Discover simple strategies to maximize profits when holding stablecoins, prominent protocols within significant ecosystems, and valuable tips for earning returns with stablecoins.
Stablecoins are cryptocurrencies pegged to fixed assets such as gold or fiat currencies. In the crypto market, the most popular stablecoins include USDT, USDC, and UST.
While holding 100% stablecoins in your wallet may not yield significant profits, especially during periods of strong market growth, those with stablecoins can take advantage of their active position and potentially “buy the dip” at more favorable prices.
Therefore, it is advisable to maintain a certain percentage of stablecoins in your portfolio, such as 15% – 20%, to remain proactive in any situation. Of course, there are still ways to generate returns with this type of asset, even in unfavorable market conditions. This article will outline five different methods to optimize profits with stablecoins.
5 Ways to Maximize Profits with Stablecoin
CEX Lending
CEX Lending represents a lending mechanism available through centralized exchanges (CEX). Prominent exchanges in the market offer various Annual Percentage Yields (APY) as follows:
- Binance: 10%;
- Gate.io: 4%;
- Okex: 6%;
- AscendEx: 8.3% – 18%;
- MXC: 6%.
Stablecoin pools are typically featured in the “Earn” section on exchange platforms like Binance. Although the APY rates might not reach significant levels, CEX Lending stands out for its simplicity and security, particularly when utilizing reputable exchanges like Binance, Gate.io, and KuCoin, which boast a substantial user base.
Buying and Selling USDT/USD
If you have prior experience with peer-to-peer (P2P) trading on prominent exchanges like Binance, you may quickly identify the following patterns:
- During periods of market stability, the USDT/USD exchange rate tends to remain relatively steady, typically hovering above or below 1,005 USD per USDT.
- Conversely, during market corrections, there is a surge in demand for USDT as investors actively seek to “buy the bottom.” This presents an opportunity to sell USDT at a higher price, potentially reaching around 1,007 USD or even 1,0077 USD. After a few days, when the market regains stability, you can repurchase USDT at the prevailing rate of approximately 1,005 USD.
It’s important to note that this approach may yield more favorable results for individuals with a more extensive capital base.
Defi Lending
When entering the world of DeFi Lending, where lending occurs in the decentralized market, individuals can deposit their stablecoins into leading lending platforms such as Aave to generate profits with an average APR of approximately 6%. Although the returns may not be exceptionally high, this approach offers a relatively safe option, particularly on established lending platforms like Aave, Compound, and Cream.
Specific lending protocols, such as Solend on the Solana blockchain, also incentivize users. Generally, the Borrow Annual Percentage Yield (APY) surpasses the Supply APY. However, with the introduction of UST on Solend, the Supply APY for UST becomes more attractive, offering returns of:
- 16.69% APY paid in SLND.
- And 12.75% paid in LUNA to incentivize users to deposit UST onto the platform.
By understanding the mechanics of Solend, some well-versed players in the market continuously engage in depositing ⇒ borrowing 80%, ⇒ further depositing and borrowing to maximize volume until the pool reaches its maximum threshold. Nevertheless, it is crucial to note that such incentive programs are relatively uncommon, so users are advised to monitor the platforms regularly to seize potential opportunities diligently.
AMM Farming
Farming represents a lucrative avenue for generating profits by lending or providing liquidity on decentralized finance (DeFi) protocols. While similar to staking, Farming entails a slightly more intricate process whereby individuals must swap for LP (Liquidity Provider) tokens to initiate their staking activities.
Within automated market maker (AMM) platforms, stablecoins assume diverse forms. For instance, on the Solana-based Saber platform, the stablecoin MIM, migrated from the Allbridge platform, assumes the symbol “aeMIM,” while UST is denoted as “atUST.”AMM DEX (Decentralized Exchange) is a pivotal component of the DeFi landscape, thereby fostering individualized AMM DEX ecosystems. Notably, most of these protocols offer dedicated Farming Pools tailored for stablecoins, boasting average Annual Percentage Rates (APR) ranging from 7% to 20%.
Bridge Farming
Cross-chain bridges revolutionize the farming landscape by enabling the locking of assets on one blockchain and issuing corresponding assets on another blockchain. This innovative approach opens new avenues for Farming beyond traditional AMM and Liquidity Pool strategies, making it an attractive profit-making opportunity, especially for newcomers.
Among the leading bridge protocols, cBridge stands out with its extensive selection of asset pools, including stablecoins. Users can deposit stablecoins from multiple chains and receive rewards through CELR tokens.
Opportunities for Profiting with Stablecoins in Major Ecosystems
Solana Ecosystem
Quarry Protocol is a comprehensive reward pooling protocol within the Solana ecosystem. By providing stablecoin liquidity on platforms like Saber, Marinade, Sencha, Saros, etc., users can earn token rewards with an average APY ranging from 6% to 15%. Notably, the rewards for CASH pools are currently relatively high.
Access Quarry Protocol: app.quarry.so/rewarders
Terra Ecosystem
Anchor Protocol is the most prominent lending platform on Terra. Users can deposit UST in the “Earn” section and earn interest rates up to 19.36%. Additionally, in collaboration with Edge Protocol, users have the potential to earn interest rates over 100% by unlocking the liquidity of interest-bearing aUST tokens.
Access Anchor Protocol: app.anchorprotocol.com/earn
Avalanche Ecosystem
Platypus is a Stableswap AMM within the Avalanche ecosystem. Stablecoin pools on Platypus currently offer approximately 8% – 10% APRs and are rewarded as a Platypus token (PTP). Furthermore, the platform’s boost mechanism rewards users for staking PTP and holding vePTP in their wallets.
Access Platypus: app.platypus.finance/
Polygon Ecosystem
Aave, a prominent lending platform, supports stablecoins running on the Polygon network, such as DAI, USDC, and USDT. Lending APY for stablecoins typically ranges from 1% to 2%, lower than Borrow APY. Hence, users can opt for a “volume farming” approach by depositing and borrowing 70% – 80% of the total value and continuously depositing to maximize rewards.
Access Aave: app.aave.com/#/markets
Fantom Ecosystem
Tarot is a Lending Protocol within the Fantom ecosystem, offering numerous farming pools from platforms like SpookySwap and SpiritSwap. Users can deposit stablecoins, such as USDC, DAI, MIM, etc., to farm with APRs ranging from 10% to 20%.
Access Tarot: www.tarot.to/
BNB Chain Ecosystem
Ellipsis Finance, a Curve Finance fork, is an AMM within the BNB Chain ecosystem. Users can deposit stablecoins into pools and stake LP tokens. By depositing assets into the pools alone, the APY ranges from 1% to 6%. However, staking LP tokens allows users to receive additional EPS rewards with an APY of approximately 5.8%.
Furthermore, Ellipsis implements a reward mechanism with LIQR tokens, offering an APY of around 33% for certain LP token stakers.
Access Ellipsis Finance: ellipsis.finance/pool
Multichain Ecosystem
As mentioned earlier, cBridge, developed by Celer Network, is one of the prominent cross-chain bridges in the market. Liquidity Farming APY for USDC across major blockchains currently ranges from approximately 9% to 17%, with rewards distributed in CELR tokens.
Access cBridge: cbridge.celer.network/#/liquidity
Important Considerations for Maximizing Profits with Stablecoins
Actively Seek Opportunities
In the ever-changing DeFi market, opportunities are not static but constantly evolving. It is crucial to seek profit-generating possibilities within different ecosystems and protocols proactively. One easy way to do this is by utilizing the Yield Aggregator platform Beefy Finance, which operates across 14 chains. By selecting Stablecoin Pools, you can explore potential opportunities with stablecoins.
Mitigate Risks
When engaging in Farming, particularly in the DeFi space, it is essential to be aware of common risks such as network congestion, hacks, and rug pulls. To avoid significant losses and optimize profits, choose reputable platforms with a large user base and diversify your capital by farming across multiple locations.
Avoid Purchasing USDT During Market Volatility
During market corrections, when the USDT/USD exchange rate experiences significant fluctuations, it is not advisable to buy USDT. Purchasing USDT at a high price can substantially reduce your profits and potentially lead to unwarranted losses, diminishing the effectiveness of profit optimization strategies.
Pay Attention to Farming Rewards
Some protocols offer rewards in their native tokens, resulting in a high Annual Percentage Yield (APY) when token prices surge and diminishing APY when token prices decline. It is crucial to carefully assess the rewards received and the future growth potential of the tokens to maximize your profits.
Maintain a Stablecoin Allocation in Your Portfolio
To maintain a proactive position and safeguard yourself in any market situation, holding a portion of your portfolio, around 15% – 20%, in stablecoins is recommended. This ensures that 80% of your portfolio can still generate profits even during solid market uptrends. During market corrections, you have a specific capital allocation readily available to capitalize on potential bottom opportunities.
Conclusion
With the strategies above for profiting with stablecoins in significant ecosystems, you can optimize your profits even during intense market volatility.
