The on-chain interest rate exceeds 60%. Is your stablecoin enough?
Original author: Ignas, crypto analyst
Original compilation: 1912212.eth, Foresight News
The crypto market has been extremely FOMO recently, and I’m afraid not many people still hold stablecoins.
The on-chain leverage ratio continues to soar, and the market demand for stablecoins has risen sharply, almost crazy. From the chart below, the total supply of stablecoins has risen above $120 billion.
According to the IPOR index, the USDT lending interest rate on Aave V2 has soared from 1% -2% to about 37% in just one year. This shows that on-chain traders are overall bullish and are constantly borrowing stablecoins to purchase other currencies or participate in on-chain profit activities.
Despite BTC hitting all-time highs, the total stablecoin supply (red line) remains low. Only USDT supply exceeds the 2020-2021 bull market peak, while USDC remains well below the top of the previous cycle. Market demand for stablecoins is very strong.
The expansion of stablecoin supply is related to the increase in capital inflows, but the entire market is still in its early stages, and it only started to turn from a decrease to an increase in October last year.
Competition among project parties is fierce in terms of stablecoin revenue. Maker RWA returns, which looked very attractive in the bear market before, are much inferior to the speculative returns in the current bull market. The return rate of sDAI is 5%, while the return rate of USDe of Ethena labs is 33% (sUSDe annualized rate is 67.2%, and there are airdrop expectations). Therefore, the supply of DAI will naturally grow more slowly compared to Ethena.
Stablecoin deposit mining is also making a comeback. For example, Instadapp’s recently launched Fluid (DeFi protocol) is opening up $3 million worth of mining rewards for ETH, stablecoins, and INST tokens. The stablecoin has a yield of up to 36% and provides INST token rewards.
Points and airdrop expectations have also led to high yields on stablecoins, and Degen airdrop hunters are borrowing stablecoins to earn more points. In Solana ecological protocol Marginfi, you can find that the USDT lending interest rate has reached 61%, which is unimaginable.
All in all, stablecoin supply remains below the top of the last bull cycle. However, as yields and on-chain stablecoin opportunities increase, its supply is expected to grow rapidly. Especially as the Federal Reserve begins to cut interest rates, DeFi yields will become even more attractive.
