On-chain interest rates exceed 60%, is your stablecoin enough?
The demand for stablecoins in the market is very strong.Written by: Ignas, Crypto Analyst
Compiled by: 1912212.eth, Foresight News
Recently, the crypto market is extremely FOMO, and it seems that hardly anyone is still holding stablecoins.
On-chain leverage is continuously soaring, and the demand for stablecoins is skyrocketing, almost crazily. As seen in the chart below, the total supply of stablecoins has risen above $120 billion.
According to the IPOR index, the borrowing rate of USDT on Aave V2 has surged from 1%-2% to around 37% in just one year. This indicates that on-chain traders are generally bullish, continuously borrowing stablecoins to purchase other cryptocurrencies or participate in on-chain yield activities.
Despite BTC reaching an all-time high, the total supply of stablecoins (red line) remains relatively low. Only the supply of USDT has exceeded the peak during the 2020-2021 bull market, while USDC is still far below the top of the previous cycle. The demand for stablecoins in the market is very strong.
The expansion of stablecoin supply is related to the increase in capital inflows, but the overall market is still in its early stages, having only started to increase since last October.
Projects are competing fiercely in terms of stablecoin yields. The previously attractive Maker RWA yields during the bear market now pale in comparison to the speculative yields in the current bull market. The sDAI yield is 5%, while Ethena labs' USDe yield is 33% (sUSDe annualized rate of 67.2%, with airdrop expectations). Therefore, the growth of DAI supply will naturally be slower compared to Ethena.
Stablecoin deposit mining is also making a comeback. For example, Instadapp's recently launched Fluid (DeFi protocol) is offering mining rewards worth $3 million in ETH, stablecoins, and INST tokens. The stablecoin yield is as high as 36%, along with INST token rewards.
Points and airdrop expectations have also contributed to the high yields of stablecoins, with Degen airdrop hunters borrowing stablecoins to earn more points. In the Solana ecosystem protocol Marginfi, the USDT borrowing rate has reached 61%, which is hard to imagine.
In summary, the supply of stablecoins is still below the peak of the last bull market cycle. However, with the increase in yields and on-chain stablecoin opportunities, it is expected that the supply will grow rapidly. Especially as the Federal Reserve begins to cut interest rates, DeFi yields will become more attractive.
