Stablecoin Yield Guide: In-Depth Analysis of 8 Types

The recent performance of the cryptocurrency market has been mediocre, and conservative and stable returns have once again become a hot topic in the market. This article will explore this classic yet evergreen topic by combining years of investment experience and in-depth research on the stablecoin sector.

The main categories of stablecoins in the current cryptocurrency market include:

• USDT: Widely used in various applications, with the highest market share.
• Compliant 1:1 pegged stablecoins: such as USDC, etc.
• Over-collateralized stablecoins: such as DAI, LUSD, etc.
• Synthetic Asset Stablecoin: such as USDe
• US Treasury-backed RWA stablecoins: such as USD0, USDY
• Algorithm stablecoin: has been fundamentally disproven by the market
• Non-US dollar stablecoins: limited impact

The main modes of obtaining stablecoin yields currently are:

1. Stablecoin Lending

Lending is the most traditional financial revenue model, with returns coming from the interest paid by borrowers. Considerations include platform security, default risk, and revenue stability. The main lending products include:

• Centralized Exchange Flexible Wealth Management
• Decentralized lending protocols such as Aave, Morpho Blue, etc.

Lending yields can reach over 20% during a bull market, while they generally range from 2% to 4% during a bear market. Fixed-rate products sacrifice liquidity but offer higher returns. Innovations in the lending space include fixed-rate agreements, interest rate tiers, and leveraged lending.

2. Liquidity Mining Earnings

Taking Curve as an example, the yield comes from AMM trading fees and token rewards. As a benchmark for stablecoin DEX, Curve has high security but relatively low returns (0-2%). Other DEX's stablecoin pool trading pairs have concerns regarding low yields or security. Currently, DeFi stablecoin pools are still primarily focused on lending.

3. Market Neutral Arbitrage Returns

Main arbitrage strategies include:

• Funding Rate Arbitrage: Utilizing the difference between perpetual contracts and spot prices
• Arbitrage: Utilizing the price difference between spot and futures
• Inter-exchange arbitrage: Utilizing the price differences between different exchanges

Ethena brings funding rate arbitrage on-chain, allowing ordinary users to participate. Users deposit stETH to earn USDe while opening short positions to profit from funding rates. The main risk lies in long-term negative funding rates leading to losses.

4. US Treasury RWA Project Returns

U.S. Treasuries, as high liquidity standardized assets, are a relatively feasible RWA product. The main projects include:

• Ondo's USDY: Aimed at non-US retail clients, earning 4.25%
• Usual's USD0: based on US Treasury bonds as the underlying asset, USD0++ provides liquidity

The yield of the US Treasury RWA project stabilizes at around 4%, with the high yield mainly derived from additional incentives such as token subsidies.

5. Structured Products for Options

The main strategy is to sell put options ( Sell Put ) to earn option premiums. It is suitable for range-bound markets, while there is a higher risk in trending markets. The Shark Fin strategy launched by OKX and others adopts a combination of Bear Call Spread and Bull Put Spread to obtain profits within a certain range. On-chain option products still need to be developed.

6. Tokenization of Earnings

The Pendle protocol splits yield-bearing assets into principal token PT and yield token YT. The main strategies include:

• Hold PT to obtain fixed income
• Buy YT to bet on future profit increase
• Sell YT to lock in current earnings
• Provide liquidity for PT and YT to earn trading fees

Pendle stablecoin pool overlays multiple yields, but with a shorter duration, frequent operations are required.

7. A Basket of Stablecoin Yield Products

Ether.Fi launches Market-Neutral USD pool, integrating various stablecoin products such as lending, liquidity mining, funding rate arbitrage, and yield tokenization. It is suitable for users seeking stable on-chain returns, with small capital and who are reluctant to operate frequently.

8. Stablecoin Staking Returns

The AO network accepts DAI staking to earn AO token rewards. It can be seen as an alternative stablecoin yield model, with the risk being the uncertainty of the AO network's development.

In summary, the yield models of stablecoins are diverse. Understanding various sources of yield and making reasonable allocations helps to cope with market risks while ensuring financial stability.