DWF Ventures, the venture arm of web3 investor and market maker DWF Labs, has published an analysis of the stablecoin market, whose total capitalization is now approaching $300B. The report, published as an X thread, identifies the factors behind their 120% growth in capitalization since January 2024 with a particular focus on yield-bearing stablecoins.
In addition to charting the rise of stablecoins as an asset class, DWF Ventures details the distinct use cases and mechanisms of the main players. It compares the APY available from yield-bearing stablecoins such as Falcon’s USDf (average 7-day APY 8.98%), Ethena’s USDe (7.39%), and Aave’s GHO (7.84%). Other benchmarks compared include collateral type, circulating supply, and fully diluted valuation.
DWF Ventures notes the evolution of stablecoins since their inception to become a key bridge between crypto and TradFi and an integral component of the blockchain industry. While pointing out that the dominance of USDT and USDC is unlikely to be challenged in the near future, DWF Ventures profiles the rise of yield-bearing stablecoins that have begun to capture market share.
Aside from Ethena and Falcon Finance, DWF Ventures highlights projects developing yield-bearing stablecoins such as Sky, Ondo Finance, Usual, and Resolv Labs. Key differences in design between various yield-bearing stablecoins, the report notes, include the type of assets they are backed by, which can include other stablecoins, crypto majors (e.g. BTC or ETH), and RWAs.
DWF Ventures additionally examines the different ways in which yield is sourced, which differs between projects. Popular options include deriving yield from real-world assets (RWAs); funding rate arbitrage; staking yield; DeFi yield; and protocol revenue share. Most yield-bearing stablecoins derive yield from multiple sources.
The report then goes on to assess the progress that has been made by the leading players within this stablecoin sector. Examples include Falcon Finance, which has become one of the fastest-growing yield-bearing stablecoins to date with $1.8B in circulating supply and 59K monthly users. It also explores the role of GHO in the development of lending protocol Aave, where the yield is derived from protocol revenue.
The other major yield-bearing stablecoin projects assessed by DWF Ventures are Ethena, Resolv Labs, Sky, and Ondo. Of these, it pinpoints Ethena’s success in seeing USDe become the third largest stablecoin by circulating supply and market dominance at $13.7B and 4.65% respectively; Resolv’s sourcing of yield from staking and funding rate arbitrage; Sky’s use of governance that’s integral to its USDS stablecoin; and Ondo’s backing of USDY by short-term US T-Bills and bank demand deposits.
The report concludes: “The growth of yield-bearing stablecoins has been massive over the past few years. With increased regulatory clarity and institutional capital looking for opportunities onchain, this rapid growth is expected to continue. Market leaders will be defined by their ability to scale along with the market, provide sustainable and high yields to users, and unlock greater capital efficiency across multiple assets and asset classes.”
DWF Labs is the new generation Web3 investor and market maker, one of the world’s largest high-frequency cryptocurrency trading entities, which trades spot and derivatives markets on over 60 top exchanges.
