One great aspect of cryptocurrency is that it allows you to earn yield on stablecoins. I focus mainly on putting my money into stablecoins that are backed by dollar equivalents. When I pull profits from cryptocurrency or if I am seeking to earn more than I can in a traditional bank account, I like to diversify the way that my stablecoins work for me. Keep in mind that this is not financial advice and you should always do your own research before investing. I will go over the methods that I use and platforms that I am using.
- Place stablecoins on a centralized platform that pays interest
This is the easiest way to start earning interest on stablecoins. You simply place your stablecoins on Celsius, BlockFi, Nexo, or Voyager. These platforms pay 8.6%+ interest in the stablecoin that you deposit. One neat feature that BlockFi offers is that you can get paid your interest in different cryptocurrencies. This is a nice way to dip into the crypto markets without having to directly purchase the coin that you want exposure to. Additionally, the interest compounds automatically and all these platforms are fairly simple to use. I have included referral links at the bottom of the article where you can get free crypto if you use my links.
2) Lending stablecoins through Aave on Polygon network
Aave is a decentralized platform that allows you to earn interest on stablecoins. One challenge of using ethereum is that the gas fees are so high when you deposit and withdraw to the platform. Therefore, if you are dealing with a small amount of stablecoins, you pay through the nose and that is going to eat into your yield. On the Polygon network, gas fees are close to zero. There is a gas fee to bridge your stablecoin over to Polygon, but once the funds are in the Polygon layer, fees are nearly free! The interest rate on Aave for loaning stablecoins varies continually. One great feature that Aave and Polygon are offering right now is a bonus yield paid in Matic tokens. As an example, at the time of writing the APY on USDT is 8.34% paid in USDT and 14.02% in Matic tokens. At some point, the bonus Matic tokens will be phased out. In the meantime, you can take advantage of getting dual rewards and claiming the free Matic tokens has almost zero gas fees. Two added bonuses are that you can restake your Matic rewards to gain additional yield and if the price of Matic increases, your yield will also increase.
This will be more challenging than using a centralized platform. However, it may be worth investing the time to learn how to do it as you can open yourself up to larger potential yield.
3) Stake stablecoins on Belt.fi on Binance Smart Chain
The Binance Smart Chain offers many of the same features as Ethereum with much lower gas fees. I enjoy investing in the ecosystem as it doesn’t require such huge investments and gives me exposure to many different projects. I use the 4Belt pool and it currently pays 35% APR paid out in Belt tokens (at the time of writing). There is an increased risk as the Belt token could go either direction whereas stablecoins will stick to their peg. I like that I earn this payout in Belt’s native token, BELT because Belt currently has $3.6 billion in locked value which is a significant amount and the market cap is of BELT is $134 million. This tells me that this is a big project and the price of BELT does have room to run higher. Again, this method is more complicated than a centralized platform, but it may make sense to research it if you are interested in more diversification and more potential upside on your yield.
4) Loan and borrow stablecoins on UnFederal Reserve
This is the most complicated and highest risk option of the four, but it may also be the most profitable. Yesterday, UnFederal Reserve launched their app on Ethereum. You can loan stablecoins and earn a bonus “distribution” paid out in UnFederal Reserve’s native token, ERSDL If you want to be more aggressive, you can also borrow against your collateral in stablcoins and get a bonus distribution in the form of ERSDL. Keep in mind, that you may be net negative on your stablecoin interest depending upon your stake to borrow ratio. Right now, the combined bonus distribution is over 500% (paid in ERSDL) when combining lending and borrowing of stablecoins. This will drop down as time goes on, but in the meantime it’s an easy way to gain ownership of a token that can still go much higher (or lower). The big drawback of this is that it’s a new project (increased risk) and that gas fees are ridiculously high right now so using the platform is expensive and there will be fees to redeem your rewards.
By staking/lending my stablecoins, it helps me in growing my Bitcoin stack (through BlockFi) and also gives me exposure to different coins like Matic, BELT, and ERSDL. It’s another way to take advantage of this burgeoning asset class. Thank you for reading this article. I hope that you have found it interesting and useful. If you have feedback or questions, please feel free to respond in the comments. Again this is not financial advice and I am not a financial advisor. If you are interested in using the platforms mentioned ion the first example, my referral links are below and using them benefits both of us.
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