ON–161: DeFi

Coverage on Tether, Curve, Frax Finance, Balancer, and Uniswap.

Mar 17, 2023

ON–161: DeFi

About the editor: Spencer Noon is co-founder of Variant Fund. If you fit one of these personas, reply to this email and say hi 👋

This week’s on-chain coverage: DeFi

① Tether

📈 USDT dominance reaches 56%

  • Tether has grown its market share during a time of turmoil for several banks over the last few weeks, Tether's stablecoin dominance has exceeded 56% at the time of writing, indicating a switch from USDC and BUSD to USDT. Users are also avoiding crypto volatility but remaining in crypto markets.

    Source: CoinGecko
  • Tether's total market capitalization has grown 3% between March 5th and March 15th, the most growth in market capitalization among all top stablecoins over the same period. This is despite a 1.7% decline in market capitalization for all stablecoins according to DeFiLlama.

    Source: CoinGecko
  • Tether is the most widely distributed stablecoin in the market, and has been natively issued across 14 protocols. Tether has more than 4M USDT ERC-20 holders, and over 15M TRC-20 holders.

    Source: Respective Block Explorers


📈 10B+ volume, 1M+ fees generated on Curve during USDC de-peg

  • Curve.fi saw over 10B in USDC volume over 6 days during the USDC de-peg, with traders exchanging up to 400M USDC in a single hour. Both buying and selling of USDC ramped up dramatically on Curve as traders scrambled to de-risk or take advantage of the unprecedented volatility.
Source: Curve Research and Analytics
  • 3pool, Curve's primary trading venue for USDC, saw large spikes in volume as USDC de-pegged, with volume primarily driven by the USDC-USDT pair. This spike in activity resulted in fees approaching 1M dollars for 3pool liquidity providers, with additional fees collected from meta-pool trades.
Source: Curve Research and Analytics
  • During the de-peg, heightened volatility and decreasing stablecoin liquidity created arbitrage opportunities across multiple trading pairs. Curve's Tricrypto2 pool (USDT, ETH, wBTC) also experienced a spike in volume, peaking at $80M in a single hour. Tricrypto2 LPs earned over $300k in fees.

    Source: Curve Research and Analytics

Frax Finance

📈 Fraxswap's YTD Volume Exceeds 2022 Total

  • At nearly $486M, Fraxswap's cumulative volume on the year exceeds its previous years' volume by a factor of 2.03x. Their ecosystem usage has grown substantially this year due to factors such as frxETH and Fraxlend. These protocols and services offered by Frax have played roles in facilitating Fraxswap being utilized more often. Understandably, the most traded pair in terms of volume for the year is FRAX-FXS. It's interesting to note that a non-Frax ecosystem token, SYN, comes in at second.
Source: Dune Analytics - @mcasto_
  • While there was worry that FRAX would be minted following this past weekend headlined by stablecoin market volatility, it does not appear that any FRAX has been minted since March 8th when 5M units were minted. This increased the current supply of the stablecoin to 1,044,853,133.

    Source: Dune Analytics - @mcasto_
  • LTV across Fraxlend appears generally healthy with low liquidation risks. There is a significant amount of FRAX sitting at a $6.93 FXS price which is at risk, but this appears to be one of the select large amounts that is at a warning level. At a high level, to date 9.3M FRAX has been borrowed.

    Source: Dune Analytics - @mcasto_


📈 LSD Liquidity on Balancer reaches $250M

  • Balancer is an automated market maker (AMM) based DEX allowing users to create liquidity pools with up to eight tokens in any ratio. TVL in V2 pools have climbed to new highs since May 2022 ($1.15B). A key driver has been PMF for liquid staking assets leveraging Balancer’s weighted and composable stable pools. wstETH liquidity has climbed to new highs since Aug 2022 ($200M). rETH has reached an ATH of $57M. Total LSD liquidity dominance is set to break its ATH of 27%.
Source: Balancer, Decentral Park Capital
  • How efficiently liquidity is used within a DEX is useful for comparative analysis. Balancer's DEX utilization ratio index (volume/liquidity ratio) still trends below Uniswap (89%) but comparable to Sushiswap (2.75%). Balancer's liquidity injection is outpacing its range-bound daily volume ($55-$200M).

    Source: Token Terminal, Decentral Park Capital
  • Balancer's USD volume vs. Coinbase and Binance has fallen to just approximately 3% and 0.2%, respectively indicating stronger CEX dominance. Within the DEX market, the opposite trend is seen. Balancer's dominance over Uniswap has climbed to new 12 month’s high at 29% due to efficient LSD pools incentivization

    Source: The Block, Decentral Park Capital

⑤Uniswap Protocol

👥 Honn

📈 Daily volume on Uniswap Protocol hits $11.84B

  • The Uniswap Protocol is a decentralized exchange protocol that enables users to provide liquidity and swap ERC-20 tokens across a number of blockchains. This past weekend, daily trading volume on the Uniswap Protocol hit $11.84B. This is the highest daily trading volume the protocol has ever seen and almost double its prior record of $6.6B. The market volatility tied to the SVB collapse, as well as the unexpected volatility in stablecoins like USDC, are likely the inputs to this spike in volume.

    Source: Dune Analytics - @austin_adams
  • Total cumulative Uniswap Protocol users, defined here as the number of unique swappers and liquidity provider addresses which have used the Protocol, has grown to exceed 6.3M users today (March 17th). Improvements in capital efficiency and trade execution enabled by Uniswap V3 can be seen as a primary driver.

    *Note that this query does not include users who have used the Universal Router, which was introduced at the end of last year. For those interested in better understanding how this data would impact the cumulative numbers below, you may take a look here.

    Source: Dune Analytics - @wanxin
  • Uniswap Protocol’s monthly trading volume on Arbitrum, which announced its airdrop earlier this week, has significantly increased YoY. The Arbitrum to Ethereum Mainnet volume ratio has increased over 5 times from 2.15% to 10.34% between February 2022 and February 2023.

    Source: DeFiLlama