Why Is No One Buying Spot Stocks While Leverage Is Exploding in U.S. Stocks on the Blockchain?

Author: Cathy, Blockchain in Plain Language

On September 17, the SEC issued a five-year pass for tokenized U.S. stocks, allowing trading of tokenized U.S. stocks on public chains using liquidity pools.

Supporting actions are also moving forward. In August, Coinbase launched ten stock tokens on the Base chain, with total trading volume exceeding $1 billion; on September 23, the NYSE signed a memorandum with Blockchain.com to bring tokenized U.S. stocks to 44 million crypto accounts.

The regulators have given the green light, products are available, and the table is set.

However, TD Cowen analyst Reid Noch poured cold water on the situation in a report on September 18, presenting two sets of samples. The stock of Figure has both a traditional listing and a tokenized version, and during a 24-hour observation period, 99.9% of the transactions were in traditional stocks, with the tokenized version accounting for only 0.1%. In Binance's Nvidia products, perpetual contracts made up 96% of the transactions, while spot tokens only accounted for 4%.

Out of every $1,000, only $1 was spent on stocks on the chain.

Noch's conclusion is straightforward: U.S. investors already have efficient channels to buy stocks, and tokenized platforms must provide clear benefits to justify enduring liquidity issues. He has spoken with dozens of issuers, and aside from companies like Figure that rely on crypto for business, almost no one is interested.

Money has indeed come in. However, from Binance's trading volume to Aave's lending pools, there are few buyers of stocks.

So where did it go?

01 Bulls Prefer to Pay 18% Annualized Instead of Buying Stocks

The first destination is U.S. stock perpetual contracts.

In August, Binance's stock perpetual trading volume was $342.9 billion. During the same period, Token Terminal reported that the total trading volume of tokenized stocks on decentralized exchanges over 30 days was $20.9 billion. The leverage trading volume was 16 times that of spot. In January, Binance's stock perpetual trading volume was only $410 million.

Open interest is also rising. Kairos Research reported on August 26 that Binance's U.S. stock perpetual open interest was $2.14 billion; by September 25, this number had exceeded $2.9 billion according to Ethena's announcement.

Why would traders prefer to open contracts instead of buying spot? The funding rate explains it. The funding rate is the amount paid by long positions to short positions in perpetual contracts; the more crowded the long positions, the higher the rate. Ethena reported that from May 20 to August 11, the average annualized funding rate for Binance's U.S. stock perpetuals was 17.5%, with 97% of the days being positive. In contrast, the annualized funding rate for Bitcoin perpetuals during the same period was only 2.2%.

In other words, those going long on Nvidia perpetuals are willing to pay nearly 18% more annually in costs for the ability to trade 24/7, leverage their positions, and not actually hold the stocks. By the end of August, the funding rate for Binance's qualified list tracked by Kairos had dropped to around 7%, with two assets turning negative, indicating waning enthusiasm.

This path is still widening. On September 18, Coinbase also applied to the CFTC for individual stock perpetuals aimed at U.S. users, planning to cover 50 to 60 stocks and ETFs, including Apple and Nvidia.

02 Aave Continues Lending Over the Weekend, but Stock Prices Freeze on Friday

The second destination is using stock tokens as collateral to borrow money.

On September 25, Aave V4 launched a market on the Base chain: seven Coinbase stock tokens, including Nvidia, Apple, and Tesla, can be used as collateral, but only USDC can be borrowed, targeting qualified users outside the U.S. The borrowing limit for USDC is $21 million, with a maximum collateralization ratio of 79% and a liquidation reward of up to 5.5%.

The issue lies in timing. U.S. stocks close at 4 PM on Fridays, and Chainlink's quotes remain at the last price from Friday evening at 8 PM Eastern until Sunday evening at 8 PM. During these 48 hours, deposits, borrowings, and liquidations continue to operate, but everyone sees only Friday's old prices.

Imagine a scenario where a stock has negative news after Friday's close, and it gaps up 10% at Monday's open. A position fully collateralized at 79% would enter liquidation status as soon as the price updates on Sunday evening at 8 PM.

The liquidator would need to sell the tokens, but according to the snapshot from September 17, the depth of price impact for these seven tokens at 2% was only between $270,000 and $1.08 million. If the gap is 20%, a 5.5% reward won't cover the gap and slippage, leaving the loss on the USDC lenders.

Currently, this is just a window, not a bad debt. On September 28, Aave's front end showed that this market had $6.2352 million in deposits, $425,200 borrowed, a utilization rate of 6.8%, and a total collateral of about $1.91 million in stock tokens. The scale is still small, but the gate is already open.

03 The USDe Bowl Has Been Swapped for the Leverage Enthusiasm of Retail Investors in U.S. Stocks

The third destination is the yield engine of stablecoins.

On the same day, September 25, Ethena announced the expansion of its basis strategy for USDe to Binance: holding Binance's stock tokens (bStocks) for spot while shorting the same exchange's U.S. stock perpetuals to earn the funding rate paid by longs.

The switch in bowls was forced. USDe's past yields came from the funding rates of crypto perpetuals, with the rate for Bitcoin perpetuals dropping from an annualized 11% in 2024 to 2.2% in the first eight months of this year. The scale of USDe has shrunk from a peak of about $14.8 billion in October 2025 to about $4.9 billion on September 25.

There isn't much to eat. According to Kairos Research, which set thresholds based on position sizes and rates for the Ethena risk committee, only 17 out of 67 pairs on Binance passed, 3 on OKX, and none on Bybit and Kraken.

Looking at this chain, there are three areas of looseness. The earnings of USDe holders now depend on the enthusiasm of retail investors in U.S. stocks to open long positions, with rates dropping from about 18% at the end of July to about 7% at the end of August, with two assets already turning negative.

The only counterparty is Binance. The issuer of bStocks, BTech, relies on a supplementary letter still under negotiation to constrain the disposal rights of the underlying stocks, and Kairos suggests waiting for it to be signed before approval; there has been no public report on whether it has been signed.

04 Those Who Leverage Don't Want Stocks, and Those Who Hedge Haven't Bought Stocks

Putting the three destinations together makes the role of spot tokens clear.

The total value of tokenized stocks from major issuers in the market has just surpassed $2.3 billion. The ten tokens from Coinbase that have exceeded $1 billion in trading volume have a combined total of $12.97 million in USDC pools on Aerodrome. Their uses are to hedge perpetuals, serve as collateral in Aave, and be part of Ethena's spot strategy.

When it comes time for them to be traded as stocks, problems arise.

On the night of September 3, seven hours after the U.S. stock market closed, AMC stock tokens issued by Robinhood surged from $2.55 to $23.16 in the Uniswap pool, nine times the NYSE closing price, and then fell back to $3.26 within the same hour. During that hour, the pool saw $10.5 million in trading volume, but the authorized participants of the issuer neither minted nor burned any tokens.

The premium held for a weekend. IOSG researcher Mario Chow reported that in the three days following the close, the issuing agent expanded the token supply from 152,100 to about 2,895,800, a 19-fold increase.

The issuing agent is estimated to have bought about $7.6 million worth of AMC stocks to bring the price back down. Tram Doman, who works at Bullish, wrote on CoinDesk: "There is no borrowing mechanism during the market closure; only one authorized participant can redeem, and even with sufficient collateral, the two markets still operate at different prices."

AMC CEO Adam Aron called on Robinhood to stop trading on X on September 4, stating that this was "a quasi-fake market created on Jersey Island." Robinhood's Chief Legal Officer Dan Gallagher responded: "We have a basic understanding of U.S. securities law."

Looking at both sides, those trading U.S. stock perpetuals do not need stocks. Those depositing USDC in Aave and those holding USDe for yield have not bought a single share, but the gap from the Monday jump and the losses from the negative rates ultimately fall on them.

The regulators provided a channel for stocks, but the market paved a road for leverage.

On September 29, Robinhood will hold a summit in Houston, where Vlad Tenev stated, "It has been too long since our last product launch," and Morgan Stanley predicts that this time they may launch perpetual contracts aimed at U.S. users.

A year ago, the slogan for tokenized U.S. stocks was to allow the world to buy Apple and Nvidia anytime.

What has been tokenized is not stocks, but leverage.

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