DeFi Market Updates 2025-12-10

Kraken’s xStocks Deal, Incentive-Driven vs Organic Liquidity, Yield Spread Arbitrage

Kraken’s xStocks Deal Signals Growing Confidence in DeFi

• Kraken has fully acquired Backed Finance, the team behind xStocks, bringing tokenised equities under one of the largest regulated exchanges. This strengthens credibility for on-chain RWAs and expands access to tokenised traditional assets, a positive signal for the gradual move of traditional markets into DeFi.

• xStocks’ AUM has climbed to above $180M, supported by 45k+ on-chain holders. The steady increase suggests users are holding these assets longer-term, reflecting growing interest in tokenised equities.

• On-chain trading volumes remain consistent with a slight improvement over time, and together with the steadily rising AUM base, point to stable engagement and early signs that RWAs may continue to gain traction.

• Having a major exchange invest directly into tokenised equities helps legitimise on-chain market infrastructure and signals growing institutional interest in bringing traditional assets onto DeFi rails. We’re seeing the same trend across the industry too: protocols like Midas and ONDO are already bringing RWAs on-chain, and Kraken’s move reinforces that this shift is becoming more mainstream.

Assessing Incentive-Driven vs Organic Liquidity

• Current market activity provides a useful case study to highlight the contrast between incentive-driven liquidity and organic demand. For example, Sentora curated vaults on Euler have grown significantly since 10/10 and now sit at roughly $650m in curated deposits (even as other curators like MEV and Re7 have seen their TVL decrease following the xUSD fiasco we highlighted in our 2025-11-24 issue).

• The most prominent Sentora markets being RLUSD and PYUSD, currently offer attractive rates for lenders, with organic APYs around 1–3%, boosted at the vault level by an additional 5–7% in incentives.

• This is a strong yield opportunity, but also a clear example of incentive-driven usage. Supply has grown quickly while borrow demand lags, with utilisation in the 35–55% range, leaving much of the capital idle and earning mainly incentives. In such conditions liquidity tends to be short-term; once incentives ease, yields normalise and TVL can exit quickly.

  

• In contrast, the Steakhouse USDC vault reflects real borrow demand, with consistent TVL and utilisation sitting around 90% on Morpho. This means deposited USDC consistently finds borrowers while still giving users access to liquidity. As a result, you can earn around 4% APY with the confidence that the demand behind it is organic, creating a more sustainable long-term yield.

Cross-Chain Yield Spread Arbitrage on USDC

• An arbitrage opportunity remains between the two Steakhouse USDC vaults. Steakhouse Prime USDC on Base is currently yielding around 5.7%, while SteakUSDC on Ethereum sits closer to 3.8%, leaving a current spread of roughly 1.9%.

• Both vaults share similar collateral exposure (mainly: cbBTC, wBTC, wstETH), so the yield gap reflects market dynamics rather than risk differences.

• Base benefits from strong Coinbase-driven borrowing demand, where users leverage crypto collateral to access USDC liquidity. This keeps utilisation and APYs higher around 5.7%. Borrowers on Ethereum have a different profile, and demand shows stronger price elasticity, acting as an indicator for risk appetite - that has been consumed since 10/10, and hence APY around 3.6%.