This week, traditional finance (TradFi) giants made decisive moves into decentralized finance (DeFi). According to areport by Sentora, BlackRock and Apollo Global Management are not only testing the waters but are actually placing their tokenized assets on the blockchain.
BlackRock integrated its Institutional Digital Liquidity Fund (BUIDL) worth $2.4 billion with UniswapX, and Apollo integrated its lending framework of Morpho.
These integrations illustrate just how large this is: Apollo currently manages $940 billion in traditional assets, and it now has the ability to purchase a maximum of 90 million MORPHO tokens (9% of the total supply) over a period of 4 years.
Source: Sentora
The total value locked in Morpho is $5.8 billion, making it the sixth-largest DeFi lending protocol in terms of deposited funds. The price of MORPHO tokens surged by 17.8% after the partnership announcement.
BlackRock Bridges Trading Efficiency with Compliance
BlackRock partners with Securitize and Uniswap Labs to make BUIDL a liquid on-chain asset by changing it from a fixed issuance to a liquid one.
Source: Sentora
Big investors can trade BUIDL for USDC at any time and from anywhere using UniswapX, which is an off-chain system that places orders and settles them on-chain. This ensures that the institutional funds are not mixed with the non-KYC retail liquidity.
The integration combines rules with decentralization. Securitize only permits approved wallets to participate, while UniswapX provides quick settlement and transparency.
BlackRock’s acquisition of UNI governance tokens is a strategic play because the company is not only leveraging DeFi services but is also invested in the governance of the protocol.
Bridging Traditional Finance with DeFi Innovation
Apollo’s foray into Morpho illustrates the growing institutional interest in decentralized credit. The collaboration enables Apollo to create bespoke lending pools with isolated risk, facilitating the on-chain deployment of tokenized private credit funds.
In contrast to other DeFi protocols that demand governance approval, Morpho enables permissionless market creation.
These trends are in line with the overall developments in the leveraged ETH staking market. The borrowing rates have increased to 3.40%, exceeding the staking yields for the prominent liquid staking assets.
Source: Sentora
This results in a negative carry market, leading to estimated annualized losses of -1.9% for the 5x leveraged positions.
The concentration of ETH borrowing, low liquidity ratios, and multi-week redemption times increase the risk of exit for institutions.
Also Read: Uniswap Launches AI Skills Upgrade, Enabling Autonomous Trading in DeFi