Apr 7, 2025: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

 explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Weekly highlight — Fed not ready to adjust rates 

Federal Reserve Chair Jerome Powell emphasized that the central bank will not rush to respond to the Trump administration's tariffs or the resulting market turmoil stemming from fears of a global economic downturn. At a conference in Virginia, he acknowledged that tariffs could significantly impact the US economy, leading to slower growth and higher inflation. However, he stated that the Fed will wait for more clarity before considering interest rate cuts.

With inflation still elevated, Powell stressed the Fed's responsibility to prevent a temporary price surge from evolving into a persistent inflation issue. Julia Coronado, President and Founder of MacroPolicy Perspectives, noted that due to current inflation levels, the Fed is not as well positioned to offer economic support as during previous trade disputes.. Even if rate cuts become necessary, they’re likely to be delayed and cautious.

Following Trump’s announcement of new tariffs, stocks fell sharply, with the S&P 500 facing its worst week since the COVID-19 lockdowns. Economists have raised concerns that these tariffs could lead to a recession, prompting increased speculation about the timing of potential rate cuts. Powell's recent comments marked a shift from his earlier stance that inflation effects from tariffs would be short-lived.

He reiterated the Fed's commitment to maintaining stable long-term inflation expectations and acknowledged the uncertainty surrounding the tariffs' economic impact. Despite signs of deteriorating consumer sentiment and business spending, Powell argued that definitive data has yet to emerge.

As the Fed prepares for its next meeting, futures markets have adjusted expectations regarding rate cuts. Powell's remarks suggest that a preemptive rate cut is unlikely before assessing the broader economic implications of the recent tariffs.

Weekly crypto highlight — Bitcoin’s resilience amid tariffs’ induced volatility

On Apr 2, 2025, Donald Trump announced aggressive U.S. tariffs: a universal 10% on all imports, with specific rates of 34% on China, 24% on Japan and 20% on the European Union (EU), while notably exempting Russia. This policy shift triggered significant volatility in both traditional and cryptocurrency markets. The announcement’s timing, just after US stock markets closed, appeared strategically timed to limit immediate reaction.

The next day, the S&P 500 fell over 5.1% and the Nasdaq Composite dropped more than 5.6%, reflecting investor fears of economic disruption and rising inflation. This was the fifth-worst trading day of the 2020s, reminiscent of Black Thursday in March 2020. In contrast, Bitcoin showed resilience, trading at around $81.7K, only a 6% decline from its recent low, indicating that investors may see cryptocurrencies as hedges against geopolitical uncertainties.

Trump framed the tariffs as the start of a "Liberation Day," introducing a two-tier system: the universal tariff effective April 5, with reciprocal tariffs on about 60 countries starting April 9. This approach aims to counteract existing tariffs on U.S. goods, compelling nations and regions like China, Japan and the EU to reconsider their trade policies.

Asian countries face severe impacts, with tariffs as high as 49% on Cambodia and 48% on Laos. Supporters view these tariffs as negotiation tactics, challenging nations to accept favorable trade terms or incur higher export costs. Trump argues this will lead to fairer trade conditions, while critics warn of potential retaliatory tariffs, increased costs for American consumers and broader economic uncertainty.

The success of this policy depends upon whether nations opt for cooperation over confrontation. Proponents believe nations will negotiate to avoid losing access to the lucrative US market, potentially boosting US jobs and profits.

Amid this turmoil, Bitcoin has shown surprising stability, holding at around $80K despite traditional market volatility. Its drawdown was significantly less severe than that of major stock indices, suggesting it may be viewed as a safe haven during economic uncertainty.

Factors contributing to Bitcoin’s resilience include its decentralized nature, which insulates it from traditional market shocks, and growing acceptance as a legitimate asset class. Continued institutional interest, driven by entities such as Strategy and BlackRock, reinforces its appeal.

In conclusion, Bitcoin's strength amid tariff-induced volatility underscores its potential as a digital asset, and signals a growing acceptance among investors seeking stability in uncertain economic times. This could signify a pivotal shift within the world’s financial landscape toward viewing cryptocurrency as a mainstream financial instrument.

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Weekly Institutional Insights: Tariffs rattle market as Bitcoin holds better than TradFi

Current US president Donald Trump introduced a universal 10% tariff on imports and higher specific rates for countries like China and Japan, signaling a major shift in US trade policy.

On Apr 2, 2025, Donald Trump announced aggressive US tariffs, including a universal 10% levy on all imports alongside specific rates of 34% on China, 24% on Japan and 20% on the European Union (EU), while the absence of tariffs on Russia was a notable exception. This policy shift resulted in significant volatility in both traditional and cryptocurrency markets.

The timing of Trump's announcement was widely speculated to be strategic, occurring shortly after US stock markets closed in order to mitigate immediate market reactions. However, the following day, Apr 3, 2025, saw substantial declines: the S&P 500 dropped over 5.1%, and the Nasdaq Composite fell more than 5.6%, reflecting investor anxieties about potential economic disruptions and heightened inflation. 

This marked the fifth-worst trading day of the 2020s, with parallels drawn to the infamous Black Thursday in March 2020. But in stark contrast, Bitcoin displayed remarkable resilience, trading around $81.7K, a mere 6% drop from its local bottom of $77K recorded on Mar 10, 2025. This stability suggests that investors may increasingly be viewing cryptocurrencies as a hedge against geopolitical uncertainties, since Bitcoin’s decentralized nature allows it to operate independently of tariffs and supply chain disruptions that affect traditional assets.

Trump characterized the tariff announcement as the beginning of a "Liberation Day," introducing a two-tier system where the universal 10% tariff would take effect on Apr 5, 2025, while reciprocal tariffs targeting around 60 countries would follow on April 9. This reciprocal approach aims to counterbalance existing tariffs imposed by other nations on American products, pushing countries and regions like China, Japan and the EU to reconsider their trade policies. During his speech, Trump presented a chart illustrating the disparities in tariff rates, using it to justify the administration's stance on the need for these measures to correct long-standing trade imbalances.

The implications for Asian countries are particularly severe, with many facing the highest tariffs, including Cambodia at 49%, Laos at 48% and Madagascar at 47%. Economists who favor proactive trade policies view these tariffs as a negotiation tactic, often referred to as a "game of chicken," whereby the US essentially dares other nations to either accept new, more favorable trade terms or face increased costs for their exports to the US. 

Trump argues that many countries impose heavy taxes on American goods that make them less competitive abroad. He believes that by introducing these tariffs, other nations will be compelled to lower their own export taxes on US products, fostering fairer trade conditions. However, critics warn that this strategy could backfire, potentially igniting a trade war damaging to every country and area involved. They express concerns that retaliatory tariffs from other countries might lead to increased costs for American consumers and economic uncertainty for businesses. 

The success of Trump's tariff policy ultimately hinges on whether other nations choose cooperation over confrontation. Proponents of the strategy argue that countries might fear losing access to the lucrative US market, prompting them to negotiate more favorable terms for American exports. If successful, this could theoretically boost US jobs and profits.

In summary, as the situation evolves, the effects of these tariffs on global trade dynamics and market stability remain to be seen, with potentially far-reaching implications for both traditional and cryptocurrency markets.

Amidst the tumultuous landscape created by the recent tariff announcements, Bitcoin has demonstrated a surprising level of resilience. Despite the significant volatility affecting traditional markets, Bitcoin maintained robust support around $80K, showcasing its ability to withstand external economic pressures. This stability is particularly noteworthy when compared to mainstream public equities, which experienced substantial declines in response to the tariffs.

The magnitude of Bitcoin's price drawdown was considerably less severe than that of many established stocks, highlighting its unique position in the financial ecosystem. While indices such as the S&P 500 and Nasdaq Composite plummeted over 5%, Bitcoin's relatively mild decline suggests that investors may increasingly view it as a safe haven and alternative asset during times of economic uncertainty.

This resilience can be attributed to several factors. First, Bitcoin's decentralized nature allows it to operate independently of traditional market dynamics and geopolitical influences, making it less susceptible to the same shocks that impact equities tied to physical goods and international trade. Additionally, the growing acceptance of cryptocurrencies as a legitimate asset class has bolstered investor confidence, leading to a more stable demand for Bitcoin, even in volatile environments. In particular, Strategy’s (formerly MicroStrategy) continued accumulation of Bitcoin and BlackRock’s launch of ETP products in Europe continues to cement Bitcoin’s unique position in equity portfolio allocation.

Furthermore, the current market sentiment indicates a shift in the way that investors perceive Bitcoin, particularly as an effective hedge against inflation and geopolitical risks. As traditional markets grapple with the ramifications of aggressive tariff policies, Bitcoin's ability to hold steady at the $80K level may attract more institutional interest, reinforcing its position as a viable alternative investment.

In conclusion, Bitcoin's resilience within the tariff-induced volatility not only highlights its potential as a digital asset, but also suggests a broader acceptance among investors seeking diversification and stability in uncertain economic times. This comparative strength against mainstream equities could signal a pivotal moment in the evolution of cryptocurrency as a mainstream financial instrument. 

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Bybit x Santiment: Tariffs-led whipsaw solidifies Bitcoin’s resilience

Our weekly crypto derivatives analytics report delves into macro events; the current state of crypto and trading signals from spot trading volume; and futures, options and perpetual contracts.

As markets near US president Trump's "Liberation Day" for tariffs, crypto remains volatile. BTC has dropped from a local high of $88K to $82K amid signs that tariffs will affect many countries. Implied volatility has spiked and then eased. Other derivatives market metrics show that BTC and ETH volatility smile skews remain significantly skewed toward puts, a level last seen in March 2023.

Please check out the report’s highlights.

BTC options show signs last seen in March 2023

As crypto prices remain highly correlated with macro-sensitive assets, the week began with a surge in short-tenor implied volatility for BTC and ETH. The sell-off continued as President Trump announced tariffs affecting about 90 countries. BTC's front-end volatility quickly fell below longer maturities, and short-dated volatility smiles briefly favored OTM puts, reminiscent of levels seen during the March 2023 US banking crisis. 

SOL options remain the least traded among major cryptocurrencies (i.e., BTC and ETH), but there was a significant rise in call options this week, dominating both volume and open interest. Following the Mar 28, 2025 expirations, many contracts weren’t reopened, with the notional size of call contracts decreasing from over $3.2M to around $2.5M. However, there has been a slight increase in the notional size of open put options, as traders respond to a continued decline from the January all-time high of $250.

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Bybit X Block Scholes crypto derivatives analytics report (Apr 2, 2025): BTC option skews show a bearish sign last seen in 2023

Fidelity recently announced that it would be launching its own stablecoin, to be pegged to the US dollar. Learn more here.

After first making headlines upon filing paperwork for its very own money market fund, Fidelity seems to be taking the next step toward this grand goal by issuing its own 

 pegged to the US dollar could be the start of a multi-stage scheme to help crypto achieve mainstream adoption.

If you're new to fund-issued stablecoins, or perhaps a crypto beginner whose attention has been piqued, you might be wondering how Fidelity’s stablecoin could impact the crypto market. From highlighting how the Fidelity stablecoin differs from its other fiat-backed counterparts (e.g., 

) to elaborating on the possible motives for launching it, here's everything you need to know about the proposed Fidelity stablecoin.

Founded in 1946, Fidelity Investments has built a reputation as a leader in financial services. To date, it's managed trillions of dollars in assets for individuals and institutions alike. 

Known for its innovative approach to investing, Fidelity has consistently stayed ahead of the curve by embracing new technologies and trends. From mutual funds to retirement accounts, it's fair to say that Fidelity is a trusted name in finance, and has successfully established its presence, thanks to its storied legacy in financial services.

Fidelity’s foray into crypto isn’t new. With the demand for digital asset services growing larger over time, the company has quietly been building its presence in the crypto space through 

 since 2018, with dedicated service that provides custody and trading services for institutional and individual investors.

By launching its own stablecoin, Fidelity is taking this commitment toward 

 innovation to the next level, signaling its belief in the long-term growth potential of digital assets.

Like many of its popular stablecoin counterparts, Fidelity’s stablecoin is pegged to the US dollar. This ensures price stability, a critical feature for traders looking to mitigate risk amid 

. Built on blockchain technology, this stablecoin is ostensibly designed to integrate seamlessly with Fidelity’s broader ecosystem of tokenized financial products. This means users can expect a secure, efficient and transparent digital asset that aligns with Fidelity’s high standards.

 like Tether’s USDT and Circle’s USDC dominate the market, Fidelity’s offering brings something unique to the table: trust. As a regulated financial institution with decades of experience, Fidelity offers a level of credibility that few other stablecoin issuers can match. Furthermore, its focus on regulatory compliance positions it as a safer alternative for both retail and institutional investors.

Fidelity’s stablecoin represents a deliberate effort to integrate its institutional expertise with blockchain’s efficiencies. By creating a dollar-pegged digital asset, the firm aims to serve as a trusted intermediary for clients navigating both traditional and crypto markets. Moreover, the Fidelity Digital Assets division has already laid the groundwork through Bitcoin custody services and 

. The proposed stablecoin extends this infrastructure, allowing institutional investors to transition seamlessly between volatile cryptocurrencies and stable-value instruments without exiting Fidelity’s ecosystem.

The stablecoin market has grown exponentially, surpassing $200 billion in 2025. This surge is largely being driven by demand for volatility hedging and cross-border payment efficiency. Fidelity recognizes that traders and institutions increasingly require reliable on-ramps between fiat and crypto. Its stablecoin offers a compliant alternative to incumbents, such as Tether and Circle, who face lingering skepticism about reserve transparency. By entering this space, Fidelity would not only meet immediate demand, but position itself as a leader in institutional-grade digital assets, thus appealing to risk-averse entities.

The US regulatory landscape under the current administration has shifted decisively toward crypto-friendly policies, and the Stablecoin Innovation Act and the GENIUS Act are advancing through Congress, aiming to establish clear rules for reserve backing and 

 compliance. Designed with Treasury reserves and audit transparency, Fidelity’s stablecoin aligns with these impending standards. By proactively adopting regulatory best practices, Fidelity avoids the scrutiny faced by Tether — and positions its stablecoin as a “gold standard” for institutional adoption.

Stablecoins generate revenue through interest earned on reserve assets. For example, Tether reported over $6 billion in net income in 2024 from its treasury holdings. Fidelity already manages $80 billion in its Treasury Digital Fund, and can potentially monetize its stablecoin reserves while offering competitive yields to clients. This creates a dual revenue stream, consisting of fees from asset management and interest from stablecoin reserves.

The stablecoin market remains dominated by Tether and Circle, but their retail-focused models leave room for institutional alternatives. Fidelity’s brand reputation, combined with its existing relationships with hedge funds and pension plans, gives it a unique edge. For example, its stablecoin could integrate directly with retirement accounts, allowing 401k participants to allocate to crypto without custody risks. This differentiation is critical as rivals like BlackRock and Franklin Templeton expand their tokenized offerings.

While details are still scarce, the following are some likely use cases for the Fidelity stablecoin.

Using Fidelity’s stablecoin for staking

One of the most exciting use cases for Fidelity’s stablecoin is staking. For traders and investors, staking offers an opportunity to 

 by locking up their assets in support of blockchain networks. With Fidelity’s stablecoin, users could stake their holdings with confidence, knowing they’re backed by one of the most trusted names in finance.

Enhancing market liquidity and capital efficiency

Fidelity’s stablecoin is also expected to enhance liquidity across trading platforms. By providing a reliable medium of exchange that 

 fiat currency and digital assets, this stablecoin could streamline trading operations and reduce transaction costs, creating a win-win for traders and exchanges.

Facilitating real-world asset (RWA) tokenization

Fidelity's stablecoin is strategically positioned to drive the tokenization of RWAs by democratizing access through fractional ownership of commodities and real estate, thus streamlining the trading and settlement of tokenized securities as a stable exchange medium. This could ultimately foster a more efficient and transparent payment ecosystem for tokenized goods and services.

How will this impact the current crypto landscape?

Legitimization and mainstream adoption of crypto

Fidelity's established reputation within traditional finance lends significant credibility to the crypto space. This legitimacy can alleviate concerns among mainstream investors who have been hesitant, due to perceived risks or a lack of understanding. By offering a regulated stablecoin, Fidelity signals that digital assets are becoming a legitimate part of the broader financial landscape, encouraging greater participation from institutional and retail investors alike. This increased confidence can lead to wider adoption of crypto-related products and services, integrating them into everyday financial transactions.

Market stabilization and increased liquidity

The substantial capital that Fidelity brings to the market can significantly increase liquidity, reducing price volatility and making crypto assets more attractive to traditional investors. Increased liquidity facilitates smoother trading and reduces the risk of significant price swings, creating a more stable and predictable market environment.

Fidelity's involvement encourages dialogue between regulators and established financial institutions, leading to clearer and more comprehensive regulatory frameworks for stablecoins and other digital assets. By leveraging its existing compliance and risk management expertise, Fidelity can contribute to the development of robust security standards and best practices for the crypto industry. This increased regulatory clarity and security can reduce the risk of fraud and market manipulation, fostering greater trust and confidence among investors.

he introduction of a regulated stablecoin from a trusted institution can accelerate the integration of traditional financial products and services into the 

 (DeFi) space. Such integration can lead to the development of innovative financial instruments, such as tokenized securities and decentralized lending platforms, bridging the gap between TradFi and DeFi while allowing for far greater capital efficiency within the DeFi space.

Driving crypto infrastructure standardization

Fidelity's participation can drive the development of standardized infrastructure and interoperability protocols, facilitating seamless transactions across different blockchain networks and traditional financial systems. This standardization could improve the efficiency and scalability of the crypto market, thereby enabling greater adoption and integration with existing financial infrastructure.

What are the challenges that Fidelity may face?

While Fidelity's late entry into the stablecoin market is promising, due to its institutional credibility and regulatory focus, it does face substantial challenges. At the top of the list of Fidelity’s potential challenges: competing with established stablecoin giants like USDT and USDC will require Fidelity to demonstrate superior transparency, security and seamless integration of the Fidelity stablecoin within existing ecosystems. 

Building trust with a potentially hesitant crypto native demographic and overcoming established network effects will also require strategic partnerships, competitive incentives and a flawless track record in maintaining a stable peg to the US dollar.

The regulatory environment surrounding stablecoins is rapidly evolving. Recent developments such as the 

 (GENIUS) Act signal a more favorable stance toward crypto in the United States. For companies like Fidelity, this creates an opportunity to innovate within clear regulatory frameworks while addressing concerns around transparency and accountability. However, this evolving legislative landscape doesn't mean that Fidelity is out of the woods yet. This is especially so because regulations aren’t uniform across all jurisdictions. Therefore, Fidelity will need to demonstrate regulatory agility and adaptability to navigate these varying requirements.

Lastly, while there’s speculation that the Fidelity stablecoin could play a huge part in the company’s tokenized money market fund offering, there’s currently nothing set in stone. This is due to the inherent complexities of integrating a newly launched stablecoin into existing financial products, as well as the need to navigate potential regulatory hurdles related to that integration. Since Fidelity Digital Assets and 

 are two separate entities, there will likely be some coordination needed before Fidelity can incorporate its stablecoin into its onchain bond market.

Fidelity’s launch of its own stablecoin marks an important milestone in the evolution of digital finance. By combining stability with trust and regulatory compliance, this new offering has the potential to reshape the way traders interact with crypto. For beginners looking for a safe entry point into crypto, as well as experienced traders seeking reliable tools for staking and liquidity management, Fidelity’s stablecoin offers an enticing proposition. 

Likewise, for institutional traders, the proposed stablecoin provides a compliant and secure bridge between traditional finance and DeFi, unlocking new avenues for managing assets and diversifying portfolios. While challenges remain, Fidelity’s entry is poised to accelerate the integration of digital assets into mainstream finance, ultimately paving the way for wider adoption and innovation.

Intermediate

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Fidelity’s new stablecoin: A bold step into crypto stability

Bybit Learn

Stablecoin

Hyped for GHO stablecoin? With Aave joining the stablecoin fray, here's everything you must know about the decentralized, multi-collateralized GHO stablecoin.

 by market capitalization, and features dozens of coins. While they operate differently, all stablecoins aim for the same goal: The promise of stability in the volatile crypto space. 

Because they were meant to be immune from market volatility, stablecoins have become popular as a means of global payments and a facilitator of DeFi lending and borrowing. 

 of the algorithmically pegged TerraUSD (UST) eroded trust in the stablecoin landscape, 

, a noncustodial market protocol, announced a new decentralized stablecoin, GHO.

Why is Aave creating the GHO stablecoin? This article examines the new project and what makes it unique.

GHO Stablecoin is a decentralized, multi-collateralized stablecoin pegged to the U.S. dollar. It was proposed by the Aave Companies (the team behind the Aave protocol) in early July 2022 and approved by the Aave DAO (

The new stablecoin will be backed by an assortment of user-selected cryptocurrencies and — most importantly — owned and governed by the Aave community, rather than a single entity. This decentralization is where it significantly differs from other stablecoins in circulation.

Aave Companies introduced the new stablecoin to increase stablecoin adoption by infusing more liquidity and stability into the fast-growing DeFi space. The Aave DAO earns all the interest accruing from GHO lending, providing them with additional revenue. 

Unfazed by the recent collapse of Terra and the resulting impact on the stablecoin market, Aave is betting on a game-changer with the GHO stablecoin.

Before we delve further into the GHO rabbit hole, let's take a peek at the protocol behind it.

Aave (Finnish for ghost) is an open-source decentralized lending protocol that allows users to lend and borrow cryptocurrencies. Aave runs on multiple blockchains including Ethereum, Fantom, Harmony and Avalanche. With a 

, its native crypto, AAVE (ranked 45 out of over 1,000 tokens) 

 from its recent bottom following the announcement of the GHO stablecoin proposal.

Aave and other DeFi lending protocols use smart contracts (bits of code that automate transactions), instead of centralized intermediaries like banks, to facilitate lending and borrowing activities. Essentially, there are no middlemen. When you borrow from Aave, you borrow directly from people who deposit their crypto assets with the protocol. The lenders, in turn, earn interest on their deposited digital assets.

Due to the volatile nature of crypto, borrowers have to overcollaterize — i.e., put up significantly more crypto than they’re borrowing for security. If the value of their collateral drops beyond a preset point, the smart contract will liquidate their collateral in order to cover their loan.

, Aave was originally launched as ETHLend in 2017 and rebranded to Aave a year later. Aave is owned and managed by a collective of token holders, known as the AaveDAO, who direct the path of the protocol through votes.

In the crowded DeFi space, Aave shines by allowing over 20 lendable crypto assets, giving users more options and flexibility. In addition, users can switch between fixed and variable interest rates when they borrow on the platform.

GHO stablecoin is created or minted when a user (or borrower) puts up collateral in a specified ratio. When the user repays the loan, the GHO protocol burns the returned GHO. The interest generated from the borrowed asset goes to the DAO’s treasury. The crypto assets used as collateral generate yield for the borrower.

Unlike purely algorithmically backed stablecoins — such as UST, which uses a complex stabilization mechanism of burning and mining the LUNA coin to keep its dollar peg — GHO proposes the use of “facilitators” who can generate and burn GHO tokens based on yet-to-be-disclosed mechanisms. The facilitator could be a protocol or an entity, and is approved by the Aave DAO. For control, the Aave governance will approve a “bucket” — the maximum GHO a particular facilitator can generate — for each facilitator.

Given the proliferation of stablecoins in the crypto space, you may wonder if there’s any point in launching yet another one. The proposed GHO stablecoin is not just another stablecoin. Aave aims to set the pace for decentralized, crypto-backed stablecoins with the introduction of GHO. A few of its defining features include: 

The GHO stablecoin shares similar characteristics with the popular DAI stablecoin (created by MakerDAO). Both tokens are decentralized and use overcollateralization to keep their peg to the U.S. dollar. However, GHO has the distinct advantage of using position-based minting instead of the collateral vault-specific minting used by DAI. Position-based minting supports more seamless and fairer position management than vault-specific minting. It also allows for better gas optimization.

Overcollateralized With Multiple Crypto Assets

The GHO stablecoin will be backed by a diversified range of cryptocurrencies accepted on the Aave platform and chosen by users. To mint GHO, users will have to deposit a higher value of crypto assets than GHO in a specific ratio. This system is referred to as overcollateralization. Overcollateralization ensures that the risk of GHO losing its USD peg is minimized.

Included in the GHO proposal are plans to integrate GHO with the Aave ecosystem by launching a specific GHO “aToken” and a GHO Debt Token. This system will use the same mechanism as other assets already on the Aave platform. The Aave-GHO integration will drive GHO’s growth on the Ethereum network.

While Aave Companies has stated that the new stablecoin intends to facilitate the growth of the global decentralized stablecoin market instead of competing, comparisons with more popular and established stablecoins will be inevitable. 

 stablecoin is a decentralized, crypto-backed stablecoin pegged to the U.S. dollar. One of the most popular stablecoins, DAI is the brainchild of Maker Protocol, a leading 

 a market capitalization of $7.3 billion, trailing behind USDC as the fourth largest stablecoin by market cap. DAI 24-hour trading volume at the time of publishing is $373,421,640.

Similar to GHO, users create DAI by depositing collateral crypto assets into Maker Protocol’s vaults. Also, like GHO, each DAI minted is backed by collateral with a far higher value than the DAI debt.

However, the makeup of DAI’s collateral structure consists mostly of USDC. Having a decentralized stablecoin primarily backed by a centralized stablecoin defeats the purpose of decentralization. It also subjects the DAI stablecoin to 

DAI uses a collateral vault-specific minting against GHO’s position-based minting. GHO’s position-based minting eases and ensures better position management while optimizing gas spending. 

The recent drama around stablecoins underscores the need for independent verification of claimed backing collateral. GHO’s first audit was carried out by 

 on July 11, 2022, right after development. DAI is no slacker when it comes to audits, either. The reputable Callisto Network conducts regular audits on DAI and the MakerDAO ecosystem. 

 hosted on the Terra blockchain and pegged to the U.S. dollar. Until its collapse in May 2022, LUNA, Terra blockchain’s native crypto, was on the list of top 10 assets by market capitalization, and UST was a leading stablecoin.

Unlike GHO and other decentralized stablecoins, UST wasn’t backed by crypto assets such as BTC or ETH. Instead, 

 to maintain its peg to the U.S. dollar. This stability mechanism works by allowing $1 UST to be redeemed for $1 LUNA. If the UST loses its peg to the dollar, it creates an arbitrage opportunity which — in theory — would incentive the market to regain the peg.

However, this played out differently in the real world, and a series of related events led to the UST depeg and subsequent collapse. UST’s failure has raised concerns over the safety of uncollateralized stablecoins, as well as calls for more regulation of the stablecoin space.

The Frax stablecoin (FRAX) is based on a fractional-algorithmic model. It's the only stablecoin that maintains its peg to the U.S. dollar with a partial collateralization structure. The other part of its supply maintains its peg algorithmically. The market pricing of FRAX determines the ratio of collateralized to algorithmic backing. When the price goes above $1, the protocol reduces the collateral ratio, conversely adjusting it upward when the price falls below $1.

The Frax Protocol consists of two tokens: The Frax stablecoin (FRAX) and the governance token, Frax Share (FXS). Like Aave, Frax is fully decentralized and uses a similar governance system.

The Frax stablecoin was designed to minimize overcollateralization risks. Overcollateralized stablecoins like GHO, which are backed wholly by crypto asset collateral, risk loss of stability when a 

 such as a flash-crash (sudden dip in the price of an asset triggered by massive sell-offs), takes place.

Frax stablecoin is also cheaper and more capital efficient from a supply perspective. Unlike GHO, which will be expensive to collateralize adequately, FRAX’s unique fractional-algorithm design allows it to cut costs (by partially using algorithmic means) to back the stability of the Frax stablecoin.

 24-hour supply of $8,938,553 and a market cap of $1.4 billion. It’s constantly audited, with the most recent one being conducted by 

Stablecoins track the value of other more stable assets, such as fiat or gold. Therefore, it doesn't make any sense to buy GHO for investment purposes since the price remains constant. However, GHO holders can use the stablecoin to hedge against inflation, while still earning interest on their deposited collateral.

The GHO stablecoin will also open up opportunities for investors to stake and earn rewards on the Aave Protocol and other DeFi protocols. Aave token stakers will enjoy a discounted rate on GHO borrowing, which will incentivize investors to help secure the Aave Protocol. This measure is expected to drive value to staked Aave (

With the first vote to approve GHO and make Aave the first facilitator out of the way, two more votes will be required before GHO goes live. The Aave community will be voting next on setting parameters, such as interest rates, collateral assets and caps, etc.

Aave plans to leverage grants and hackathons to promote mass adoption of the GHO stablecoin. The selling points will include the use of GHO as a reliable borderless and permissionless payment system. The development team also hopes that the rapidly growing Layer 2 ecosystem, with its low transaction fees, will provide fertile ground for more developments, involving the widespread use of GHO.

Aave Companies have proposed a new stablecoin, GHO, even though the dust from Terra’s implosion has hardly settled.

The GHO token will be overcollateralized, with multiple crypto assets, which should provide some comfort following the recent events in the stablecoin market.

Instead of competing, the fully decentralized GHO is expected to bring more liquidity and growth to the decentralized stablecoin market, as well as more revenue for the Aave protocol.

What Is GHO & Why Is Aave Creating a Decentralized Stablecoin?

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