The surging crypto frenzy has come to an end, and the tide-makers, who have ventured and made a lot of money in this new world, have begun to face a new problem: how to avoid the downside risk of the market if they do not use complex derivatives for hedging? And achieve sustained profitability?
Perhaps you can find many answers from the traditional world. Bankless co-founder Lucas Campbell has analyzed the utility of asset classes such as cash, bonds, stocks, gold and real estate to balance crypto assets. However, the crypto industry itself has given a better solution: stable currency financial management .
We sorted out the best stable coins wealth management products of the top TVL (Total Locked Value) DeFi protocols (Curve , Aave , Compound , Anchor Protocol and Yearn) and some centralized exchanges (Binance, OKX and Gate.io) in the market , draw the following conclusions:
- Stablecoin wealth management provides a higher annualized rate of return than traditional financial wealth management. The highest rate of return we observed is Yearn’s DAI vault on Fantom, with a rate of return of 24.96%;
- The upper limit of yield of DeFi wealth management is higher than the wealth management products of centralized exchanges, but the threshold of DeFi wealth management is higher, and there is gas wear;
- There is a trend of integration between centralized exchanges and DeFi wealth management products. For example, OKX acts as an agent to help users access Anchor Protocol;
- High-yield DeFi wealth management is usually distributed on the new public chain or Layer 2, and they are generally characterized by lower capital scale;
- Except for a small number of fixed-term, fixed-rate wealth management products provided by exchanges, stablecoin wealth management is usually current and floating rate.
Stablecoins: A Safe Haven Amid The Crypto Wave
Stablecoins are encrypted assets anchored to fiat currencies, with relatively stable value, and mainstream stablecoins are anchored to the US dollar. In the crypto industry known for its volatility and risk, stablecoins are an important safe-haven asset. Investors can lock in the value of assets by holding stablecoins and avoid losses caused by market downturns.
In the emerging DeFi field, stablecoins are also an important tool for value transfer and storage. With the expansion of DeFi and the entire crypto market, stablecoins have also experienced explosive growth. According to CoinMarketCap data (note: data not indicated in the text, according to the official website of the corresponding project), the current total market value of stablecoins has reached 168 billion US dollars .
Not only is the overall market value expanding, but there are also more and more types of stablecoins. Stablecoins with higher market capitalization and better liquidity have better stability and security. This article aims to find a less risky and more stable financial management approach, so our observations are limited to the top five stablecoins by market capitalization, which are: USDT, USDC, BUSD, UST, and DAI .
- USDT: Issued by Tether, it is the largest stablecoin by market value, with a market value of $78.3 billion
- USDC: Issued by Circle, with a market value of $46 billion
- BUSD: issued by Binance, with a market cap of $14.3 billion
- UST: Issued by Terra, $10.8 billion market cap
- DAI: issued by DeFi protocol MakerDAO, with a market value of $9.7 billion
Stablecoin wealth management products are rich and diverse, covering all corners of the crypto industry. This article divides the mainstream stablecoin wealth management products into two camps, DeFi and CeFi, from the perspective of wealth management service providers, and comprehensively compares and analyzes the current situation of stablecoin wealth management.
When comparing wealth management products, we take yield as the most important parameter. But the rate of return is not everything, especially in DeFi financial management, the amount of funds in the asset pool and the transaction fee friction of on-chain operations must also be referred to.
DeFi Stable Currency Financial Management
The DeFi wave that started two years ago is an important booster for the outbreak of this round of the encryption industry. After two years of development, the DeFi ecosystem has changed from what it used to be, with TVL (total locked value) reaching 228 billion US dollars. DeFi products are also constantly exploring new areas, and transactions, lending, and other derivative businesses around stablecoins are booming. There is still a certain gap between the new DeFi protocol and the old mature protocols such as Aave and Curve in terms of capital scale and security. Similarly, we select protocols with stable market operations and high lock-up value as the observation objects.
Curve is one of the earliest AMMs (Automated Market Makers), initially focusing on providing exchanges between stablecoins (the V2 version expands non-stablecoin transactions), and provides large-scale, low-slippage stablecoin transactions through innovative algorithms. The total locked value of Curve has reached $23 billion.
Curve currently supports 8 chains including: Ethereum, Arbitrum, Avalanche, Fantom, Harmony, Optimism, Polygon and xDai.
Curve’s main stablecoin pool on Ethereum is 3pool , which provides transactions between DAI, USDC, and USDT, with a maximum yield of 2.44% (among which the transaction fee reward is 0.28%, and the CRV token incentive is amplified through the Boost mechanism) After 2.5 times, it is 2.16%. Note: The Boost mechanism will only work if you hold a certain amount of CRV tokens to obtain bonus. If there is no CRV, only the minimum passive income in the interval can be obtained, which is 0.86%).
It is worth mentioning that Curve has come from behind in the DeFi AMM liquidity competition, and Convex Finance has contributed greatly .
Compound is another of the DeFi lending duo with a current TVL of $13.2 billion. Compound is only deployed on the Ethereum network and supports lending and borrowing of DAI, USDC, and USDT.
It is not difficult to see that the annualized deposit returns of DAI, USDC and USDT are 2.84%, 2.97% and 2.52% respectively, and the best USDC Interest Rates is 2.97%.
Yearn is a DeFi revenue aggregator with a current TVL of $4.23 billion (DeFi Llama data). Yearn seeks to maximize returns by automating the distribution of funds deposited by users among other protocols. Yearn currently supports the two chains of Ethereum and Fantom, and provides two income products, Vaults and Iron Bank, of which Vaults are income aggregation products and Iron Bank is a mortgage lending product. The highest annualized yield is DAI Vaults on Fantom with an interest rate of 24.96%.
4. Anchor Protocol
Anchor Protocol is a fixed interest rate agreement for Terra ecology. It is personally operated by Terraform Labs and provides low-risk fixed interest rate income tools for the ecology. As of now, the TVL is 11.3 billion US dollars. Anchor has publicly promised to provide a savings product with an annualized rate of return of 20%. Currently, it supports UST’s demand deposits. The current annualized interest rate is 19.39% , and the interest rate will remain around 20% for a long time.