Several tokens that support blue-chip decentralized finance applications are bucking the bearish market trend.
CurveDAO’s native governance token CRV has surged more than 21% over the past week as users minted $114 million crvUSD, Curve Finance’s newly launched stablecoin backed by Bitcoin (BTC), Ethereum (ETH), and ETH liquid staking derivatives as collateral.
Elsewhere, governance tokens behind Maker (MKR), Frax Share (FXS) and Chainlink (LINK) posted weekly gains of between 8% and 9%.
According to CoinGecko data, the broader DeFi credit and lending sector witnessed growth, with most tokens trading in the green over the past seven days.
The positive movement can likely be attributed to the rise of real-world assets (RWA) and liquid staking tokens as collateral in each of these applications.
RWAs are traditional financial instruments, such as bonds or corporate bonds, that have been tokenized.
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According to data from DeFiLlama, total deposits into RWA asset protocols have increased across the board. RWA asset protocols are decentralized applications for tokenized RWAs.
Another recent CoinGecko report shows that total deposits into liquid staking protocols have grown 5,870% since January 2023, reaching $919.0 million at the end of August.
Liquid staking derivatives (LSDs) refer to tokens such as Lido’s sETH that provide users with a token representation of their staked Ethereum position that can then be repurposed in the DeFi sector.
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DeFi lending protocols are increasingly using liquid staking derivatives to add as collateral.
For example, Curve Finance’s new stablecoin crvUSD has about 53% of its collateral composed in LSDs such as Lido’s sETH and Frax staked ETH (frxETH).
Crypto is teetering as bond yields hit 2007 highs
The broader crypto market has faced challenges due to risk sentiment in global markets.
Bitcoin saw a 3.2% price drop, while Ethereum followed suit with a 2.6% loss for the week, mainly attributed to the rise in US Treasury yields that neared 2007 highs.
The annual yield on ten-year US Treasury bonds reached 4.5% – a level last seen during the last financial crisis of 2007.
The increase in government bond yields is the result of the market’s expectation of a new interest rate increase by the US Federal Reserve as a result of rising inflation.
Higher returns also lower the opportunity cost of investing in risky assets like cryptocurrencies and stocks, both of which have fallen since last week.
The total crypto market cap fell 2.4% from $1.112 trillion to $1.084 trillion, losing $27.6 billion over the week, according to Coingecko.
Moreover, declining trading volumes in the market and delays in the approval of a spot Bitcoin exchange-traded fund (ETF) in the US are further contributing to the prevailing negative sentiment.
The author’s views and opinions are for informational purposes only and do not constitute financial, investment or other advice.