In brief

  • ETH's weekly economic output surpassed Bitcoin's for the first time in years.
  • USDC's broke new records.
  • It's all down to DeFi.

The adjusted weekly value of Ethereum trades has surpassed that of Bitcoin for the first time since early 2018, according to a new report published today by market analytics firm Coin Metrics.

On Saturday, the “7-day average adjusted transfer value”—Coin Metrics’ formal term for a metric that tries to capture the true economic output of the Ethereum market, a little like the gross domestic product of a country—hit $3.08 billion for Ethereum. Bitcoin, the largest cryptocurrency by market capitalization, hit $3.01 billion. ETH traders sustained the victory for the subsequent two days, according to the firm. 

The metric excludes quick trades—Ethereum’s daily volume is $17 billion—but instead tries to weed out “outputs [that] represent a legitimate, economic transfer of value.” Coin Metrics attributes it to the obvious: the rise of DeFi, or decentralized finance. DeFi refers to non-custodial financial services, such as decentralized lending protocols, stablecoins and synthetic stocks. 

The vast majority of DeFi is housed on the Ethereum blockchain, meaning that ETH is something of a common currency among them. About $7.6 billion of value is locked up in Ethereum-based DeFi protocols, according to metrics site DeFiPulse

One recent DeFi development perhaps responsible for the spike, as noted by Coin Metrics, is the introduction of yearn.finance’s yETH vault, a kind of lending protocol that lets people earn interest on their spare ETH. At present, there is $78.6 million worth of Ethereum locked in the yETH vault, and $1.12 billion locked up in yearn.finance overall. 

Another is the ignominious rise of SushiSwap, a spinoff of decentralized exchange Uniswap, which caught about $1 billion worth of value in its smart contracts. Its creator, the so-called Chef Nomi, tainted its reputation by dumping about $12 million on the market over the weekend, leading to allegations of an “exit scam.” 

Also caught up in the DeFi craze is the Coinbase and Circle-led stablecoin USDC, which in the past week also hit a record for the amount transferred by its users: $1.08 billion. By comparison, this is almost double USDC’s most recent peak of $622 million, which occurred on August 18. 

Why? “It is very straightforward for both retail and institutional customers to easily both get and redeem USDC,” Jeremy Allaire, Circle CEO and chairman, told Decrypt.

The recent activity is “probably a sign of the red-hot interest in the DeFi space,” Charles Bovaird of Quantum Economics told Decrypt. USDC allows people to have exposure to the DeFi space while bypassing the inherent volatility. Its integration with various protocols “has led to significant network effects in its use and adoption,” said Allaire. 

Denis Vinokourov, head of research at digital asset prime broker Bequant, added that USDC is cheaper to borrow on top DeFi lending protocols than the DeFi-native stablecoin, DAI. “Even with the recent capital outflow, it remains cheaper to borrow USDC on Aave at 6.40% APY vs DAI at 7.47% APY,” he told Decrypt.

But whether its USDC or a different coin, decentralized finance protocols, and the stablecoins that often enable them, are driving Ethereum's rise.

“Stablecoins have become an integral part of the broader DeFi infrastructure and this trend is expected to accelerate,” said Vinokourov.