Forex Stablecoin Yields in Risk-Off Markets
With Anchor Protocol recently discarding their signature stable 19.5% APY for a new “semi-dynamic rate” which adjusts dynamically each month—alongside continuous anxiety-ridden discussions about UST’s capacity to maintain its peg, one question surfaces above all others: Where can one find better yield on stablecoins in such a risk-off market?
In the past, investors diversified in ETH put selling strategies as an alternative opportunity to earn high-yield on stablecoins, like those automated by Ribbon Finance and StakeDAO, as well as products offered by newer protocols such as Katana on Solana. These strategies offer the advantage of being collaterized in USDC and other stablecoins whose capacity to stay pegged to the USD is trustworthy, unlike Terra’s algorithmically pegged UST . However, these option strategies have one crucial disadvantage: they are often not as profitable as they present themselves to be. Looking at Ribbon Finance’s performance this year, one can clearly gather that such strategies have significant potential downside — soon to be halfway through 2022, and the pool is barely above break-even.
