Market and Trading Volume Muted Heading into Year-End
In this report:
From Governance to Cash Flows: UNI’s Transition Toward a Fee-Bearing Asset
Primary Market Revival: New L1s and Perp DEX Tokens as Collateral Supply
On-Chain Cash Management: Tokenized RWAs Drive Institutional Lending Demand
AAVE DAO Votes to Remove USDS and DAI Collateral Eligibility
Market Update
Following the sharp leverage unwind in October and early November, crypto markets entered a rebalancing wind down phase through December with trading activity generally muted. BTC and ETH traded in relatively tight ranges with price action increasingly driven by flows rather than momentum. BTC ETFs experienced one of their weakest two-month performance with outflows over $4 billion in November and December. From mid-November to end of December, BTC price dropped over 17%, with the price staying in the 88k-93k range throughout December. ETH price also dropped 17% with December price fluctuating in the 2.8k-3.3k range. In December ETH spot ETFs showed a $564m outflow showing a reduced liquidity and low risk appetite heading into year end.
Funding remained consistently negative across many names including SOL, ZEC, SUI, and AVAX signaling a continued demand for short hedging. BTC CME annualized basis was deeply compressed relative to earlier periods, reflecting a subdued institutional leverage demand. Following a sharp drop in November, the basis failed to regain prior highs stabilizing in the 5-6% range for most of the month.
Key trends
001
From Governance to Cash Flows: UNI’s Transition Toward a Fee-Bearing Asset
Uniswap announced the unification of Uniswap Labs and Uniswap Foundation, consolidating protocol development, governance coordination, and ecosystem strategy under a more centralized operating model. The approved unification proposal activates a protocol fee switch, which then allows them to use the fees to burn millions of UNI tokens. 100M UNI has been burned retroactively as an estimate of what might have been burned if the protocol fee switch had been active at token launch. This is a structural change to the ecosystem as UNI would not be just a pure governance token, but a value-accruing asset. The protocol fee switch is now enabled for v2 and v3 pools.
Previously the two entities operated with distinct mandates, where Uniswap Labs focused on product development such as interfaces, UX, and routing while the Foundation worked on governance, and long-term protocol alignment. Following the proposal, Uniswap Labs would transition to drive the protocol development and growth. The proposal marks a notable shift in regulatory clarity towards tokens and a big step forward for protocols that operate on-chain.
002
Primary Market Revival: New L1s and Perp DEX Tokens as Collateral Supply
December saw renewed primary market activity with notable token generation events (TGE) across Layer 1 blockchains and perp DEXs. Monad (MON)’s TGE in Coinbase had a very strong start with the public sale raising nearly $216 million, oversubscribed compared to its aim of raising $187 million. The high performance EVM compatible Layer 1 blockchain launched with 50.6% of the 100 billion token supply locked at launch. Although MON had a slower momentum post launch, this marked it as one of the larger scale token generation events this year.
On the decentralized perpetual futures exchange side, Lighter began its airdrop of its LIT token. 25% of the total supply was airdropped to early users, valued at ~$650 million at recent prices, with an additional 25% reserved for future ecosystem growth. Lighter’s launch closely mirrored competitor Hyperliquid with LIT initial listing only on the Lighter exchange, and the protocol aiming to direct revenues back to token holders. In terms of perpetual trading volume, Lighter’s 30d trading volume recently passed $160 billion.
New TGEs expand the universe of lendable assets but introduce heightened volatility and price discovery risk. For lenders, early-stage tokens like MON and LIT represent opportunities for structured lending, basis trades, and ecosystem-backed credit — particularly when supply schedules, lockups, and revenue-sharing mechanisms are well defined. As perp DEXs increasingly route protocol revenues to token holders, these assets may begin to resemble yield-linked collateral rather than purely speculative equity.
003
On-Chain Cash Management: Tokenized RWAs Drive Institutional Lending Demand
As the crypto industry continues to mature from its highly speculative nature, institutional adoption of digital assets advanced in the market. In December, Ondo Finance, State Street Investment Management, and Galaxy Asset Management announced the launch of the State Street Galaxy Onchain Liquidity Sweep Fund (SWEEP), which is a tokenized private liquidity vehicle targeting institutional investors. The purpose of SWEEP is to bring traditional cash management on-chain, allowing qualified purchasers to subscribe and redeem using PYUSD stablecoins. The fund is expected to debut on the Solana blockchain in early 2026, leveraging Galaxy’s digital asset tokenization infrastructure and State Street’s custodial and cash management capabilities.
JPMorgan also launched its first tokenized money-market fund (MMF) on the Ethereum blockchain, called My OnChain Net Yield Fund (MONY) which will be available to qualified investors. MONY’s structure is similar to that of a traditional MMF where the yield would accrue daily, primarily backed by U.S. Treasuries and repurchase agreements.
For crypto lending markets, tokenized RWAs introduce high-quality, low-volatility collateral that is structurally familiar to institutional balance sheets. Products like SWEEP and MONY can enable on-chain repo-style lending, and support leverage strategies that were previously difficult to implement in DeFi. Over time, the convergence of tokenized cash products and crypto-native lending infrastructure is likely to compress funding spreads and expand institutional credit participation.
004
AAVE DAO Votes to Remove USDS and DAI Collateral Eligibility
Aave’s DAO has approved a governance proposal to remove USDS and DAI as eligible collateral across all Aave V3 markets by setting their loan-to-value (LTV) to 0% and increasing their reserve factors to around 25%. The proposal received 98.4% support in DAO voting and cited factors including limited protocol revenue contribution from USDS and risk considerations related to its issuance structure. As part of the changes, USDS will be excluded from e-Mode and assigned a higher reserve factor to mitigate protocol exposure.
Notable News:
Galaxy Expands into Liquid Staking as Development Company for Liquid Collective
Invesco and Galaxy Expand Access to Solana Through the Invesco Galaxy Solana ETP (QSOL)
Bitwise files for 11 'strategy' ETFs, tracking tokens including AAVE, ZEC, TAO
Sberbank issues Russia’s first crypto-backed loan to bitcoin miner Intelion Data
Aave deepens integration with CoW Swap with MEV-protected swaps & intent-based flash loans
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