TVL has shown a recovery in growth since mid-May, capturing a market share of 3.24%. Starknet’s TVL has maintained a steady growth since the beginning of May, currently locking $54 million, accounting for less than 1% of the market share.
In the past week, the Total Value Bridged for Arbitrum, Optimism, Starknet, and Zksync has become comparable. Among them, Starknet has the highest bridge with 6,647 ETH, while Arbitrum has seen a significant decline compared to the previous week. Zksync has shown some recovery.
Recap of Layer2 Events in the Past Week
1. Optimism Mainnet Upgrade — Bedrock
The Bedrock upgrade for Optimism’s mainnet is scheduled to take place on June 7th, 00:00 UTC. According to official documentation, the Bedrock upgrade brings the following five improvements:
(1) Cost Reduction: Bedrock aims to lower costs by optimizing data compression strategies. While the specific range of cost reduction has not been provided, the removal of Gas fees related to EVM execution when submitting data to L1 is expected to provide an additional 10% reduction in costs.
(2) Shortened Deposit Confirmation Time: Previous versions of the protocol required up to 10 minutes for deposit confirmation. With Bedrock’s improved handling of L1 reorgs, this confirmation time is expected to be reduced to within 3 minutes.
(3) Improved Proof Modularity: Bedrock abstracts the proof system from the OP Stack, allowing rollups to choose between fraud proofs or validity proofs.
(4) Enhanced Node Performance: The upgrade replaces the “one transaction per block” model with the ability to include several transactions in a single rollup “block,” significantly improving node software performance.
(5) Ethereum Equivalence Enhancement.
2. As OP approaches its one-year anniversary, on May 31st, the circulating supply of OP will increase.
Optimism tweeted that in the two weeks leading up to this date, there may be a significant amount of on-chain transfers in preparation for the distribution.
According to the official provided table, the unlocked OP quantity for the next year starting from May 2023 is 913 million tokens, accounting for 21.26% of the total circulating supply, which is 2.7 times the current circulating amount. It is worth noting that early core contributors and investors will experience their first unlock.
According to the token unlock data, early core contributors and investors will unlock 81.6 million and 73.01 million OP tokens, respectively, on May 31st, 2023, accounting for 45.8% of the current circulating supply. This may result in significant selling pressure.
3.On May 18th, Radiant Capital passed the ARB distribution proposal
“RFP-18: Strategic Application of ARB Allocation for Radiant DAO Treasury” with a 89% approval rate. The Arbitrum Foundation granted 3,348,026 ARB tokens to the Radiant DAO treasury, which will be distributed as follows:
40% of ARB (1,339,210 tokens) will be airdropped to new dLP stakers on Arbitrum and BSC chains for a period of 6 months to 1 year. The first snapshot was completed on May 18th, and the second snapshot will be announced within the next 30–60 days. Eligible dLP holders must lock their tokens on Arbitrum or BNB Chain for 6–12 months between the two snapshots.
30% of ARB (1,004,408 tokens) will be distributed over the next 52 weeks to all dLP stakers on Arbitrum.
30% of ARB (1,004,408 tokens) will be reserved for strategic purposes in the future.
The ARB rewards provided by RFP-18 have a total value of approximately 2.8 million and will increase the dLP yield, incentivizing longer-term (6–12 months) locking of new dLP tokens and enhancing RDNT liquidity.
4.Starknet Foundation announced the results of the Starknet Early Adopter grant (EAG) program.
The EAG program has a total budget of 10,000,000 STRK tokens, accounting for 0.1% of the initial token supply of STARK (10 billion tokens). The EAG committee will distribute grants to early developers through multiple rounds of selection. In the first round of the EAG program, 104 projects applied and 67 projects were selected. Projects that launched on the mainnet before April 5th can unlock 100% of the granted tokens. Projects that were only deployed on the testnet before that date can unlock 25% of the granted tokens, with the remaining 75% distributed within 2 months after the mainnet launch.
【DEX】
The overall trading volume in the cryptocurrency market has gradually declined since April. DEX trading volume reached a recent high of $133.5 billion in March, dropped to $73.7 billion in April, and stood at $51 billion as of May 22nd. However, Dex to Cex Spot trade Volume reached a historic high of 21.84%.
In addition, the Total Value Locked (TVL) has also decreased from its recent peak. Dex Combined TVL was $14.8 billion at the beginning of 2023, reached a recent high of $19.4 billion in mid-April, and currently stands at $17.2 billion.
Here are the basic data for DEXs in various ecosystems:
Ethereum
ETH L2/sidechain
BTC L2/sidechain
Alt L1
Project Weekly Recap:
Maverick, an AMM with customized liquidity strategies, captured $20 million TVL on Ethereum and $2.6 million TVL on Zksync Era. It ranks among the top five in 24-hour trading volume on Ethereum and has a relatively low Mcap/TVL ratio, indicating higher capital efficiency of Maverick’s customized liquidity AMM.
【Derivatives DEX】
Since May, the trading volume of Derivatives DEX has been steadily declining. The daily trading volume of major protocols has dropped over 50% compared to April, and open interest has decreased by approximately 20%. The decline in trading volume has resulted in decreased protocol revenue and a 5% slight decrease in TVL.
Image: Daily Trading Volume Chart of Derivatives DEX in the Liquidity Pool Model
Image: Daily Trading Volume Chart of DYDX in the Order Book Model
Both the trading volume and the number of active users of the top protocol GMX and DYDX are lower than in the months of March and April. GMX reached its user peak in February, with daily active users exceeding 2,500. It reached its trading volume peak in March, surpassing $10 billion. There was a slight decline in April, followed by a significant drop in May, where the trading volume level was comparable to December 2022, and the daily active users decreased to 1,200.
Image: Monthly Trading Volume and Daily Active Users Chart of GMX
DYDX’s monthly trading volume follows a similar pattern to GMX. The trading volume exceeded $40 billion in March and began to decline afterward. In April, it reached $30 billion, and from May until now, it stands at $1.5 billion, indicating a significant decrease. In terms of active users, during epoch 21, the number of users holding margin on the platform was 4,300, but it decreased to 2,900 in epoch 22, suggesting that many users withdrew their margins and left the trading market.
Image: Monthly Trading Volume Changes of DYDX
The decline in trading volume has resulted in a simultaneous decrease in revenue and a significant drop in the yield rate of fund pool DEXs. GMX’s staking yield rate has decreased from the previous 6% to 3%, and the staking ratio has dropped from its peak of 80% to 77%. The yield rate of GLP has declined from the range of 20%-25% to 10%-15%, and the funds in the GLP pool have experienced a slow decline, decreasing from a peak of $695 million to the current $665 million. The gDAI pool of Gains Network has also seen a decrease in yield rate to the range of 3%-5%.
It’s worth noting that despite the overall decline in trading volume, Kwenta has experienced an increase in trading volume, with May’s trading volume surpassing that of April. This is mainly attributed to its trading incentives program, which started on May 3rd, offering protocol tokens and OP tokens as incentives to its trading users. In a market with low overall sentiment and a decline in trading users, Kwenta’s trading incentives have attracted more users and captured a larger market share.
Image: Monthly Trading Volume Changes of Kwenta
【RWAs】
The peak cumulative borrowing amount for RWAs was reached at $1.4 billion in May 2022. Since the beginning of May until now, there have been no significant changes in the data for the RWAs sector, with the current active loan volume standing at $512 million.
Image: Active Loan Volume by Protocol
The top 5 active protocols are Maple Finance, Centrifuge, Clearpool, Goldfinch, and TrueFi. Apart from Clearpool, there have been no significant growth in data for the other protocols this week.
Image: Active Loan Data by Protocol
According to Defillama data, Clearpool’s TVL reached a low point in February 2023, at approximately 2.7 million USD. On April 21st, Clearpool’s TVL was 7.96 million USD, and as of May 21st, it has reached 17.46 million USD, representing a monthly growth rate of 119.3% and a weekly growth rate of 12.7%.
The significant growth over the past few months can be attributed to the protocol attracting three new borrowers: Portofino (launched on March 9th), Fasanara (launched on March 30th), and Alphanonce (launched on April 26th). Additionally, the protocol introduced credit risk premium parameters in April.
Image: Clearpool TVL
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