Stablecoin Rush Breaks Out; JPMorgan, DBS and Temasek Launch Partior

Stablecoin Rush Breaks Out; JPMorgan, DBS and Temasek Launch Partior

As the Coinbase public listing approached, many analysts were looking for a $100 billion valuation. The cryptocurrency exchange, founded by Brian Armstrong and Fred Ehrsam, hit that mark briefly after listing, but COIN has settled down to a less-rarified valuation.

Meanwhile, CoinGecko calculates a total market capitalization of $128 billion for decentralized finance (DeFi), the corner of the cryptocurrency industry that represents a wide range of lending, trading and betting activities carried out almost entirely on blockchain networks using tokens as proceeds and collateral. The top five tokens on CoinGecko’s list are UNI, LINK, LUNA, AAVE and CAKE.

The following chart is from a CoinGecko page that tracks the combined market cap of all DeFi tokens:

Related: Stablecoin Rush Breaks Out; JPMorgan, DBS and Temasek Launch Partior

Coinbase, it should be noted, listed DeFi as a potential competitor when it filed for a public listing, but for whatever reason, market caps aren’t how we usually talk about the DeFi market. We usually talk about the value of assets people have deposited in DeFi apps to earn yield.

But that measure gives a similar reading: There is now more than $100 billion worth of assets locked up in DeFi.

These get to be very large numbers, numbers that are worth reviewing to illuminate a story that somehow continues to be missed even as cryptocurrency has started going mainstream.

Here at CoinDesk we have focused on DeFi on Ethereum because DeFi originated on Ethereum, and it is where the best-known entrepreneurs have committed to operating.

Related: Paxos Joins Crypto Unicorn Club After Latest $300M Funding Raise

Those aforementioned deposited assets are referred to as total value locked (TVL). TVL on Ethereum, using the most widely cited data site, DeFi Pulse, is $66 billion as of this writing, more than quadrupling since Jan. 1 when it was $15 billion.

Meanwhile, DeFi has taken off in a big way on Binance Smart Chain (BSC). According to Defistation, the current TVL on there is $38 billion, led by PancakeSwap but also including money markets filling a similar role to Aave and derivative solutions that fill a similar role to dydx.

Story continues

DeFi on BSC has grown much faster than on Ethereum; it first hit $1 billion in TVL only at the end of January.

DeFi vs. ICOs

Here’s a chart that compares funds entrusted to Ethereum’s many DeFi smart contracts in the last year or so to funds that went to founders in initial coin offerings during the 2017-2018 boom (an updated version of one published here):

It should be noted that DeFi Pulse was in the midst of updating how it tracks the TVL for the robo-adviser for yield, Yearn Finance, when this was made, and so those numbers aren’t in this graph. According to Yearn itself, though, it has had several billion dollars tied up.

Read more: DeFi reshapes the CoinDesk 20

While the 2020 surge was known as “DeFi Summer,” it’s already evident the market is much bigger now.

For example, TVL first broke $1 billion in February 2020. It broke $10 billion in September, on Ethereum. Earlier this month, the money market platform Compound broke $10 billion in TVL all on its own.

Tuesday night, the original DeFi protocol, stablecoin minter MakerDAO, also broke $10 billion for the first time.

1 million users? Maybe 2 million?

Richard Chen, at the venture firm 1confirmation, has been assembling on-chain data about users using Dune Analytics. One chart is worth citing here in particular.

This shows there are at least 2 million wallets that have interacted with DeFi protocols. So that probably means something like more than a million individuals, maybe even close to two? It’s very hard to say, but it is also worth noting that sometimes individuals participate in DeFi via third parties. So while some users hold many wallets, it’s also true that some wallets represent many users.

Whatever the real count of users, the amount of money changing hands shows these applications are real businesses. The site Crypto Fees has been tracking usage fees charged on different DeFi applications. The top DeFi applications it lists (Uniswap, SushiSwap and Compound) show a seven-day average of daily fees collected ranging from $1 million to $4 million.

If there’s one kind of finance that everyone understands, it is lending. The blockchain software company ConsenSys just released a first-quarter report on DeFi on Ethereum, showing a growing market for loans:

DeFi represents a much more credible narrative with more substantive businesses because it shows products with genuine returns and provides a way for people to earn impressive yields on deposits rather than making wild bets and hoping.

Wild bets are the best way to describe much (though certainly not all) of the investing that took place in the initial coin offering boom of 2017 to 2018. That boom drove the prior bull run, and the public appeared capable of making that connection.

Four years later, the cryptocurrency industry is in a bull run again, but the public appears incapable of connecting it to these billion-dollar deposits into this new iteration on finance. For whatever reason, the main topics are, again, bitcoin’s price and, somehow, non-fungible tokens and dogecoin.

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Tether Releases Consolidated Reserves Report, Backing $50B in Assets

Bloomberg

(Bloomberg) – Before his bet on cryptocurrency exchange Coinbase Global Inc. became a multi-billion-dollar exit, Union Square Ventures co-founder Fred Wilson compared Bitcoin to science fiction.“We may be completely wrong, it may be a fantasy,” he said at a marketing conference in May 2013. That was shortly after he had invested $2.5 million in Coinbase, the U.S.’s biggest cryptocurrency exchange, where people can buy and sell Bitcoin and other digital tokens such as Ethereum and Litecoin. “It’s straight out of a sci-fi novel, but sci-fi novels are the best things you can read if you want to invest,” Wilson said. “It’s a gut bet.”Eight years later, Wilson’s wager became Union Square’s most profitable exit. Earlier this month, Coinbase listed on Nasdaq and soared to $328.28 a share, catapulting the company’s valuation on a fully diluted basis to about $86 billion. That’s a ten-fold increase from its last public funding round in 2018 and valued Union Square’s stake at $4.6 billion by the end of the first trading day.Wilson will have to listen carefully to his gut to navigate the volatile cryptocurrency market and Coinbase’s rocky debut. But the large volume of cryptocurrency trading is good for boosting Coinbase’s revenue, and Bitcoin has been rallying again after hitting its lowest level since early March. Wilson has said that “one of the hardest things in managing a venture capital portfolio is managing your big winners.” On the day of the Coinbase listing, Union Square Ventures sold 4.7 million shares for $1.8 billion, according to securities filings.Coinbase isn’t Wilson’s first foray into a nascent technology trend but it’s certainly the largest payout. His New York-based venture capital firm has invested in more than 100 businesses and has had 10 public exits since the firm’s inception in 2003. Nine of those have reaped billion-dollar valuations on the day of their stock market debut, according to data from PitchBook and Securities and Exchange Commission filings compiled by Bloomberg.Wilson was an early believer in the social networks that defined the 2010s and oversaw Union Square’s biggest successes, including Twitter Inc.’s $24 billion valuation after the company went public in 2013, boosting the value of the firm’s stake to $1.2 billion, online gaming company Zynga Inc.’s $7 billion IPO in 2011 and Tumblr’s $1.1 billion purchase by Yahoo!.“Fred is driven by intellectual curiosity,” said Zynga founder and chairman Mark Pincus. “He didn’t get involved for the money.”Wilson declined to be interviewed for this article saying he doesn’t “think investors should be the focus of attention when the entrepreneurs and management create all of the value.”Union Square’s latest iteration of its investment philosophy homes in on companies with strong communities that “broaden access to knowledge, capital and well-being,” according to the firm’s website. “Coinbase is at the center of this” said Angela Lee, chief innovation officer at Columbia Business School where she teaches venture capital and leadership courses. “Most venture capital firms deviate from their investment thesis. Union Square is very disciplined. They’re very smart about taking a trend and breaking it into components.”Wilson began investing in 1987 at Euclid Partners, a small venture capital firm in New York, recalling it “wasn’t a stellar start” to his career, he wrote in his blog in 2008. Then the internet came along. Wilson co-founded Flatiron Partners with Jerry Colonna in 1996 and together they invested $150 million into early stage internet deals that turned into $750 million in the span of three years, according to Wilson’s blog post. “We were undisciplined and not diversified,” Colonna said in an interview. “We were a little too enthusiastic.” Colonna is now the CEO of executive coaching firm Reboot.io, where his work was described in a Wired article as: “This man makes founders cry.”Flatiron folded in 2001 during the dot-com bust, but Wilson carried those lessons to Union Square, Colonna said. “Fred’s not a Vegas gambler. He doesn’t throw darts at the wall and doesn’t just tag along to other people’s investments.”Wilson’s belief in connecting ideas, people and experiences on the internet through networks was in motion even before social media startups made it into his portfolio. The native New Yorker’s networking ethos was born out of the post-dot-com bubble era that ushered in early social networking startups or “Web 2.0” companies like Friendster, Orkut and Tribe.net. His views were first put into practice when he started his popular blog, AVC, in September 2003, shortly before he co-founded Union Square with Brad Burnham.Though his early posts revolved around family, hobbies and music, the blog expanded into tech, business and management and became a vehicle for sourcing investment ideas and connecting with entrepreneurs, he said in a March 2006 episode with Businessweek’s Cutting Edge podcast. “The process of writing helps me crystallize my thoughts about what’s interesting and what’s not interesting, what’s potentially strategic and what’s potentially risky about a particular sector.”One of Wilson’s earliest musings on cryptocurrency was in 2011, when he wrote that “an alternative currency with roots in peer to peer networks and based on an algorithm that is transparent to everyone is an idea whose time has come.” Union Square’s founding theory of seeking out emerging, fast-growing online communities has since evolved beyond original social media to include other blockchain and cryptocurrency startups like Stacks 2.0, an open network for decentralized apps and contracts on the blockchain, and even CryptoKitties, an Ethereum-based virtual game that allows players to adopt, raise, and trade virtual cats that kickstarted the craze for non-fungible tokens, or NFTs.Coinbase’s breakthrough listing was the buzziest investment in recent years for Wilson, whose enthusiasm has been more measured compared with crypto evangelists like investor Mike Novogratz or the Winklevoss brothers who started the Gemini digital asset exchange.In January 2018, Wilson wrote about locking in profits at a time when Bitcoin was taking off. “I know that many crypto holders think that selling anything is a mistake. And it might be. Or it might not be. You just don’t know,” he said. By the end of that year, Bitcoin had plunged over 70%.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.