Inside the 300-to-1 onchain gap between the dollar and euro

Crypto Long & Short: Inside the 300-to-1 onchain gap between the dollar and euro

This is your institutional newsletter, Crypto Long & Short. This week:

• The dollar leads the euro about 3 to 1 offchain and more than 300 to 1 onchain. Ryan Connor of RockawayX on what has kept euro capital out, and what is finally changing
• Top headlines institutions should pay attention to by Francisco Rodrigues
• “StonkFun revenue ignites as memecoin mania gathers onchain attention” in Chart of the Week

Thanks for joining us!

300 to 1: The Biggest Opportunity In Stablecoins

The euro is the world’s second money, representing 20% of global FX reserves versus the dollar’s 57%. The eurozone is the world’s third-largest economy, and all of its activity — from trade to capital markets — is denominated in euros. Across measures of currency activity and demand, USD usage is approximately three times that of the euro. But onchain, that ratio explodes past 300-to-1. All euro-pegged stablecoins sum to €711 million, less than 1% of total stablecoin supply in dollar terms.

Euro stablecoin activity is small, but rapidly growing. Euro vault AUM across DeFi increased from roughly €12 million a year ago to €135 million today, still representing only 2.4% of total vault AUM. We believe euro-denominated real-word asset (RWA) yield products will accelerate EUR stablecoin growth.

Path Dependency & Missing Infra

Onchain euro issuance is trailing the offchain world primarily for two reasons: a historical path dependency and lack of euro-denominated DeFi infrastructure.

Path dependency. Stablecoins were built to settle crypto trading, and crypto pairs were originally priced in dollars. Since the base pair was USD, USD stablecoins launched to match the assets they settled.

Missing infrastructure. Vault infrastructure and looping (where each loan funds the next purchase) accelerated dollar-denominated DeFi. Dollar-denominated yield-bearing assets were issued onchain. Lending protocols accepted them as collateral and issued dollar debt against them, allowing users to buy more dollar-denominated yield-bearing assets.

Consequently, every major lending market onchain today reflects this dollar-denominated looping trade. Euro-denominated leverage markets did not take off because the legs of the loop didn’t exist.

Dollar Defi is Insufficient for Euro-Denominated Users

Euro-denominated vault infrastructure is a market necessity for European asset managers, corporate treasuries that operate and report in euros and European DeFi users who think in euro terms. These users represent significant latent demand, as they have been structurally limited from fully participating in the onchain economy due to burdensome FX risk and hedging costs.

1. 1Kalshi election data goes live on DoubleZero ahead of U.S. midterms1 hr ago
2. 2PayPal expands stablecoin rails with custom token issuance platform1 hr ago
3. 3Hunter Biden’s new LAPTOP token lost 98% of its value in under an hour after $1.6 billion debut1 hr ago
4. 4KYC data is an irresistible honeypot for hackers, and we must change how it is collected2 hrs ago
5. 5Algorand names former Chainlink executive William Herkelrath as CEO2 hrs ago
6. 6Germany moves to tax bitcoin like stocks as new draft bill targets tax-free gains2 hrs ago
7. 7Crypto lobbying orgs ask court to suspend Illinois tax as legal case continues3 hrs ago
8. 8U.S. Bank takes next step towards launching its stablecoin with cross-border payment test3 hrs ago
9. 9OpenAI says 10,000 AI agents solved a $1 million math problem. Now mathematicians are fighting3 hrs ago
10. 10Wall Street’s newest crypto fund comes with a staking feature to boost returns3 hrs ago

Tokenized Equities Lead RWA Inflows as bStocks Sets the Pace

Tokenized equities lead RWA inflows as the market recovers; Binance’s bStocks hit ~$118.5M in two months, now #2 issuer and ~90% of on-chain equity DEX volume.

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Source: cryptonews.net