Ever since the heydays of 2021 crypto bull market, the origination volume of onchain private credit space has seen very little growth, signalling a lack of capital inflow into this asset class.
I have spent a good part of past 6 months working on various permutations of onchain private credit products and current landscape of crypto capital holders and allocators. Nothing looked remotely competitive in the face of 5% risk-free US Treasury rate and deteriorating economic conditions for private borrowers.
Onchain Private Credit Market Overview
While the allocation towards US Treasuries aka the risk-free rate has exploded from 0 in 2022 to more than $1.5bil right now, a look at new RWA origination deal sizes since beginning of 2023 tell the story of tempered expectation.
Below is the graph of MakerDAO’s capital allocation towards RWA products. Notice the category called MIP65 has exploded from 0 in 2022 Q4 to more than $1.1bil in 2023 June. MIP65 is MakerDAO’s proposal to allocate their USD stablecoin holdings towards US Treasuries. You can read up on it here.
In addition, other projects with a focus on tokenized US Treasury products such as Ondo and OpenEden, have seen their TVL exploded.