
Although inflation has been decreasing, interest rates are still soaring.
This is painful for various reasons, but for crypto bros, it basically means risk-on assets like Bitcoin and Dogecoin aren't as attractive as, say, conservative bonds issued by the U.S. government.
In fact, the DeFi sector-specifically stablecoin providers-is finding distinctive moves to make the most of the current high-interest rate environment.
It's the return of the interest-bearing stablecoin. But this time things are looking a whole lot different than Terra's Anchor protocol.
From Maker's DAI to Frax Finance's sFRAX, the arena is getting crowded with various flavors of this new variety of stablecoin.
T-Bills and other real-world assets, like corporate debt, generate their yield from sDAI and sFRAX.
And with that'safe' yield of as much as 5% on those idle U.S. dollars, investors are pouring in.
The creator's sDAI push, Spark Protocol, just announced that the token had reached 1 billion in circulation.
It's not only the dollar coins but euro-pegged stablecoins like Angle Protocol are also getting in on the action. The agEUR is raking in a 4% yield from its bag of real-world assets.
Is there anything related to yielding in crypto? If so, why?
agEUR is generated by generating its yield from a tokenized representation of a European government bond. While some other stablecoins are generating that yield via staked ETH, Veyrat says it's not a fan.
Until the Fed lowers rates, alternative designs-specifically those that don't rely on interest rates may enjoy an uptick.
However, this product is currently having quite the edge from one of the most powerful central banks in the world.
The irony of this entire niche appears to be that the industry appears to be profiting from centralized governments and their financial policieas, a dynamic from which Bitcoin fans sought separation.
Many of these stablecoins are vulnerable to any change in monetary regimes, which can cause them to be vulnerable.
Crypto is becoming a dynamic new tool for making money better and more transparent no matter how the market operates, as it is not a complete rejection of traditional finance.
It's far from conclusive, of course.