Weekly Top Stories - 12/05/25

In this week’s newsletter, Christopher Rosa explains the significance of Ethereum's Fusaka upgrade; Jianing Wu looks at recent moves by TradFi institutions to expand retail clients’ access to crypto products; and Thad Pinakiewicz examines the recent challenges faced by one of DeFi's oldest protocols, Sky (formerly MakerDAO).

Vanguard, Schwab and BofA Come Around to Crypto

On Tuesday, Bank of America (BofA) announced that its advisors will be allowed to recommend bitcoin investments to clients starting in January. Four U.S. spot bitcoin exchange-traded funds (ETFs) will be available across the megabank's wealth-management platforms, including Merrill, Bank of America Private Bank, and Merrill Edge. Alongside this move, BofA’s Chief Investment Officer Chris Hyzy suggested a 1%-4% portfolio allocation to Bitcoin, echoing Morgan Stanley’s guidance from October.

The same day, Vanguard opened its platform to third-party crypto ETFs and mutual funds, following reports in September that it was weighing such a move. The newly available products span bitcoin, ether, XRP, and Solana’s SOL.

Meanwhile, Charles Schwab set a timeline for launching spot bitcoin and ether trading, targeting mid-2026. Schwab CEO Rick Wurster revealed the firm’s plan during a CNBC interview in July 18.

OUR TAKE:

The story of institutional adoption continues to unfold. In our Oct. 17 newsletter, we covered Morgan Stanley’s removal of restrictions on crypto fund access for its financial advisors, which BofA is now mirroring, along with Vanguard’s plan to offer crypto funds to its clients and Citi’s plan to launch crypto custody in 2026.

Three of the four major U.S. wirehouses have now lifted restrictions on crypto investment: Bank of America this week, Morgan Stanley in October, and Wells Fargo Advisors, which has put spot bitcoin ETFs on the recommendation list on its brokerage platform a few months ago. The last holdout is UBS Financial Services. While we haven’t heard much from UBS on the crypto front, the firm provides limited and conditional access to crypto exposure for select clients. Perhaps it hasn’t made the leap because its parent bank is based in Switzerland, where it might face more regulatory hurdles, and it must also consider its global operations and focus on non-U.S. clientele.

Beyond the wirehouses, Vanguard, the second-largest asset manager, has begun allowing clients to trade crypto ETFs and mutual funds. The move was rumored to be in the works in late September and stands in sharp contrast to the firm’s earlier skepticism toward crypto. When U.S. spot bitcoin ETFs launched in 2024, Vanguard told Business Insider:

“While we continuously evaluate our brokerage offer and evaluate new product entries to the market, spot Bitcoin ETFs will not be available for purchase on the Vanguard platform. We also have no plans to offer Vanguard Bitcoin ETFs or other crypto-related products.

“Our perspective is that these products do not align with our offer focused on asset classes such as equities, bonds, and cash, which Vanguard views as the building blocks of a well-balanced, long-term investment portfolio.”

These reversals in attitude are largely driven by client demand. As crypto gains regulatory acceptance and becomes more integrated into traditional finance, investors are increasingly seeking exposure so they don’t miss out on potential opportunities. As more firms open access, competitive pressure builds, particularly now that backend logistics are no longer an obstacle. The SEC has streamlined the process of listing crypto ETFs; available products have grown more diverse, giving investors more options; assets under management have grown, improving liquidity. Vanguard permits trading not only of spot bitcoin ETFs but also a few altcoin funds, with the potential to support more crypto products that meet regulatory standards, while BofA is limiting access to just four spot bitcoin ETFs in January. Interestingly, Vanguard has not endorsed any specific portfolio allocation to bitcoin. Its decision to allow trading in crypto funds is more an emphasis on providing investors with choice.

We’ve noted before that opening these distribution bottlenecks in U.S. financial markets could unlock roughly $30 trillion in assets managed by 300,000 financial advisors. BofA reportedly serves around 70 million clients with more than $2 trillion in assets, while Vanguard oversees 50 million accounts and $11 trillion in assets. Combined, that’s a $13 trillion market opportunity. Even a modest 1% allocation would translate into about $130 billion, which would more than double the total inflows into all U.S. spot crypto ETFs since their inception.

With bitcoin as the first step, ether and other altcoins are likely to follow on platforms that haven’t yet adopted them. As we mentioned in our previous newsletter, these flows tend to be stickier and less sensitive to short-term volatility, which could in turn reduce market swings and attract more institutional capital. – Jianing Wu

Sky Protocol's USDS Booted From Aave on Risk Concerns

This week, Aave offboarded Sky’s (formerly MakerDAO’s) stablecoin USDS (formerly DAI), pitting two of the oldest DeFi protocols against each other. Aave cited concerns over the changing trends in the risk profile of the collateral backing USDS and Sky ecosystem incentive structures. Rune Christensen, Sky’s founder, has responded to the delisting claiming Aave misunderstood the risks, but that didn’t stop the vote in Aave governance from passing. This latest blow to Sky comes on the heels of several months of criticism over the latest addition to the protocol, stUSDS, a high-risk stablecoin collateralized by SKY, the protocol’s governance token (a successor to the original MKR token).

Buckle up for some background because this one goes deep.

stUSDS is the latest sign of the Sky protocol appearing to take risk to support its founder’s governance token holdings. Coming into 2025 there was a small amount of USDS (originally known as DAI) available to borrow from Sky collateralized by MKR through a protocol extension called the SEAL Engine. The terms from SEAL were conservative: $20 million of USDS borrowable with a 200% liquidation ratio and a 12% borrow rate, reasonable requirements considering this was the protocol’s first foray into issuing a stablecoin against homegrown collateral.

In February, when MKR’s price was down over 40% from the start of the year, an emergency executive resolution hit Sky governance. It claimed a potential governance attack on the protocol was imminent and proposed an expansion of SEAL’s borrowing capacity as the solution. The resolution quickly passed, nearly doubling the borrow capacity to $45 million, raising the rate to 20%, and reducing the liquidation ratio to 125%. Following the rush vote, the question was naturally asked: what was the nature of the potential governance attack? Christensen responded in the project’s Discordserver that the would-be attacker was rumored to be shorting MKR with the goal of liquidating large borrows to drive the price sharply lower and acquire the token at a discount to influence governance votes.

Christensen’s response raised more questions than it answered: why is there so much MKR being used as collateral on a borrowing platform rather than engaging in governance, and who is attempting this purported takeover?

The answer to the first question is that the large borrower who had put up MKR as collateral for a loan was Christensen himself. He had borrowed large amounts of stablecoins collateralized by MKR he had previously pledged to Aave and Morpho and converted the proceeds to fiat. The purported attacker? PaperImperium, a longstanding Maker community member and governance liaison at blockchain research and development firm GFX Labs. The response from PaperImperium claimed his actions were innocuous; he was not shorting MKR and had acquired the token so it could participate in governance votes as an activist investor.

Over the summer, governance token holders pushed to remove the endogenous backing from USDS and get the MKR/SKY-backed loan off Sky’s balance sheet. The solution put forward was a new stablecoin, stUSDS. stUSDS offers users high yields (up to 40%) in exchange for supplying the USDS to MKR/SKY-collateralized borrowers, offloading the loan from the Sky protocol to stUSDS purchasers. While the move did de-risk Sky’s balance sheet, it did not remove the costs from Sky’s income statement. Sky subsidizes any rate paid to stUSDS lenders above 20% and has provided $1 million or more in liquidity to pools to help facilitate exit liquidity.

Even with the Sky subsidies, lenders may not get out ahead, because their terms are subject to materially adverse condition covenants that favor the borrowers. stUSDS is collateralized by SKY, but liquidations are turned off; in fact, all liquidations on SKY-backed vaults are paused until the conversion from MKR to SKY is concluded (currently only 85% complete). Furthermore, the parameters for the stUSDS market, including the rate that lenders are paid and the debt ceiling, are managed by a set of wallets external to the Sky governance process. Those wallets are controlled by Christensen, the main borrower in the pool. In total, lenders' positions are collateralized by an asset that can’t be liquidated, are being paid a rate that is controlled by the borrower and are managed by a governance process that appears to favor the borrower’s position.

OUR TAKE:

Aave’s move to delist USDS was not surprising. Aave’s liquidation engine depends on predictable rules, not discretionary governance interventions. It cannot safely integrate an asset whose repayment profile fundamentally relies on whether insiders choose to liquidate themselves.

While stUSDS may not be an existential threat to Sky (the $100 million of stUSDS supply pales in comparison to $10bn USDS outstanding), it could potentially undermine the credibility of the Sky ecosystem and protocol governance. It seems that typical process has been neglected: loans extended to counterparties without debate, rates manually set by borrowers instead of programmatically enforced by a utilization curve, liquidations disabled until the Maker transition completes at an unknown future date. If an emergency vote can be passed to save one of Christensen’s borrows, who is to say when the next erosion of Sky governance will occur or under what terms? – Thad Pinakiewicz

Ethereum's Fusaka Upgrade: Less Node Pain, More Rollup Gain

On Dec. 3, 2025 at slot 13,164,544, Ethereum launched its latest network upgrade called Fusaka. Fusaka is Ethereum’s latest hard fork that cranks up blob capacity, raises gas limits, and quietly rewires the protocol for a rollup-first world. At the center of the upgrade is Peer Data Availability Sampling, or PeerDAS, which lets nodes sample pieces of blob data instead of downloading every byte. This opens the door to much higher blob throughput without crushing node bandwidth and keeps the network on the scaling path set out after the previous Dencun and Pectra upgrades. The Ethereum Foundation will follow Fusaka with a series of Blob Parameter Only forks that steadily raise the per-block blob target and maximum, giving rollups more room to publish data while maintaining safety.

Fusaka also raises the default block gas limit and adds a hard cap on gas per transaction, plus a grab bag of UX and dev quality-of-life upgrades. The default gas limit on Ethereum L1 moves to 60 million, while a new protocol-level cap at roughly 16.8 million gas per transaction prevents a single transaction from hogging an entire block and sets the stage for future parallel execution. On the UX side, a new precompile brings native support for the secp256r1 curve, the key format built into most phones and laptops. In practice, this means users can log in to Ethereum services with a fingerprint instead of a seed phrase, removing friction from the onboarding experience. Taking all these changes together, Fusaka is more about making Ethereum cheaper, faster, and easier to build on than about shipping flashy new user-facing features.

OUR TAKE:

It is worth unpacking a few terms that keep coming up in the Fusaka conversation. Blobs are temporary data packets that rollups post to Ethereum so the network can verify what happened on the L2 without storing every byte forever. Blob space is just the per-block room Ethereum allocates for this rollup data. When Fusaka increases blob throughput, it is basically giving rollups a wider lane to publish their data, which lets them lower the fees user pay while still inheriting Ethereum security.

Gas is the unit that measures how much computation and storage an L1 transaction uses, and the gas limit is how much of that work can fit in a single block. Fusaka raises the default block gas limit to 60 million while also putting a hard cap on how much gas any single transaction can consume. In practice that means blocks can carry more normal transactions during busy periods, but no single heavy transaction can hog the entire block. Put together, bigger blob space plus a higher gas limit make rollups cheaper and smoother to use while keeping mainnet viable for simple apps, asset issuance, and settlement, which is exactly the balance Fusaka is meant to strike. In other words, Ethereum is making an explicit trade: keep L1 as a high-value settlement and data layer and push most activity into blob-powered rollups.

On the usability front, Fusaka is firmly in the infrastructure tune-up category. Users see faster confirmations, more headroom during busy periods, and better integration with passkeys and secure enclaves. Developers get more predictable gas pricing and cleaner networking. The open question is where value accrues.

Cheaper blobs and higher L1 capacity tend to compress explicit fee revenue per unit of activity even as total throughput rises. This looks like a worse deal for ETH if you only stare at margins. The bet behind Fusaka is that a larger share of global onchain activity will choose to settle and publish data on Ethereum when doing so is cheap and predictable. If so, total blob fees and settlement demand for ETH should grow even if L2s pay less per transaction. In the short term, lower fees often benefits L2 tokens, stablecoin issuers, and applications that sit on top of the stack more than it boosts pure ETH-denominated yield. But it helps Ethereum defend its position as the neutral settlement layer that everything else plugs into, rather than a chain that tries to capture every last unit of margin at the front end.

The honest debate around stablecoins and tokenization is whether Ethereum can remain the default home for dollar and asset flows while a chain like Solana offers a cheaper, more integrated alternative. On one side, Solana’s pitch is straightforward: one high-throughput environment, low fees, simple developer tooling, and a rapidly growing stablecoin footprint make it an obvious place for issuers, exchanges, and fintechs that just want fast, cheap dollars and tokenized U.S. Treasuries without worrying about rollup architectures. On the other side, Ethereum plus its L2s offer a deeper moat: battle-tested security; multiple independent clients; a growing ecosystem of rollups that can specialize for different use cases; and an L1 whose decentralization and credible neutrality reduce the sense of betting on a single operator or jurisdiction. For the institutions that do care about that kind of platform and governance risk, Ethereum still feels like the safer long-term home. Fusaka leans into that second story by making Ethereum cheaper and more pleasant to build on directly, while giving rollups more blob space so they can compete on raw cost, which is how the community hopes to keep stablecoins and tokenization anchored to its settlement layer even as monolithic competitors try to win them away.

Under the hood, bigger blocks and higher gas limits naturally keep the decentralization debate going. Raising the default gas limit to 60 million while capping per-transaction gas is a textbook way to increase L1 capacity without pushing it past its limits. The change should reduce the risk that a single heavy transaction can stall a block, thus creating room for more normal activity. The flip side is the long-running concern that bigger blocks and higher throughput raise the hardware and bandwidth bar for node operators. PeerDAS aims to counterbalance that by letting nodes verify data availability with far less bandwidth, but the real-world effect on decentralization will only become clear over time as clients and infra providers adapt to these new settings. Ethereum creator Vitalik Buterin’s recent writing boils down to a simple message: even if most activity moves to rollups, Ethereum still wants an L1 that is cheap and pleasant enough that you do not feel foolish for shipping on it. Fusaka is one of the first upgrades that makes that vision feel real.

For teams building infrastructure-heavy protocols or complex smart contracts, that is exactly the kind of boring progress you want, and it supports a value accrual story that relies less on extracting maximum fees from each transaction and more on owning the broad settlement and data layer that everything else runs on. Looking ahead, Ethereum’s next network upgrade, Glamsterdam, which is targeted for the first half of 2026, is expected to push L1 scaling further, building on the foundations that Fusaka just laid. — Christopher Rosa

Charts of the Week

The combined activity of prediction platforms Polymarket and Kalshi is nearing all-time highs on momentum from sports-related markets. The weekly volume on such markets between the two platforms has increased 5.85x since the first week of this year to $1.6 billion. This is a considerable shift in the volume composition of prediction markets, which rose to fame last year on their election-related markets. While political markets fluctuate based on election calendars and it is expected their volumes will pick up as the mid-terms near, the growing dominance of sports markets is undeniable.

On a per-platform basis, Polymarket has a more even distribution of volume across categories, while Kalshi is dominated by sports markets. Since the week of Sept. 1, nearly 90% of volume on Kalshi has been sports market-related. On the other hand, sports markets have comprised just 38% of Polymarket volume.

Other News

🖐️Tokenized Stocks Face Resistance From Citadel in Letter to SEC

🚀Polymarket Launches U.S. Platform for Waitlist Sign-Ups

🕹️Sony Reportedly to Issue U.S. Stablecoin for Gaming

💵Jane Street Leads $105m Funding for Antithesis Tool Used by Ethereum

💰Ostium, the ‘Perps for RWAs’ DEX, Raises $20m in Series A

🇬🇧U.K. Passes Law Formally Recognizing Crypto as Property

🇪🇺European Banks Led by BNP, ING Push Ahead on Euro Stablecoin Plan

🔮Kalshi Courts Degens With Tokenized Betting Contracts on Solana...

📺...and Strikes Prediction Data Partnership with CNN

📱Solana Mobile Says SKR Token Launch Is Coming in January