IBIT Leads the Charge, Aave Leverages ZKsync, and the Stablecoins’ Ever-Expanding Frontier

• BlackRock takes over Grayscale becoming the world’s largest digital asset manager
• Aave launches on ZKsync-powered Era mainnet
• Tether to develop UAE dirham-pegged stablecoin

BlackRock seizes the crown, Aave leverages ZKsync

The crypto markets rallied this week, the total market cap of the crypto universe was just shy of $2.1 trillion, and bitcoin dominance hovered around 56%. Among the blue chips, bitcoin rallied 4.2% compared to the previous week, while ether posted a weekly decline of 1.2%. In the US-listed spot ETF universe, bitcoin ETFs recorded daily net inflows, whereas ether ETFs saw daily net outflows, though both remained relatively modest.

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BlackRock continues to lead in the cumulative daily net inflows for both assets, with IBIT accumulating $20.5 billion and ETHA reaching $1 billion in cumulative inflows since inception. Notably, IBIT, which has surpassed GBTC in assets under management (AUM), has only experienced one day of net outflows since its launch in January, with the last outflow occurring on May 1. According to an X post, it was also recently reported that 60% of the largest hedge funds in the United States have exposure to bitcoin ETFs.

Decentralized lending protocol Aave led the large-cap DeFi sector this week, posting an impressive 32% gain. This surge follows the launch of an initiative to boost liquidity and expand yield opportunities within the Elastic Chain ecosystem, a network of chains powered by ZKsync technology. ZKsync, a Layer 2 scaling solution for Ethereum, is designed to increase the network's transaction capacity while reducing costs.

It leverages ZK-rollup technology, consolidating multiple transactions into a single proof validated on the Ethereum blockchain. This technology allows developers, enterprises, and financial institutions to create customizable ZK chains, forming the backbone of the Elastic Chain ecosystem. Aave users could benefit from zero-knowledge (ZK) proof technology, which offers low-cost yet secure transactions. The launch of Aave on Era may unlock new possibilities for privacy-focused DeFi applications.

The teams involved see this deployment as a step toward enabling new institutional use cases, such as private networks and networks tailored to specific asset classes, risk profiles, and user groups. BGD Labs provided a favorable technical review of the deployment, and the Aave DAO has approved USDC, USDT, WETH, and wstETH as the initial assets available on Era. Moreover, the Aave DAO has pledged to redistribute airdrops received from the ZKsync ecosystem to its users through liquidity mining. This distribution will include GHO, Aave’s overcollateralized native stablecoin, alongside liquidity incentives, safety module deployments, and merit programs.

Stablecoins unveiling the new frontiers, and zooming out

According to a post by The Block, starting August 28, Coinbase will enable conversions between fiat euros and the euro-pegged stablecoin (EURC) at a one-to-one ratio in supported regions. Similar to how USDC is tied to the US dollar, EURC is pegged to the value of the euro. These conversions on Coinbase Advanced will be fee-free. Additionally, Coinbase will introduce a new EURC-USDC order book while phasing out its current EURC-EUR and EURC-USD order books. Although dollar-pegged stablecoins are a dominant force in the market, euro-pegged stablecoins represent the majority of non-USD stablecoins. Data from The Block’s Data Dashboard shows that euro-pegged stablecoins account for approximately 92% of the supply of all non-dollar stablecoins on the Ethereum network.

Tether, the leading stablecoin provider, has announced plans to introduce a new stablecoin pegged to the United Arab Emirates dirham (AED). This initiative will be in partnership with UAE-based Phoenix Group and Green Acorn Investments. The new AED-pegged stablecoin is expected to offer users an economical way to benefit from the dirham's value. According to the press release, the stablecoin aims to simplify international trade and remittances, lower transaction fees, and provide a hedge against currency volatility.

Additionally, Tether revealed earlier this week that it will launch USDT on the Aptos network. This move aims to leverage Aptos's renowned speed and scalability to enhance platform efficiency and resilience. Aptos is well-regarded for its blockchain infrastructure, which boasts exceptional performance metrics. Recent data shows impressive ecosystem growth, with average daily active users climbing from 96,000 in January to 170,000 by July 2024. In May 2024, the network set a record by processing 157 million transactions in a single day. Tether's integration with Aptos will also benefit users with minimal gas fees, which cost only a fraction of a penny. This will significantly lower transaction costs, making it feasible for a wide range of applications, from microtransactions to large-scale enterprise activities.

Zooming out, 2024 echoes many aspects of 2020 with respect to the Bitcoin Halving, yet history rarely repeats itself. The macroeconomic fears that dominated previous years appear to be waning, particularly around anticipated rate cuts. The typical slow summer season is coming to an end, crypto markets have seen some big drawdown events resulting in a flush out of the leverage, and the influx of selling pressure from bankruptcies and liquidations has begun to subside. These signs indicate that the worst might be behind us.

Macro pulse 

Among the TradFi markets, US equities reached a five-week high, recording a 3% gain for the week, driven by a significant downward revision in US payrolls that bolstered expectations for a rate cut in September. The Federal Reserve's Jackson Hole Economic Symposium begins on Thursday, with Chair Jerome Powell set to speak on Friday. Oil futures fell by 6.6% from the previous week as the Middle East concerns eased and the growing worries about economic weakness in China raised concerns about demand. Elsewhere, the US Dollar index fell by 1.4% and the 10-year US Treasury yields slipped by 3 bps while the Gold & Silver index rallied 7% week on week.

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*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on August 22, 2024 

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