Macro Update

Markets traded choppy over the last week, with BTC oscillating between $116K and $112K, trading at the lower end of the range at the time of writing. Total digital asset market cap stands at $3.95T, only briefly able to hold above the $4T mark throughout the summer. The ongoing Bitcoin-to-Ethereum rotation remained, with continued BTC outflows met by ETH inflows, signalling a sustained shift in sentiment and reinforcing ETH’s relative strength. At the same time we’re seeing strong inflows in single names such as HYPE. BTC dominance continues to decline, now at 57.5%, mainly driven by blue-chips and large L1s as SOL touched $200 and BNB reached a new all-time high of $900.

The rally that followed Powell’s Jackson Hole speech was fuelled by naked option buying, primarily in ETH, which briefly pushed the asset  to new highs above $4.9K. Those flows were short-dated and have since faded, leaving ETH back near $4.65K and reinforcing the divergence in option positioning between BTC and ETH.

The weakness early last week came ahead of Jackson Hole, where investors braced for a hawkish tone following the latest higher-than-expected PPI  print. While broader markets, including digital assets, remain driven by the macro and policy environment, option activity continues to show ETH skew outperforming BTC, with more persistent demand on the ETH upside. We see this reflected in positioning: despite a pick-up in downside hedging and more active upside capping into year-end versus a few weeks ago, ETH continues to benefit from more speculative flows  relative to BTC. At the same time, supportive regulatory headlines and institutional adoption out of the U.S. provide a constructive backdrop as the market heads into September

Index performance this week highlights a reversal from the prior week, with the GMCI-30 climbing +2.7% despite notable dispersion across sectors. Layer 1s led with a +4.8% gain, a shift from last week’s Layer 2 strength, as the move was driven not by mega-caps like ETH, SOL, or BNB but by smaller L1 plays that outperformed on relative rotation. DeFi also managed to stay marginally positive (+0.2%), supported by LINK’s continued bid (making up 25% of the index). The GMCI USA Select gained +1.3%, echoing the relative resilience in larger caps even as breadth narrowed.

Finally looking at changes in funding and open interest of perps, we note AVAX and HYPE. AVAX open interest reached the highest levels across majors (OI z-score +3.3), even as funding stayed broadly unchanged, reflecting structural long positioning tied to the new S-1 ETF filing and adoption headlines. HYPE, meanwhile, saw the most extreme funding shift, with annualised rates surging as bullish constructive sentiment on HyperEVM ecosystem continues and new headlines such as Arthur Hayes’ new price target triggering a wave of speculative longs. Broader large caps like ETH, BNB, and DOT also showed steady OI builds with elevated funding, while BTC remained comparatively balanced.

Our take:

“Macro still leads, but adoption is broadening across the entire digital asset space”

As we exit the summer lull, macro remains firmly in the driver’s seat and will likely continue to dictate direction until the September FOMC minutes. This has been the dominant force in recent weeks, keeping digital assets highly sensitive to shifts in rate expectations. At the same time, large pockets of the market are increasingly driven by digital asset treasuries, adding another structural force alongside macro in shaping flows.

That said, we note a constructive backdrop across both L1s and the regulatory/institutional adoption front. Importantly, the headlines are broad-based rather than idiosyncratic, with multiple ecosystems showing momentum. The breadth of adoption suggests the digital asset space as a whole is attracting sustained interest, pointing to deeper and more structural demand than we’ve seen over the past few years.

Notable Headlines

• Kanye West launched the $YZY token this week, but it quickly crashed ~75% within 24 hours, with onchain data pointing to large insider allocations and potential manipulation.

• The EU is fast-tracking plans for a digital euro stablecoin, exploring a rollout on Ethereum or Solana, as stablecoins marks another step in a broader shift toward tokenization on public blockchains with Ethereum at the center.

• VanEck has filed for the JitoSOL ETF, the first 100% Liquid Staking Token ETF, marking the intro of a distinct new product suite for Solana and DeFi.

• Last week, Plasma partnered with Binance to launch a USDT Locked product, hitting $1B TVL as vaults sold out fast. Its zero-fee USDT transfers boosted its stablecoin dominance. Early Binance Earn USDT depositors got 1% of Plasma’s token supply plus yields.

• Aave expands beyond EVM with its Aptos debut, re-implementing V3 in Move to support USDC, USDT, APT, and sUSDe at launch, backed by fresh collateral markets, audits, and a $500K bounty.

• Trish Turner resigned as head of the IRS Digital Assets Division, after three months in the role. She has joined Crypto Tax Girl to advise clients on crypto tax compliance.

Gold Coming To Aave

On 23 August the proposal was “YAE’d” to onboard Tether’s XAUt gold-denominated stablecoin to the Aave v3 Core Instance. 

Aave isn’t the first to flip the switch on tokenized gold. On Hyperliquid, traders can access $PAXG perps, with funding currently around -10% annualised, meaning longs are effectively paid to hold exposure, while Hyperbeat offers yield strategies on $XAUt across lending protocols at roughly 1% APY.

For a closer comparison to Aave, Fluid is the one to look at. It enables users to LP, lend, and borrow in both $XAUt and $PAXG, with the added flexibility of using them as smart collateral to run leveraged strategies.However the difference in Aave and Fluid is clearly the size. Not to throw shade on Fluid (as it’s been growing TVL >3x YTD), Aave’s just an order of magnitude larger when it comes to size and activity. This instantly becomes clear when comparing TVL between both platforms.

Our take:

“Gold has been flying under the radar of many but there’s a large demand for it and the implications for the DeFi ecosystem are not to be underestimated"

Gold’s Relevance

While smaller than the equities or fixed income markets, gold remains a cornerstone of global markets with a ~$23tn market cap, still significantly larger than Bitcoin’s ~$2.2tn. Beyond serving as a store of value, it has historically backed sovereign currencies like the U.S. dollar and today still underpins certain stablecoins such as Paxos’ PAXG and Tether’s XAUt. Its depth, liquidity, and credibility make it one of the most important real-world assets which is finally finding some onchain traction

Both gold and Bitcoin are cast as stores of value, tied to narratives around inflation and de-dollarization. In practice, though, they trade very differently. Gold tends to cover both left and right tails - acting as a defensive hedge in downturns, alongside the classic liquidity instrument, while Bitcoin, lacking regulatory clarity until recently and carrying perceived risks like smart contract exposure, has often moved more in line with high-beta tech, particularly the Nasdaq. 

Since 2018, the correlation between gold and digital assets has hovered around zero, meaning their price moves are largely unrelated. By contrast, Bitcoin remains the anchor of the digital asset space, with most tokens still trading closely in line with it.

Gold’s DeFi Relevance

Tokenized gold has mostly been about holding or trading, through stablecoins like PAXG/XAUt or perps on exchanges. Some lending (see Fluid) already exists, but tying gold to large TVL and a blue-chip protocol takes it to another level. It stops being a passive asset and starts working inside DeFi’s credit system:

• Put gold to work: Instead of just holding it or trading perps, lending makes gold productive: you can earn yield or borrow against it without selling.

• Stronger collateral mix: Gold doesn’t move with crypto, so it helps steady lending pools and lowers the risk of big liquidations in sell-offs.

• New market to play with: Once gold has borrow/loan curves onchain, it opens up credit, carry trades, and hedging strategies that don’t exist with just spot or perps.

→ In the end, putting gold into DeFi lending connects the oldest store of value with the newest financial rails and could be a strong driver of real institutional use.

Pushback

One concern is that borrow rates on gold will be low, since demand to borrow it looks limited today. And while that’s fair, this could quickly change as gold becomes a real building block in DeFi. Three things in particular could drive borrow demand higher:

• Perps: As gold perp markets grow, traders will need to borrow gold to hedge, short, and run carry trades.

• Institutions: TradFi desks already run gold lending and basis trades off-chain, once liquidity is there, they’ll bring those strategies onchain.

• Options & shorting: As margin and options on tokenized deepen, market-makers and shorts will have to borrow gold to sell and hedge.

Quietly BrewingOn top of a new building block falling into place for tokenized gold to find deeper adoption, we’ve also seen onchain activity pick up meaningfully in recent months. This goes beyond market cap growth, which has naturally benefited from rising gold prices, and is more importantly visible in active addresses and transfer volumes. 

Transfer volume is up 209% YTD, market cap has expanded 57%, and active addresses have grown 48%. Gold is no longer just sitting idle onchain, where its only real use was diversification for DAOs and other native entities. Instead, activity is rising alongside the buildout of supportive infrastructure such as Chainlink’s Proof of Reserve, which makes it possible to use gold in permissionless, decentralized financial applications. That shift enriches the value of having gold onchain, turning it into a genuine USP.

It’s reasonable that this USP is particularly compelling for institutions. Gold is an asset class they already understand, but pairing it with meaningful DeFi functionality creates an entirely new set of use cases. Over time, this could make tokenized gold one of the more powerful drivers of institutional onchain adoption.