Blackrock is investing in DeFi. We saw what happened to Ondo while Blackrock said it was investing in it and RWA platforms, generally.
Ondo is up 25% in the last 3 months. 3 months that have been dismal for alts. And Blackrock is doing it again. This time in DeFi. So which DeFi protocols will follow Ondo and buck the general market trend thanks to the new publicity from Blackrock? Stay tuned and we’ll show you 3 from this crypto sector to benefit from this news.
1) FRAX
Thanks to exposure from BlackRock, many see DeFi making a comeback very soon. DeFi, like all financial platforms, needs a lot of money and scale to be successful. That’s because margins are small in this type of finance. For an institution to make more than 1 or 2% on a multi-million dollar transaction is rare.
So with that in mind, let’s jump into one area we expect to grow. Staking and Restaking. Lido is by far the biggest player here. They continue to be around 30% of the total market for staked Ethereum. And they are the leader in liquid staking options. But they are not the only player here.
Source: X
One further down the table that we also like is Frax. They are currently #23 at 0.48% of the market. And that sounds small. But that number means they are staking almost $490 million of ETH on their platform. They started liquid staking much later than Lido, Binance, and Coinbase. Those are the 3 leaders. Frax has its liquid staking coin, frxETH. Frax also has a crypto-collateralized stablecoin. We like this a lot and think we will need stablecoin options outside of Circle and Tether.
So, to be clear, the coin we are recommending from growth in DeFi is FXS (FraxShares). The last 3 months have been particularly unkind to FXS, as is true with most alts. In the last 90 days, FXS has lost half its value dropping from $5.10 down to $2.50. Circulating supply is 80.5 million out of just under 99 million total. Its market value is just under $200 million.
Almost $13 million is part of the collateralization of the FRAX stablecoin. So that allocated FXS is not going anywhere. Also, as counter-intuitive as it sounds, we think even though the ETH ETF will NOT allow the funds to stake or restake, liquid staking markets will continue to grow. Maybe the ETF gives new awareness to new groups to try crypto as an investment, too. That would lead to new liquid staking growth as well. Here is an example:
Source: X
Going even further than that, our Partner Content Lead Stu thinks that Blackrock will try to set up its validator. That and fork a version of ETH that they can more easily manipulate. This is easier to do on PoS networks. After all, if Lido or Frax can have a liquid staking version of ETH, why can’t Blackrock which is much bigger, more powerful, and more market-connected?
The important point here is that both the ETF and liquid staking should lead to more growth for ETH. And maybe, both things help each other grow. And if you think they will grow, then you should consider Frax’s FXS for your portfolio.
2) Compound (COMP)
Now we move on to a traditional DeFi platform, Compound. Compound created the first AMMs in crypto. They are an OG. They have also collateralized over $2.2 billion across 8 EVM markets to make stablecoin borrowing easy and inexpensive. The idea here is that if Blackrock is going to invest solidly in DeFi, then DeFi infrastructure like Compound provides, will be one area that gets some of that funding.
Source: X
Just like liquid staking and restaking will as we discussed with Frax moments ago. Savvy investors will also see there are some opportunities here. You can borrow inexpensively and maybe deploy the stablecoins you borrow to earn more than your interest payments. That said, it’s not efficient given the LTV (loan to value) limitations, most of which are in the 75-80% range. Like this example of borrowing USDC on Base for a net 3.8%.
But still, if you need stablecoins for your favorite LP, you can get them at Compound while keeping your coin on deposit. We covered Compound quite a bit a couple of years ago during DeFi Summer. And they are just chugging along quietly making their platform better.
Source: X
In the last year, the $COMP token is down 30%. Its market value is $350 million and it’s down almost 50% from its recent March high of $95 to $51. It’s been beaten down mostly due to the negative sentiment across all alts. And that means a good project like Compound is now on sale. What DeFi protocols are your favorite? Let us know in the comments below.
3) RocketPool
Back to liquid staking again. And this time, it’s RocketPool. They are #9 in the staking rankings with $2.3 billion ETH staked. That makes up 2.62% of the market. There’s almost $100 billion in ETH staked right now. But 41% is held by either Lido or Coinbase.
That’s a little too concentrated for many to be comfortable with. So with the same reasoning we used for Frax earlier, we also like RocketPool for when people will want to liquid stake but choose an established option outside of the top 3 or 5 validators.
Source: X
Rocket also makes it easy for you to run your node if you want to stake for yourself and you have the 32 ETH required. That node infrastructure is a nice added benefit. It can lead to better decentralization of ETH staking if more people use it. You can also migrate your existing validator to Rocket and split your 32 ETH into 8 ETH validators. Again, another nice infrastructure-type benefit.
The last 12 months have been unkind to RocketPool despite liquid staking growing. RocketPool’s native $RPL token is down 54% in the last 12 months and down 33% in only the last 30 days.
Source: X
People are ignoring ETH staking and infrastructure in favor of the Eigenlayer-style staking narrative. But we see this as a mistake. Both should grow together and of the two, a direct staker like RocketPool is a lower risk than Eigenlayer. Eigenlayer is subject to rehypothecation concerns while RocketPool, Frax, and other direct Ethereum stakers are not as they have the coins in their possession staked with their validator of choice.
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