DeFi Research News Year End 2024 | Nov & Dec

Stablecoins Update

Total Stablecoin Market Cap Hits ATH

At the end of November, the stablecoin marketcap (excluding algorithmic stablecoin) reached an all time high again at $191 billion from $171 billion dollars in October. End of December the marketcap of stableocin stands at $203 billion dollars, recording close to $30 billion in crease in the span of 2 months.

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Source: DeFi Llama

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This is due to USDe and USD0 seeing significant inflows (85.35 and 139% respectively) while USDC and USDT are seeing inflows of 14.29% and 9.99%. USDT is now just shy below 70% market share at 69.53%.

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Bitcoin Update: 

Bitcoin to $100k, Low CEX Reserve And Diamond Hands

Since the beginning of the year CEX bitcoin reserves have been decreasing in linear fashion reaching 2.5 million bitcoin mid-October worth at the time $174.2 billion while in November 4th, investors buying the dip at $67,812 and the runnup to $75,000 quickly took off their bitcoin self custody depleting CEX reserve by around 50,000 in 5 days. Since 2022 we have constantly seen a decrease in bitcoin reserves, even when leading up to March of this year after the dip in price in January 2023 which we could have expected to see an increase in reserve as investors would sell part of their position to realize some profits. 

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The exchange net flow shows a clear bias toward net outflow since the beginning of the year highlighted by the 30 days SMA.

We can clearly see the timing of the flow as well with outflow generally corresponding to dips where investors buy bitcoin for self custody, while inflow align with general local tops when investors take profit 

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MSTR Sets In Motion Its End Game Plan: 3 Purchases In November

Michael Saylor and Microstrategy are not sleeping on making its end game plan a reality. In fact in November made bitcoin purchases that were the biggest since it started accumulated in 2020. Nov 11 MSTR purchased 27,200 BTC for $2.03 billion; then a week later made a purchase of 51,780 BTC for $4.6 billion and lastly on Nov 25 a purchase of 55,500 BTC at a price of $97,862 worth $5.4 billion.
In November alone, Miscrostrategy increased its holding by 134,480 BTC which was roughly equal to 53% of its entire holdings of 252,220 BTC as of October. Now this is increasing MSTR average buy price at $58,000 when at the beginning of the month it was at $39,500.

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Microstrategy BTC Yield YTD as of November 30th is now 59.3% while the quarterly BTC Yield is 35.2%. This means that they are accumulating BTC faster than they are issuing shares as the BTC Yield is the ratio of bitcoin holdings to Assumed Diluted Shares Outstanding from period to period. Make note that last month we explained BTC Yield % being a representation of BTC backing MSTR shares but it isn’t, this was our misunderstanding of the metric.
The BTC shares backing would be the ratio of BTC holding to its Market Cap as the market cap is the sum total of the Assumed Diluted Shares Outstanding. As of early December it would be around 50%, 48.12% exactly, with bitcoin holding worth $46.68 billion while MSTR Market Cap equals around $97 billion. This means that each MSTR holder roughly has 50% of the share value backed by bitcoin. Each share is backed by around 1.995 mBTC or 0.001995 BTC roughly equal to $209. 

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Microsoft December Shareholder Meeting Reject Proposal To Invest Treasury In bitcoin

Microsoft shareholders turned down a proposal calling on the company to consider diversifying its investments by including bitcoin in the mix, but Microsoft is actually open minded as we highlighted in our previous DeFi Research News for October. 

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In fact, the reason the board recommended voting against the proposal was the same reason it shared in the filling, specifically that “Microsoft’s management already carefully considers this topic.”

Amy Hood, Microsoft’s chief financial officer, elaborated in response to questions submitted by shareholders during a Q&A session at the virtual annual meeting Tuesday morning. She started by explaining that Microsoft has accepted Bitcoin as a form of payment from customers since 2014.

“As we continue to think about the evolution of crypto, we’ve also thought about it as an asset class,” Hood said. Microsoft’s treasury team, along with its board, “looks at all the asset classes available to us,” she added. In her comments at the meeting, Hood emphasized the importance of liquidity — along with capital preservation and income — to fund operations, invest in partnerships, and build data centers, among other uses of its cash. “So with those three goals, we look across asset classes, including cryptocurrency, as a form of investment,” Hood said. “It’s something we cover with the board consistently and continue to assess different categories year-to-year.” 

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The bitcoin investment proposal was submitted by National Center for Public Research and they noted in their proposal that in Q1 2024, Microsoft had $484 million in total assets of which the majority are US government treasury bills that barely outpace the CPI rate, meaning T-Bill barely keeps up with real inflation rates in turn eating away at Microsoft treasury. With true inflation rates most probably higher than the CPI rate of around 500 bps a business asset needs to increase its revenue by at least those rates to breakeven in purchasing power.

Michael Saylor also presented slides to the shareholders meeting with a very calm and based attitude highlighting the fact that Microsoft as a Digital company needs to adopt Digital Money which is bitcoin if it wants to outperform and increase its growth potential. You can check it out here.

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NYDIG Shows Correlation Between Basis Trade And ETF Inflow

The great team at NYDIG put out a short research on the correlation between Hedge funds basis trade and the ETF inflow, primarily BTC. We could categorize the ETF inflow into 2 broad categories of exposure: the spot long investors that can be retails, family offices while the other would be hedge funds that purchase the ETF shares as part of their basis trade strategies while they short BTC or ETH futures. For those not familiar with how basis trade works, head over here.

NYDIG shares that the following scatter plot and regression define the relationship between hedge fund futures shorts and ETF fund flows. All else equal, for every dollar in weekly ETF fund flows, the weekly change in basis shorts is expected to increase by 30 cents. The model has strong statistical significance and explains around 51% of the variance in weekly flows.

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Ethereum Update

Ethereum Foundation 2024 Report

The Ethereum Foundation published its 2024 report, outlining its non-profit role in supporting the Ethereum ecosystem through funding, development, and education. Guided by three core values—long-term thinking, subtraction, and stewardship of open-source values—the EF aims to enable sustainable ecosystem growth. The report details spending allocations and treasury holdings, noting that the EF allocated $105.4M in 2022 and $134.9M in 2023 across internal teams and broader ecosystem initiatives. The EF’s treasury stands at $970 million, with the majority held in ETH. The report also highlights a conflict of interest policy, which sets guidlines for EF members to manage and disclose conflicts.

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Puffer Launches UniFi Testnet

Puffer Finance launched UniFi, its Layer 2 based rollup solution, on testnet, initially open to builders. UniFi provides sub-second transaction speeds and near instant asset withdrawals. As a based rollup, it uses Ethereum L1 validators for transaction sequencing. In its mainnet release, Puffer plans to introduce atomic composability, allowing users to execute instant cross-layer interactions between L1 and L2 within a single Ethereum block.

Now you might wonder whats so great about based rollup. Read on the next story.

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What's So Based About Based Rollups? 

Ethereum’s rollup-centric layer-2 roadmap has successfully tamed the congestion and ludicrous gas fees on the base layer — but at the cost of creating a fragmented ecosystem.

Designed to scale the network, L2s have become little islands on their own, each with its own rules, systems and barriers. Liquidity is siloed, users are stuck navigating bridges between L2s, and developers are forced to choose whether they want to build on Base, Arbitrum, Optimism or Starknet.

Since last year in March, thanks to giga brain Justin Drake, Ethereum researcher, the ideas of making L2 better and solving their glaring issues has come to fruition with what is now referred to as Based rollups. Main difference between rollups like Optimistic or ZK rollup and Based rollups come down to their sequencer. In “traditional” L2s these sequencers are centralized entities that have the right and responsibility to sequence the blocks on layer 2 before getting validated on Ethereum (L1). Due to the disparity between sequencers on different L2s, it makes it difficult for interoperability. On the contrary, Based rollups are sequenced on L1, hence “Based sequencing” inheriting L1 liveness and decentralisation. More concretely, a based rollup is one where the next L1 proposer may, in collaboration with L1 searchers and builders, permissionlessly include the next rollup block as part of the next L1 block. 

We’ll be monitoring the changes around this new way of building L2s as they could solve the liquidity fragmentation issue. 

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Ethereum ETH ETFs Net Inflow

ETH ETF saw massive inflows in November contributing to pushing ETH price higher. 

Image by Coinchange from Coinglass ETH ETF Tracker

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The bulk of the inflow went to Blackrock’s iShares Ethereum Trust ETF (ETHA) while the other ETF, Grayscale Ethereum mini Trust ETF and Fidelity Ethereum Fund pale in comparison. Blackrock ETH ETF registered $350 million dollar inflow on November 29th and then received another $292 million on December 5th.
It is certain that those inflow were responsible for the performance ETH had in November and early December. Keep in mind, those inflows represented at the time close to 10% of ETH marketcap. It always comes down to supply/demand mechanics, showing that sellers are exhausted and buyers remain strong. 

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Make Ethereum Great Again

As we’ve highlighted above regarding the rollup centric roadmap, the Based rollup could prove a viable solution to overcome the siloed liquidity that results from this development. However this does not mean that the leak in value accrual in Ethereum is solve. We’ve mentioned this in our DeFi Research News of October where we shed some light on the reasons why ETH does not perform well primarily because of the lack of value accrual mechanism now that tx fee have been reduced close to zero.
Based rollup could spark an increase in transaction fee paid via the sequencers posting to L1 for block inclusion using searcher-builder-proposer infrastructure in place. Based rollup can be tokenless, they must use the L1 native token (ETH) to pay for gas which is another mechanism that increases value accrual back into ETH. As based sequencers post directly to L1, the MEV from the rollup is captured on L1 while in the case where MEV is burned this further strengthens the value accrual to ETH as it increases its scarcity. Finally, Based rollup could spark more validators to secure Ethereum as the MEV income would directly be foregone by the sequencers, strengthening the economic security of Ethereum. Taiko L2 is a good example of this stark change as a based rollup. It has paid since launch consistently more fees to L1 than any other L2 that uses centralised sequencers. 

However, adoption of Based rollup has some challenges especially on the part of sequencers, since they are making ton of money since sequencing is a centralized job. Cointelegraph recently provided some numbers (photo below).

This is the cumulative sequencer revenue in ETH as of Nov 20, 2024. Arbitrum sequencers have made $210 mln while Optimism sequencers have earned 10 times less with $23 mln. 

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DeFi Updates

UAE Central Bank To Launch AED backed Stablecoin in Collaboration With Tether

Yes, you read that right! UAE Central Bank has granted approval last October to AED Stablecoin LLC to issue AED backed stablecoin. The announcement reads “AED Stablecoin LLC as the first entity in the country to issue a stable digital currency linked to the Emirati dirham, in line with the regulatory frameworks approved by the Central Bank. AE Coin keeps pace with the 2025 UAE vision and its future digital strategy and provides a financial experience based on stability, safety and efficiency.” 

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This recent approval has eased concerns over potential restriction according to most recently released Licencing Framework from UAE Central Bank which prohibits crypto payment for goods and services unless using licensed dirham-pegged tokens. Furthermore, AED backed stablecoin can only be issued to UAE residents while its transfer and acceptance isn’t prohibited in any shape or form. This is to be expected so that AED stablecoin issuance remain under the UAE Central Bank jurisdictions while not preventing the free flow and use of the stablecoin for payments and transfer. Regarding stablecoin issued by Foreign entities, they can’t be used for payment for goods and services except for the purchases of crypto assets or crypto derivatives 

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Unichain Update

Unichain has recently posted an update regarding its fault proofs. “On Monday January 6, 2025, Unichain Sepolia will undergo a scheduled upgrade to enable permissionless fault proofs. This is a critical milestone toward the full release of Unichain which will launch the mainnet launches as an open, trustless system.” 

Prior this month it underwent another update with “Holocene” which came with 3 main changes:

• Upgrade to the block derivation improving the derivation pipeline by making it simpler and stricter, which improve worst case scenarios of the fraud proof system. 
• EIP-1559 configurability enabling the system to modify the gas target and limit independently using the L1 contract.
• MIPS contract upgrade to support additional calls to be made by new contract that Unichain uses. 

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Tether Trading At Premium

Early November, Tether USDT started trading at a premium compared to its $1.00 peg. This shows buying demand for crypto on CEX, coinciding with the day of US Leections which saw Trump Winning 

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Key DeFi Stats for November and December

November

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December

Image: DefiLlama

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In November, the TVL moved up by around $34 billion dollars from October’s $89 billion, reaching $123 billion. In December it stabilized and decreased to $121 billion. TVL still has some way to go up to reach the previous high in 2022 around the $180 billion dollars. DEX 30 day volumes have gone up  reaching $217 billion, making it an increase of almost $100 billion from last month. In December it went up by around $20 billions, reaching $241 billion.  

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A look at the top DeFi protocols based on the fees generated

Let’s look at the top 5 DeFi/NFT protocols/ecosystems with the most fees generated over 30 days, which generally translates to the most active protocols. In some cases, the protocols take a % of the fee as revenues (eg. Lido Finance) in other cases its distributed almost entirely to the Liquidity Providers Stakeholders (eg. Uniswap Liquidity Providers) hence their revenue varies based on such parameters. 

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Here are the top 5 protocols for the month of September in terms of Fees generated:

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Image by Coinchange, data sourced from DeFillama 

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At the end of November, Jito and Raydium are 1st and 3rd respectively, while Uniswap claims the second spot, Lido takes the fourth and Pancakeswap is still at fifth place. 30 days fees have dramatically increased this month reaching a cumulative for the top 5 of $633 mln.

Macro View

BRICS Summit Pushes For Dedolarization

Building on the news about a new BRICS currency that was announced at the BRICS summit in Kazan in October. This month we got some insight about Trump's views on the matter. Apocalypsos commented with a link to Paulo Nogueira Batista interview explaining the birth of BRICS nation and the idea to create their own currency.

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Source: X

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As we reported, Russia is spearheading this effort as it needs alternatives for international currency settlement since it has been excluded from the SWIFT/Dollar system. Putin and other BRICS countries that faced US sanctions through the US Dollar have been blaming the US for the ongoing dedollarization.

IMF Strikes Deal With El Salvador 

The past few months the IMF has wanted to strike a deal with El Salvador in order to narrow the regulation around the Bitcoin adoption in the country in exchange for loans and help to its government by the IMF. We have written on the subject in October, check it out here. 

Recently the IMF has reached a staff level agreement with El Salvador on an Extended Fund Facility. This initial agreement is subject to approval from the IMF Boards of Directors after IMF staff will provide a final report on the agreement scope. Nonetheless we can estimate that most of the directives in this initial step will found their way in the final report. 

Most noteworthy items are:

• $1.4 billion US dollars to support El Salvador reform agenda over 40 months. Other financial backers are expected to raise the total financing package to $3.5 billion US dollars. 
• The program aim to reduce primary balance of payments to 3.5% of GDP in 3 years and reduce debt to GDP ratio which peaked at 85% in 2024. France for example stands at 110%
• Fiscal transparency is expected to be overhauled with improvement made to KYC and AML policies while modernizing infractructure. 
• Reserve buffers and  liquidity framework of the central bank will be strenghten while supporting growth of the private sector. Reserve buffers to increase to 15% by 2026 when currently standing at 11.5%. 
• Bitcoin “potential risks” will be diminished significantly. Bitcoin acceptance by the private sector will be voluntary in contrast to mandatory. In the public sector the engagement in Bitcoin related activities and purchases of Bitcoin will be confined. Taxes will only be paid in US Dollars and government participation in Chivo bitcoin wallet will slowly be unwinded. 

Now, this last part about Bitcoin adoption is the most interesting as it does not seems to backtrack on all of the work that has happened, but seems to try to make a point about narrowing down the bitcoin adoption. This is expected as the IMF is pro establishment which Bitcoin adoption as legal tender threatens directly. Max Keiser, a vocal Bitcoin OG and maximalist published his thoughts about it on X. TLDR is that IMF statement in regards to bitcoin policy is DOA (Dead On Arrival) as all of it has little to no influence on bitcoin adoption in El Salvador.

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G20 Summit in Rio De Janeiro

https://visionias.in/current-affairs/news-today/2024-11-20/international-relations/the-g20-summit-2024-concluded-with-adoption-of-rio-de-janeiro-declaration 

The G20 Summit held in Rio de Janeiro in November themed “Building a Just World and a Sustainable Planet” focused on 3 main priorities:

1. Social Inclusion & fight against hunger and povertysome text
   1. The Global Alliance against hunger and poverty was launched
   2. Global Coalition for Local and Regional Production, Innovation and Equitable Access was launched to promote access to vaccines, diagnostics, and other health technologies for neglected diseases and vulnerable persons
2. Sustainable development, energy transition and climate actionsome text
   1.  Establishment of Task Force on a Global Mobilization against Climate Change, tasked to identify & address structural barriers to foster private capital flows for climate action, particularly for developing countries
   2. Support for COP 30 to be held in Belém, Brazil while reiterating commitment to the Paris Agreement.  
3. Reform of global governance institutions some text
   1. Pledged to reform UN Security Council aligning with realities & demands of 21st century, which is more inclusive, effective, democratic, etc
   2. Endorsed G20 Roadmap towards Better, Bigger, and More Effective Multilateral Development Banks (MDBs)
   3. G20 countries agreed on guidelines to ensure that AI advancements align with global ethical standards

A more in depth summary of the outcomes of the G20 summit in Rio can be found here. 

FOMC Meeting, Caution Is Still On

The Federal Open Market Committee (FOMC) held its last meeting on December 17-18, 2024, resulting in a 25 basis point cut to the federal funds rate, bringing the target range to 4.25%-4.50%. This marks the third consecutive rate cut since September 2024, totaling 100 basis points of reductions.

Its economic outlook is positive while unemployment remains low, however it acknowledges that inflation is still elevated though slow progress is made towards its 2% target, hence the FOMC remains cautious and we’ll likely see slowing down rate cuts in 2025. 

This has reassured market participants that increased inflation risk are lower than expected which consequently sparked notable increases in the stock market and crypto market. Goldman Sachs, Beth Hamm (president of the Federal Reserve Bank of Cleveland) are still cautious about continued inflation impact on the US economy. Some investors are also concerned about Trump's stance on the import tariffs which will have inflationary pressure on consumer goods.

To finish, remember the target inflation rate at 2% has been set arbitrarily by Central Banks around the world while the idea has been proposed since the 50s by John Meynard Keynes, the father of our current Modern Monetary Theory.

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Regulations Update

International regulations

The Basel Committee on Banking Supervision (BCBS) has finalised various technical amendments to the Basel Framework, including a technical amendment on cryptoasset exposures and risk curvature, which will be implemented from 1 January 2026 as part of the final cryptoasset exposures standard. The International Organization of Securities Commissions (IOSCO) has launched a new roadmap to enhance retail investor online safety. This roadmap focuses on 3 main points: influencers and the risk they poses by spreading biased information and promoting high risk investments. Copy trading which poses risk to retail investors to automated high risk trading strategies; digital engagement practices like gamification and targeted prompts which lead to young people investing without much experience.  

US Crypto Regulation Might Be Shifting

With Donald Trump as the next POTUS, the crypto regulation in the US might shift. Reuters reported in mid November that  less enforcement in the cryptocurrency sector could be on the horizon, as President-elect Donald Trump prepares to reset policy at the Justice Department and regulatory agencies, current and former senior government lawyers said on Friday. The lawyer further commented on the fact that the new administration Department of Justice focus would be shifted toward enforcing immigration law rather than regulating crypto via enforcement. 

On the other hand, the CFTC’s GMAC (Global Markets Advisory Committee) has released a recommendation paper on usage of non-cash collateral via DLTs. This is essentially because DLTs offer increased efficiency and reliability for non-cash collateral settlement. The paper further notes: “As a result of these benefits, use of DLT can help address the challenges to noncash collateral described above by enabling the direct pledge or transfer of eligible assets without the need to convert those assets into cash. Consequently, use of DLT can facilitate asset transfers to meet margin calls during times of market stress without fire sales to generate cash

collateral.” 

Notably, on December 15th FASB’s new fair value accounting rules for bitcoin went into effect. Previously, bitcoin was treated in a rather draconian accounting way; any drops in price by corporate holders of bitcoin had to be listed as losses, but any gains in price couldn’t be listed as gains. Now, both losses and gains are accounted for, which makes sense. 

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IMF Publish Report on CBDCs Landscape

IMF staff published a note on the most recent advancement of CBDCs around the world while exploring specific points like its adoption in already existing payment rails, its resiliency to cyber risk, how to get it adopted in different countries while not interfering with monetary policies. The note summarizes the findings from feedback received from participant Central Bank which have been compiled into different Fintech notes: (i) positioning CBDC in the payments landscape; (ii) cyber resilience of the CBDC ecosystem; (iii) strategies for CBDC adoption; (iv) CBDC data use and privacy protection; (v) implications of CBDC for monetary operations; and (vi) cross-border payments with retail CBDC.

The note also provides an overview of the CBDC landscape with the most important advancement being as follows. The Bank of International Settlement is also quoted regarding the eventuality that up to 15 CBDCs might be launched by 2030. The ECB seems to fast track its retail CBDCs (rCBDC) with estimates for potential launch as early as November 2025. The UK on the other hand is still in the project phase where tech and policy requirements are explored. China has rolled out its e-Yuan, a retail CBDC, for several years now in 17 Chinese provinces. Government and corporations have increased their usage of the e-Yuan for payrolls, primarily.  The Eastern Caribbean Central Bank (ECCB) has sunsetted its D-Cash in January this year while preparing to launch D-Cash 2.0 aiming to improve UX and make it more versatile. In India, the rCBDC has around 5 mln users and is integrated into online payment systems via use of QR code. 

Wholesale CBDC isn’t overlooked and has more chances of being launched in the next 5 years than before, especially when it could improve settlement cost and time while acting as an efficient settlement layer for tokenized assets. BIS project mBridge

Has reached the MVP stage mid 2024 and aims to provide a multi central bank digital currency platform  to private and commercial banks to facilitate cross border payment and settlement. Project Rialto, Project Aurum 2.0, Project Hertha and Project Tourbillon have all been pushed out by BIS Innovation Hub. 

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Monetary Authority of Singapore Advances Tokenisation Services

The Monetary Authority of Singapore (MAS) has announced plans to advance tokenisation in financial services, including by:

1. forming commercial networks to deepen liquidity of tokenised assets; 
2. developing an ecosystem of market infrastructures;
3. fostering industry frameworks for tokenised asset implementation; and
4. enabling access to common settlement facilities for tokenised assets.

Two industry frameworks developed by Project Guardian industry group members and intended to facilitate the broad based acceptance and implementation of tokenised assets by financial institutions have also been published: (i) the Guardian Fixed Income Framework (GFIF), which provides an industry guide to implementing tokenisation in Debt Capital Markets, and (ii) the Guardian Funds Framework (GFF), which provides a set of recommendations for industry best practices for tokenised funds. Under the Project Guardian, more than 40 financial institutions are collaborating in order to productize and market the successful trials. To this en it established the Guardian Wholesale Network industry group where select participants will establish a multi-member network to commercialise their respective asset tokenisation trials and scale usage. 

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Capital Raises in November and December 2024

November

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December

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Source: ICO Analytics

For the past 2 months we continue to see substantial investment into infrastructure with AI based projects specifically in December. Most notably, the total raise in December eclipses previous raises of the year totalling close to $2 trillion dollars with Rumble video strategic round from Tether of $775 million and Riot finalizing the issuance and sale of $594 million worth of convertible senior notes. 

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