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Today’s News Headlines:
Derive opens vote on US-regulated derivatives
Yearn opens two stYFI governance votes
Aptos says three confidentiality layers live on mainnet
Predict.fun launches Prophet Challenge Season 2
Ledger hackers reportedly laundered via Zcash, traced
Dolomite warns of phishing posts on official account
Standard Chartered launches institutional RLUSD custody on XRP Ledger
Strategy buys 250 BTC, repurchases $192M STRC
Strategy proposes daily dividends for STRC, STRF, STRK, STRD
Key Takeaways:
Bitcoin Underperformed Equities Last Week.
Spot Bitcoin ETFs lost $679M, the biggest weekly outflow since late June, and USDC supply fell $1.1B. Ether exchange reserves rose about 210,000 ETH while Ether dropped more than 8%.
Activity fell almost everywhere, but one new exchange stood out.
16 of 20 chains lost TVL, and weekly DEX volume fell 35% on BSC and 32% on Robinhood Chain. On Hyperliquid, Papertrade mints its token only for traders who lose money. Its TVL went from $14.3M to $102.1M in two days, then fell to $62.1M.
Six DeFi tokens rose 15–46% in a week when Bitcoin fell 4.5%.
Meteora (+35%), Fluid (+22%), Derive (+16%), and Orca (+15%) benefited from new product launches and upgrades.
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Macro Brief:
Rates and the dollar: The 10-year Treasury yield hit 5.36%, its highest since 2002, before easing after a strong $39B bond auction. The 2-year yield fell to 4.75%. Fed minutes favored another hike by year-end, but Jefferson and Williams signaled no urgency.
October hike odds fell to 20%, while December odds reached 85% for at least one hike. September CPI on Oct. 14 is the next key catalyst. The dollar index edged up to 102.2.
Crypto vs stocks: The S&P 500 set a record on Wednesday, and the Nasdaq rose 0.6% on the week. Bitcoin fell 2.7% and Ether 6% over the seven days to Oct. 12.
Bitcoin underperformed the Nasdaq. When a report said OpenAI’s revenue was $20B below earlier estimates, the Nasdaq fell about 1.2% on Thursday; Bitcoin fell about 2%, and $974M of crypto positions were liquidated.
This is likely attributed to rising yields, rate-hike expectations, profit-taking, ETF outflows, and higher oil. Buying that did come in went mostly to AI stocks.
Capital On-Ramp
Stablecoin supply fell about $0.9B (−0.3%) to $306.2B, and USDC accounted for the entire drop, falling $1.1B (−1.5%). USDT was flat. USDC and USDT are the stablecoins traders use most to buy, sell, and move money, so a shrinking USDC supply means less on-chain trading cash.
Sky’s USDS grew 2.9% (+$194M) as Sky raised its Savings Rate from 3.60% to 3.80% on Oct 7. That is still below the 4.14% one-month T-bill rate. Ondo’s USDY supply grew $113M (+5.1%). Despite Ethena’s USDe falling 3.1%, overall yield-bearing dollars are gaining traction as the market grew more conservative.
Spot ETFs Saw Outflows:
Bitcoin ETF outflows totaled $679M, and Ether ETF outflows totaled $542M, the largest weekly ETF outflows since late June. Most of the Bitcoin outflow came on Wednesday, the day the 10-year Treasury yield hit its highest since 2002. (DefiLlama: ETF flows)
Although BTC’s exchange flows remain flat week on week, ETH on exchanges rose about 210,000 ETH to 14.90M. Rising exchange reserves usually mean more coins are positioned to be sold. (CryptoQuant)
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Week-Ahead Catalysts
US CPI, Wed Oct 14 (8:30 am ET): Headline inflation is expected at 3.6% (prior 3.4%) and core at 2.5%. PPI and retail sales follow Thursday, and Fed Chair Warsh speaks late Thursday ET.
Evernorth (XRPN) lists on Nasdaq, Mon Oct 12: The XRP treasury company, backed by Ripple, SBI and Pantera, expects to hold about 473M XRP. The debut was delayed from Oct 8. [Update status before sending.]
Starknet unlocks 127M STRK, Oct 15: That is 3.4% of circulating supply. It lands a week after Starknet said it is considering becoming its own Layer 1.
Cronos and deBridge unlocks, Oct 16 to 17: CRO unlocks about $69.5M (2.3% of supply), the largest in dollars. DBR unlocks about 10% of circulating supply, worth about $12M. Unlocks are scheduled releases, not confirmed sales.
Onchain Risk Regime
Across Aave, Spark, Morpho, and others, stablecoin borrowing costs averaged 5.01% this week, while suppliers earned 3.93%. Funding rates fell to 2.63%, below the monthly average of 4.87%, suggesting less demand for leveraged longs. Historically, similar periods have offered better buying opportunities.
Structural Shifts: Onchain Activity Analysis
The week was broadly down. Of 20 chains, 16 saw TVL fall, 16 of 18 lost DEX volume, 14 of 18 lost app fees, and 13 of 17 lost chain fees. Perp volume was split, with 7 chains down and 6 up. Windows are Oct 5–11 vs Sep 28–Oct 4.
Activity rose at Hyperliquid, likely due to one new protocol.
Hyperliquid’s chain fees rose 78.3% to $186K, the biggest rise of the 20 chains. But $115K of that came on Oct 8, the day Papertrade opened pre-deposits (below), and app fees were flat (−0.7%). I haven’t tested whether Papertrade caused the spike. Avalanche’s app fees also rose 45.2%, but only because Centrifuge and Grove had negative fees the prior week.
The One Standout: Papertrade
Papertrade is a perpetual-futures exchange on HyperEVM (Hyperliquid’s smart-contract layer), launched Oct 10, with leverage up to 1000x on BTC and ETH. It has no order book. Every trade is a bet against one shared USDC pool that started at $0. Losing traders’ money goes into the pool, and winners are paid from it.
The twist is the token. PAPER can’t be bought. It is minted only to traders who lose money or get liquidated, and staked PAPER earns USDC from the exchange’s trading fees. Traders bet that the staking income will be worth more than their losses. PAPER can’t be sold at launch, only staked.
$14.3M of TVL on Oct 9 converted into $102.1M on Oct 11 as pre-deposit funds ape into the LP vault. However, it quickly dropped $62.1M a day after a $40M drop, as Traders’ losses on the platform now exceed $35M, close to that drop.
Why? It’s mainly because of how the native token is designed. People are deliberately losing money to mint PAPER, and that loss shows up as TVL leaving. Hyperliquid’s TVL fell 5.0% on the week, or about 10.3% without Papertrade.
Risks: the payout queue could back up if the pool runs short, and Hyperliquid’s prices are the oracle, so manipulation is possible. The Block reports one trader made about $1.28M within hours of launch. At 1000x, a 0.1% move can wipe out the margin. The co-founders are semi-anonymous.
Token Movers:
Product launches and deal news led this week’s gainers, while most large DeFi tokens fell (UNI −15%, SKY −15%, AAVE −6.5%). Moves are CoinGecko 7-day changes as of Oct 12. (CoinGecko: DeFi category)
Meteora (MET), +35%
Meteora unveiled DLMM Pro on Oct 6, which lets a token launch and trade in one Solana pool from day one. Open interest rose to about $50M from about $27M in September, so leverage is part of the move. Fees on Meteora’s DLMM pools fell 36% over the week. (DefiLlama: Meteora DLMM)
USD.AI (CHIP), +29%:
Its GLX exchange, launched around Oct 1, lets USD.AI sell GPU-backed loans to institutions. The team claims $25B of inbound demand. The CEO’s Oct 10 post on “commit-and-compound” value accrual, rather than buybacks, drew attention. Holder benefit is not yet shown. (DefiLlama: USD.AI)
Derive (DRV), +16%:
V3 went live Oct 7, with Ethereum now settling trades and holding user funds. Daily volume rose about 6x to $112M on Oct 9. (DefiLlama: Derive)Orca (ORCA), +15%: real catalyst, vote pending.
Orca and Loopscale merged into Formation on Oct 7, and ORCA becomes Formation’s token. A proposal to cut xORCA’s fee share from 40% to 10% is open for voting until Oct 16. (DefiLlama: Orca)
TVL Gainers
Six protocols posted large 30-day TVL gains. Three are mostly new deposits (Arcus, Current and infiniFi), Rhea’s gain is mostly the price of NEAR, Zama’s is the same money counted twice, and Papertrade launched this week. Below: what each is, why it grew and what is on offer. (DefiLlama: TVL rankings)