In today’s Crypto for Advisors newsletter, Samantha Bohbot, partner and chief growth officer from RockawayX, breaks down decentralized finance and the different roles Bitcoin, Ethereum, and Solana serve in this sphere.
Then, Kevin Tam answers questions about institutional investment in crypto ETFs while highlighting global trends in Ask an Expert.
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Sectors Beyond Bitcoin: Ethereum, Solana and On-Chain Economies
Bitcoin may lead the crypto conversation as the most established digital asset, yet the current landscape presents diverse opportunities for investors. Beyond Bitcoin, various blockchains support applications that captivate global users, generate significant revenues, and are demonstrating impressive growth.
Bringing Global Finance On-Chain
Tokenized real-world assets (RWAs), which refer to the issuance and trading of traditional instruments (like stocks, bonds, commodities, and alternative assets) on blockchains, offer substantial benefits. Settling asset trades on-chain allows for near-instantaneous transactions, enabling participation from anyone, anywhere (if permitted by the issuer). Furthermore, the transparency of transactions allows for easier tracking and automation.
Currently, nearly $300 billion worth of tokenized assets reside on-chain, with projections estimating the market could reach $600 billion by year’s end and likely $19 trillion by 2030, per a report from the Boston Consulting Group. Recent deployments of RWAs are highlighting the transformative potential of blockchains in traditional markets.
In connecting traditional assets to on-chain applications, blockchains serve as marketplaces, creating typical “chicken and egg” scenarios where issuers look to operate where user activity is highest, while users gravitate towards sites with the new and best offerings.
Ethereum was the natural starting point, as stablecoins like USDC and USDT first emerged there, giving Ethereum the largest pool of tokenized dollars and the majority of today’s on-chain RWA value.
Solana is a leading candidate for RWA activities, demonstrating its capability to rapidly transform traditional markets through recent launches. Kamino Finance, Solana’s premier borrowing and lending app, enables users to easily borrow against their holdings in xStocks, representing tokenized shares of companies like Apple and Tesla. Since the launch of xStocks across blockchains on June 30, Solana has accounted for approximately 93% of the daily trading volume.
On-chain stock token volume by blockchain
Source: Dune Analytics
Solana’s dominance in global developer activity and active users (over double that of the next chain) provides an advantage in attracting asset issuers, and successfully onboarding them will reinforce the activity.
Moreover, decentralized finance (DeFi) continues to grow, showcasing greater diversity in on-chain products and offering institutional-grade options. Builders are creating products that integrate stablecoins, RWAs, and yield mechanics to cater to varying risk preferences.
Ethereum currently leads this sector with over $94 billion in total value locked (TVL) and thousands of protocols. Retaining the industry’s deepest liquidity offers a significant advantage, although TVL is not the only metric of importance in DeFi.
In fact, Solana’s DeFi protocol recently surpassed approximately $10 billion in TVL, and it’s essential to note that the applications on Solana collectively earn more in on-chain fee revenue than all other chains combined. Thanks to its speed and low costs, Solana has positioned itself as the DeFi trading hub and consistently leads Ethereum in decentralized exchange (DEX) trading volumes.
Beyond Bitcoin’s role as “digital gold,” both Ethereum and Solana blockchains have become pivotal digital infrastructures, each with unique strengths. Ethereum was the first open computer, where decentralized applications were developed, and foundational institutional projects emerged.
On the other hand, Solana’s DeFi momentum is continually accelerating. It’s now the most utilized chain worldwide, becoming a hotbed for innovative DeFi products. Like Ethereum’s ETH token, Solana’s SOL token offers broad exposure to the ecosystem, allowing investors to partake in overall growth rather than picking individual application winners.
The long-term success of Ethereum and Solana hinges on their ability to host applications that provide real value while disrupting traditional financial systems. If they succeed, today’s prices might represent attractive entry points.
Ask an Expert
Q. One year into the institutional investments in crypto ETFs trend, how are Canadian banks and pension funds engaging with Bitcoin?
A. Recently released 13F filings indicate that Montreal-based Trans-Canada Capital has made significant digital asset investments, managing pension assets for Air Canada, one of Canada’s largest corporate pension plans. The pension fund recently added $55 million in a spot bitcoin ETF.
Institutional bitcoin investment
The institutional adoption of Bitcoin has rapidly increased in the past year, catalyzed by clearer regulatory directions, the introduction of spot ETFs, and growing recognition of Bitcoin as a strategic asset. Schedule 1 banks in Canada have invested over $139 million in bitcoin exchange-traded funds, indicating rising institutional demand and a long-term positioning trend.
Bitcoin ETF demand
Q. How could institutional accumulation impact Bitcoin’s market dynamics?
A. Last year, ETFs bought around 500,000 bitcoins, while the network produced 164,250 new bitcoins through proof-of-work. This indicates ETF demand was three times the newly created supply. Additionally, both public and private corporations purchased 250,000 bitcoins. As government bodies contemplate including Bitcoin in their strategic reserves, other entities are exploring its integration into their corporate treasuries.
Q. How will the Financial Conduct Authority’s (FCA) approval of retail access to crypto ETNs in the U.K. expedite retail and institutional adoption?
A. This decision signals a pivotal moment for crypto products in the retail market as an asset class, reflecting a broader shift in the U.K.’s regulatory approach toward digital assets. This is a stark reversal from a 2020 ruling when the FCA prohibited crypto exchange-traded notes. ETNs will have to be traded on FCA-approved investment exchanges, indicating the U.K.’s desire to cultivate a digital asset industry and bolster its economy, thereby reassuring institutional investors that it aims to be a competitive player in the global crypto arena.
