Market Watch
Things to Watch This Week (August 18 - August 22)
Jackson Hole Symposium (Aug 22)
The focus of the week ahead will likely be on the Jackson Hole Symposium at the end of the week. The primary interest will be on Fed Chair Powell’s expected unveiling of a new monetary policy framework and any hints on the potential for future rate cuts.
Random Musing This Week
S&P Assigns First-Ever Credit Rating to DeFi Protocol
On August 11, S&P Global Ratings broke new ground by issuing a B‑ (stable outlook) issuer credit rating to Sky Protocol, previously known as Maker Protocol. This marks the first time a major traditional credit agency has evaluated and rated a decentralized finance platform. The rating encompasses Sky’s principal liabilities, including its USDS and DAI stablecoins along with their savings token variants, and signals institutional recognition of DeFi risk frameworks.
The evaluation covered USDS and sUSDS liabilities, liquidity buffers in USDC and tokenized money market funds, minimal loan losses, and governance risk, recognizing Sky within the same evaluative framework as bonds and corporates. S&P also set USDS as the benchmark stablecoin in its global framework and outlined steps toward an investment-grade rating: decentralizing key functions, dynamically adjusting reserves, and mitigating depositor concentration, signaling that even traditional finance views decentralization as a core risk mitigator.
Sky’s USDS stablecoin has a $7.85 billion market cap, ranking third behind USDT and USDC, as of time of writing. Sky also holds $8.6B in total assets, a $90.5M surplus buffer, and generated over $181M in net revenues in 2024 and is at $107M in net revenues for 2025 YTD.
While the rating applies specifically to Sky’s policy liabilities and not its governance token SKY, it indirectly impacts market perception of SKY’s risk profile. A B‑ rating places Sky’s credit quality in speculative territory, akin to high‑yield corporate debt or sovereign bonds from emerging markets. This may temper speculative premiums but enhance institutional credibility over time. Still, S&P’s analysis highlighted several systemic vulnerabilities: centralized governance (founder Rune Christensen controls ~9% of governance tokens amid low voter participation), high depositor concentration, thin capitalization (risk-adjusted capital ratio around 0.4%), and regulatory uncertainty. These caveats underscore that while integration paths are opening, they are conditional upon governance reform, financial resilience, and regulatory clarity.
The subdued rating likely won’t trigger immediate price swings, but for the asset manager community, it serves as a signal. This milestone reinforces a growing overlap between decentralized protocols and traditional financial infrastructure. For the first time, a DeFi protocol has been brought into the formal language of credit risk analysis, providing counterparties like prime brokers, insurers, and structured product managers with a familiar framework to gauge risk exposure. Ultimately, this move could pave the way for regulated entry points, structured products, and deeper TradFi–DeFi convergence, provided protocols elevate transparency, governance, and resiliency.
Recap of Top Stories (Aug 11 – Aug 15)
Interesting
Coinbase completes $2.9 billion cash-and-stock acquisition of Deribit
Commentary: Coinbase (ticker COIN) completed its acquisition of crypto derivatives exchange Deribit. The deal positions Coinbase as the global leader in crypto derivatives by open interest and options volume, integrating Deribit’s $59 billion in open interest and over $1 trillion in annual trading volume, according to an announcement on Thursday.
The largest U.S. crypto exchange, Coinbase, said it would purchase Deribit, launched in 2016 by brothers John and Marius Jansen, for approximately $2.9 billion in a cash-and-stock deal announced in early May 2025. The transaction included $700 million in cash and 11 million shares of Coinbase Class A common stock.
US Treasury Secretary Bessent says government won't buy bitcoin for strategic reserve but will retain seized assets as crypto markets see red
Commentary: U.S. Treasury Secretary Scott Bessent said the government would not be buying additional bitcoin for President Trump's strategic reserve, valuing the country's current holdings at $15 to $20 billion.
Describing the Strategic Bitcoin Reserve as the U.S. "starting to get into the 21st Century," Bessent did reiterate that current seized assets would continue to be held, with no bitcoin sold, and that future confiscations could add to the government's holdings over time.
Circle to launch Layer 1 blockchain Arc using USDC stablecoin as native gas token
Commentary: Fresh off the back of its blockbuster $1.2 billion IPO in June, Circle unveiled plans for its own stablecoin-focused Layer 1 blockchain, Arc, on Tuesday, expected to launch on public testnet this fall.
The EVM-compatible chain is designed to provide an enterprise-grade foundation for stablecoin payments, FX, and capital markets applications, according to a press release.
Terraform co-founder Do Kwon pleads guilty to two fraud charges in years long US case
Commentary: Terraform co-founder Do Kwon will plead guilty to wire fraud and conspiracy to defraud, Reuters reports, following a years-long criminal case after the collapse of algorithmic stablecoin Terra USD, which wiped out tens of billions of dollars.
Kwon, 33, also told the court that he would be waiving the right to go to trial and acknowledged that he could face 25 years in prison, according to reporting from Inner City Press.
Stripe to build new L1 payments blockchain in partnership with Paradigm
Commentary: Stripe is quietly developing a new blockchain, marking its latest push into the crypto and stablecoin ecosystem, according to a Fortune report. A recently removed job posting for the crypto lobby group Blockchain Association described the project, called Tempo, as a high-performance, payments-focused blockchain. The listing said Tempo is in stealth, run by a five-person team, and built in partnership with Paradigm.
The fintech has been steadily assembling the core components of a stablecoin tech stack, from payment integration and wallet software to potentially operating its own blockchain infrastructure.
Paxos renews push for US bank license as stablecoin rules take shape
Commentary: Paxos Trust Company, the crypto infrastructure company behind PayPal’s PYUSD stablecoin, has filed to convert its New York limited-purpose trust charter into a US national trust bank charter, renewing an effort that expired in 2023.
If approved, the federal charter, issued by the Office of the Comptroller of the Currency (OCC), would allow Paxos to custody customer assets and settle payments nationwide under federal oversight, potentially boosting its appeal to institutional clients. Unlike traditional banks, a national trust bank cannot accept cash deposits or issue loans.
Upcoming Market Events
August 21-23 - Jackson Hole Economic Policy Symposium
August 29 - BTC CME August (BTCQ25) Options Expiry
September 17 - U.S. FOMC Interest Rate Decision