Newsletter

Asset management – Weekly fundamentals #67

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A walkthrough of the most interesting charts and trends in crypto, with a focus on key business drivers and protocol fundamentals.

This week’s newsletter focuses on the asset management market sector, which has a designated dashboard on Token Terminal. Let’s dig in!

Asset management protocols offer smart contract-based ‘investment funds', often referred to as vaults. The funds invest user assets according to predefined investment strategies, with the goal of generating better yields than what the user could access on their own.

Introduction

  • Asset management protocols allow crypto market participants to optimize and diversify their crypto investments. The market sector includes a diverse group of projects that allow users to buy crypto indices, optimize their investment strategies, and pool capital for investments.
  • Investment strategies in the crypto market can be complex. Since the launch of the first DeFi applications such as Compound, Aave, and Uniswap, users have been depositing assets into different applications to secure a return on investment. This return comes in various forms including interest fees, trading fees, and other rewards.
  • Asset management protocols witnessed rapid growth during the 2020-2022 bull market. The launch of numerous projects and increased yield farming opportunities sparked a surge in demand for these protocols. However, when the market began to cool down and yields decreased, interest in the market sector started to decline. This demonstrates the marked cyclicality of this market sector.

Overview

The daily capital deployed and fees from the beginning of the year for the top projects in the asset management market sector are visualized below.

Scope of analysis

  • The asset management dashboard features 21 projects. There are numerous asset management projects not yet listed on Token Terminal, so the dashboard can only give an indicative analysis of the market sector. It is also worth noting, that we are still working on adding complete datasets for the projects currently listed on our platform. For example, Yearn Finance and Convex Finance do not yet have the capital deployed metric visible.

Chart analysis

  • Since the start of the year, capital deployed through leading asset management projects has steadily decreased. For instance, capital deployed in PoolTogether experienced a 75% reduction year to date, falling from $42M at the beginning of the year to just above $10M currently. The decrease can be partially attributed to the reduced distribution of OP token incentives to PoolTogether users. Similarly, Ribbon Finance saw a significant drop in capital deployed, from $41.8M to $20.8M over the same time period. This downturn appears closely tied to RBN token incentives, which have significantly dropped from $285.1K in January to $85.9K in May.
  • The overall public interest in the crypto ecosystem is mirrored by the trends in the asset management sector. As the market has transitioned toward a more risk-averse environment, the demand for onchain investment platforms has decreased. Additionally, falling governance token prices have resulted in a significant drop in the USD value of distributed token incentives, reducing the allure for users to funnel their assets into these protocols.
  • Convex Finance currently stands as the leader in the asset management market sector based on fees. Remarkably, it generates around 80% of all daily fees within the sector, exhibiting consistent growth. Convex Finance facilitates boosted Curve staking, and it primarily generates fees via taking a cut of CRV (Curve’s governance token) rewards. Curve is a DEX specialized in efficient stablecoin trading that incentivizes liquidity providers on their platform with CRV token incentives. These token incentives can be boosted by locking CRV tokens.

Momentum

Some of the most interesting trends for projects in the asset management market sector are visualized below.

  • Gamma Strategies has emerged as the top protocol specializing in active liquidity management, with the total value locked (TVL) growing from $2.7M to $84.6M year to date. The surge in demand for active liquidity management, largely driven by Uniswap V3's concentrated liquidity mechanism, has been well capitalized on by Gamma Strategies.
  • In February, Gamma Strategies announced an integration with QuickSwap, a move that spurred an increase in both TVL and revenue generated. Alongside the integration, QuickSwap rolled out dQUICK and MATIC rewards to various Gamma pools to incentivize usage. At present, Gamma is generating between $1000 and $3000 in daily revenue, with occasional days of higher spikes.
  • Gamma Strategies' business is currently heavily reliant on the popularity of the concentrated liquidity model of AMMs'. We foresee growth in Gamma Strategies as long as the dominant model for DEXs/AMMs includes a concentrated liquidity function. However, how Gamma Strategies responds and adapts to shifts in AMM models remains to be seen. Furthermore, announcing new partnerships on a regular basis should aid Gamma Strategies in preserving its status as a market leader in its category.
  • Index Cooperative has managed to grow their capital deployed from $43.6M to $52.9M year to date, a rise of nearly 25%. At present, Index Cooperative offers nine distinct products in the market. The most prominent among them are the Interest Compounding ETH Index (icETH), the ETH Flexible Leverage Index (ETH2x-FLI), and the DeFi Pulse Index (DPI), with $19.1M, $14.1M, and $12.4M of capital deployed, respectively.
  • The growth can be largely explained by the rapid growth of the Interest Compounding ETH Index (icETH) product. The icETH product has grown by over 50%, moving from $12.6M to $19.1M in capital deployed. icETH is designed to provide holders with enhanced exposure to Ethereum staking yield. This growth was propelled by both a rise in the price of ETH and the escalating popularity of ETH staking. For more on Ethereum staking, refer to our liquid staking newsletter.
  • Index Cooperative has sustained profitability, with daily earnings averaging over $2000 year to date. It's important to note that this figure only includes revenues and token incentives while excluding all other operational expenses. Nevertheless, it's encouraging to see that Index Cooperative has successfully established a cash-flow-generating business that consistently yields returns, even in the volatile and challenging crypto landscape.
  • The indices provided by Index Cooperative are held by tens of thousands of individual addresses. As it stands, the DeFi Pulse Index (DPI), the Metaverse Index (MVI), and the ETH Flexible Leverage Index (ETH2x-FLI) are the three most popular products, based on the number of holders. These products have 15,872, 11,026, and 4,071 holders respectively.
  • The DeFi Pulse Index, Index Cooperative's debut product, maintains the highest number of holders to this day. Since its initial launch in September 2020, it has successfully held its ground as one of the foremost capitalization-weighted indices in the DeFi space. Several factors could account for its success, including its straightforward structure and the robust brand that Index Cooperative has effectively built around index products.
  • The three products launched in 2023 have struggled to attract capital. Diversified Staked Ethereum Index (dsETH), Gitcoin Staked Ethereum Index (gtcETH) and Money Market Index (icSMMT), all products launched during the past year, have not seen any notable traction. As of now, the most successful product is dstETH, with $1.4M in capital deployed and 77 addresses holding the token on Ethereum.

Other key highlights from the asset management market sector

  • PoolTogether introduced its new Hyperstructure version of the protocol earlier this year. The goal is to create a protocol that can run for free and forever. The Testnet V5 contracts have now been deployed on Sepolia.
  • Alongside launched the Alongside Crypto Market Index, a market-cap weighted basket of 25 assets. Currently the AMKT index has about $2.6m in capital deployed.
  • Index Cooperative announced a partnership with the CeFi firm Matrixport. Index Cooperative’s icETH product is now listed on the platform and a part of Matrixport’s Earn offering.
  • Gamma Strategies announced that they have been natively integrated on QuickSwap. This allows users to deposit assets into automated strategies managed by Gamma Strategies on both the QuickSwap interface and Gamma Strategies interface.
  • Ribbon Finance launched the V2 of their Ribbon Earn USDC product. This upgrade introduced changes both to the risk-free rate used and the ETH 10-delta Knock-Out Barrier.
  • Unipilot launched both on BNB Chain and Arbitrum during the beginning of the year. The growth has been more dominant on Arbitrum, but the fact that the BNB Chain deployment is more recent possibly explains the difference.

Changelog

Recent updates and improvements to the asset management market sector on Token Terminal.

ActionBusiness impact
Addition of net treasury data for Index Cooperative.Allows user to get a better understanding of how the treasury holdings look like excluding the native governance tokens ($INDEX) from the treasury.
Addition of Arbitrum and BNB Chain data for Unipilot.Allows Token Terminal to provide more accurate and up-to-date data for Unipilot. Now Arbitrum and BNB Chain data is included in addition to Ethereum and Polygon data.
Addition of Ribbon FInance’s rEarn and Treasury vault contracts. Allows Token Terminal to provide more accurate and up-to-date data for Ribbon Finance. Now the data set visible on the project dashboard is more complete.
Addition of Polygon and Arbitrum data for Gamma Strategies. Allows Token Terminal to provide more accurate and up-to-date data for Gamma Strategies. Now Polygon and Arbitrum data is included in addition to Ethereum and Optimism data.
New listing of Thetanuts.New listing of a DeFi Options Vault (DOV) protocol deployed on multiple blockchains. This has increased Token Terminal’s overall coverage of the asset management market sector.

Interview of the week

In this week's episode of the Fundamentals podcast, we're joined by Pablo Veyrat, the Co-Founder of Angle Protocol – a decentralized Euro stablecoin protocol.

Angle is a decentralized, capital-efficient, and over-collateralized stablecoin protocol that was launched in November 2021. Their stablecoin, agEURO, is currently the most liquid Euro stablecoin on the market.

In this episode with Pablo, we discuss what Angle is, how it works, its core value proposition, and its position within the market. We also get an overview of Angle’s smart contract infrastructure, how they ensure robust security, the team behind the project, the venture case for Angle - and Euro stablecoins in general - plans for the future, and more!

Listen to the episode

Timestamps:
00:00 Introduction
02:50 Angle’s purpose
03:48 Angle’s product suite: agEUR, borrow, leverage, earn
06:54 Overview of Angle’s smart contract architecture
09:16 Angle’s multichain strategy & technical implementation
10:39 The Euro stablecoin market and Angle’s position within it
12:52 Angle’s unique selling proposition
14:02 The team building Angle
15:07 DeFi needs safer building blocks
15:49 Angle’s business model
18:05 The ANGLE token & its purpose
19:02 The venture case for Angle & pitch to investors
20:59 Current growth drivers and challenges
22:46 Smart contract development process & security
24:34 What’s next for Angle?


Tweet of the week


Product tip of the week

Tips for getting the most out of Token Terminal

There are currently six different ways to interact with onchain data on Token Terminal:

  1. Metrics:
    Example use case: find a project that has the highest 90d daily active user growth.
  2. Market sectors:
    Example use case: find which project has grown its market share the most in the Lending market sector over the past 180d.
  3. Projects:
    Example use case: find out what % of the project's governance tokens will be unlocked in the near future.
  4. Trending contracts:
    Example use case: find out which contracts/projects consume the most gas on a specific chain.
  5. Financial statements:
    Example use case: find out how much a project generates in revenue vs. spends on token incentives.
  6. API:
    Example use case: create a portfolio monitoring app to figure out which tokens to sell or buy more of.

The authors of this content, or members, affiliates, or stakeholders of Token Terminal may be participating or are invested in protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Token Terminal does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only, and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Token Terminal at any time without notice. Token Terminal accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.

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