Octover 12, 2023: The Real World [Assets] 🏠🎥
$USDM, $sFRAX joining the RWA boom triggers a rare bull narrative
Every Thursday night, the world tunes into the greatest show in DeFi, as new Curve pools start receiving emissions and yield farmers go shopping for new rewards.
For instance, consider the FraxLend pool created amidst a failed whale hunt a few months back. It’s not only delivering two types of $CRV rewards, but also has some nice internal yield not captured on the UI due to the interest-bearing nature of these tokens…
Or perhaps you might make a bet on JPEG’d.
The JPEG’d stablecoin has played with a few different pools in their past, but with $1MM in TVL it’s more likely the yields persist.
Just be cognizant of the historically looser peg the token holds.
Or, what about the RWA race? Two real-world assets have landed, offering T-Bill yield and then some…
The former is MatrixDock’s $STBT, the latter is $stUSDT of LlamaRisk fame.
Both purport to invest the funds in T-Bills and give you the yield. It’s part of the RWA wave of bringing the high interest rates onchain to DeFi, where it can be nicely composed into innumerable ponzinomics.
While both of these newer pools carry lower TVLs, another RWA pool has not yet begun pursuing a gauge but carries a more stable $1MM in TVL.
Reclaiming the $USDM moniker from the bygone Mochi project, the new “Mountain Protocol” dropped a thread explaining the new service.
The new $USDM boasts an strong pedigree, worth keeping an eye on it.
Yet the toughest to locate RWA pool is the one that’s generating the most buzz. From Frax chat:
Frax’s $sFRAX launched last night, and quickly sailed past $25MM via several whale mints.
The yield here is from $50K worth of rewards, so we can expect that this would settle around treasury rates at around $52MM
The emergence of 5% interest rates offers a flicker of hope in the protracted bear. Not strictly for the interest rates, but the likely composability…
This was explained in a rare bullpost
This led to a white hot wen-gasm on Telegram.
So while people are getting stoked on RWAs, we’ll drop some notes on the flipside of the argument. RWAs carry risks!
We saw yesterday the collapse of $USDR, which was intended as the real world asset’s stablecoin.
In the ensuing panic
Hopefully you were already subscribed to Llama Risk!
Big deal! T-Bills are risk-free, right? RIGHT?
The concept of tokenized T-Bills is fairly immature. Attempts to do so didn’t exactly gather a ton of momentum when the yields were near zero.
The US government has been outright hostile towards cryptocurrency. However, they don’t always act. Unless they’re generating significant press, targets tend to be ignored until they reach shakedown size (unless the enforcers happen to be on the take).
RWAs haven’t really passed this threshold just yet. The real test will be what happens when tokenized treasuries start to reach systemically important size. As much as we might protest that this is good for America, we foresee the enforcers decide to start meddling anyway under the theory of #ManifestDestiny
If a tokenized T-Bill platform is earning a few basis points to keep yields high, and gets slapped with a multi-billion dollar fine by overzealous prosecutors, then what? Historically, the riskiest place in crypto has been the nexus where the real world collides with the chain.
If you’re looking for treasury yields, you should always ask your financial advisor about just buying T-Bills directly and removing any risks associated with derivatives.
That said, we are bullish on the RWA narrative. For Curve’s sake, its entire history has seen rugpulls and scams get listed, and its done little to blunt the appeal of the site.