On June 28, Shenyu, the co-founder of F2Pool and the absolute main force of DeFi mining in the Chinese community, posted on social media that recently the market has been flooded with a large number of stablecoins, which has caused the DeFi yield to drop miserably. According to Aave and Compound USDC Based on the average calculation of pool deposit APY and CRV 3Pool’s unaccelerated rate of return, today’s DeFi risk-free rate of return is only 2.73%.

Interestingly, the current seven-day annualized return of Yu’e Bao in Alipay is about 2%, while Chaochaobao of China Merchants Bank is about 3%.

In the past year, many people have transferred funds from banks to the DeFi field, using stable coins such as USDT for mining, in an attempt to obtain risk-free returns that are much higher than deposits. At present, with the sharp correction of the overall market value of encrypted assets, the space for this kind of "arbitrage" is not only compressed, but there may even be no excess returns to draw.

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1 The risk-free returns of stablecoins have plummeted, and some are not as good as Alipay?

Let’s take a look at the three chains of Ethereum, BSC and Polygon for the rate of return of lossless mining of stablecoins. The following data comes from APY Assistant (apy999.com), which mainly shows the annualized rate of return of a pool of lossless mining.

Ethereum chain:

AAVE：USDT 2.41% ；DAI 0.71%

dForce：USDT 4.05% ；DAI 3.36%

Compound: USDT 1.3% ；DAI 2.39%

Yearn：USDT 3.84% ；DAI 7.16%

DFI：USDT 13.36%; DAI 16.56%

BSC chain:

Alpaca：USDT 9.77%; BUSD 9.86%

Autofarm：USDT 11.5%；BUSD 9.85%

Belt：USDT 2.9% ；BUSD 3.5%

Bunny: USDT 3.83% ; BUSD 3.33%

Venus: USDT 3.6%; BUSD 3.13%

YFII: USDT 14%; BUSD 31.72%

Polygon chain:

AAVE：USDT 1.68% ；USDC 0.97%

ForTube ：USDT 2.15%；USDC 2.49%

Solo：USDT 14.95% ；USDC 7.93%

Supremex：USDT 23.55%；USDC 10.85%

It is not difficult to find that the non-destructive mining rate of USD stablecoins for most projects is not very attractive. This is at least the case on the above three public chains. The non-destructive returns of some well-known projects are even lower than Alipay’s currency funds.

In addition, Loanscan data shows that the deposit rates of USDC and DAI have also undergone great changes in the past year, and both have a very large retracement from the historical high. Taking Aave as an example, the historical high is in January 2021 , the interest rate was close to 20%, but today it has dropped to 2.36% half a year later.

As with deposits, so with loans. It used to be possible to make a lot of money by borrowing, but the situation of waiting for the wind to blow the money is no longer seen.

Currently, Binance’s Launchpad is staking mining for two projects, KLAY and ATA. Earlier this year, Binance’s Launchpad could earn high returns for investors, but today, data shows that these two projects have pledged BUSD in total. About 900 million U.S. dollars, and its yield is only about 2%. This data is even lower than the regular 7-day BUSD wealth management with a yield of 4.5%.

So, what should you do with the dollar stablecoin in your hand? According to feedback from practitioners, either consider mainstream coins and stable coins to form LP mining, but need to bear the risk of impermanent losses. Or just rush to the top mines of some new projects.

Some people also say that the risk-free mining rate of return of some projects is actually not bad, but some DeFi scientists said that compared with the corresponding risk, the rate of return seems very weak. "If the money is not earned, don't let the principal be swept away. The hidden risks of new projects and unknown projects are huge." They said.

On June 29th, Compound Labs announced the establishment of a new company, Compound Treasury, which allows banks and financial technology companies to convert US dollars into USDC and obtain a 4% interest rate. This also reveals that even a 4% return is still very tempting compared to traditional financial markets.

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2 The proliferation of stablecoins? Exchange stock at $17 billion

Shenyu said that the current market is flooded with a large number of stablecoins. This feeling must be experienced by many practitioners. According to data from Dune Analytics, as of 14:00 on June 28, the supply of US dollar stablecoins was 74.16 billion US dollars. The top three USD stablecoins by market capitalization are USDT, USDC and BUSD. Since June, the total market value of USDT has grown steadily, with a growth rate of 0 in the past week.

The market value of USDC and BUSD has grown rapidly, with a growth rate of about 615% and 300% in the past week.

Why are there so many stablecoins recently? It is very likely that as the price of encrypted assets plummeted, investors held stablecoins after selling encrypted assets, but did not withdraw money immediately. On the other hand, there is currently an OTC frozen card problem in China, and investors are also worried that their withdrawals will be frozen.

And these stablecoins generally have two destinations. Some investors will inject into the DeFi mining field, and some may directly purchase wealth management on exchanges or pledge mining such as Launchpad. To some extent, this may indeed compress the income of the above two channels.

Interestingly, according to Cryptoquant data, the current stock of stablecoins in exchange wallets is about 17 billion US dollars, which is already a record high. The same period in 2020 is only about 200 million US dollars.

How will such a large number of stablecoins affect the market? This may be very interesting, after all, this has not been experienced in the entire history of cryptocurrencies.