In traditional financing, the “risk -free clean”, the interest rate an investor can expect to earn from an investment that carries zero risk acts as a basic benchmark for all investment decisions. Today, Defi has quietly established its own equivalent: The Basic Frequency for Lending StableCoins.
The emergence of this new basic rate is not only a passing trend it is a structural shift that challenges traditional funding by demonstrating the market-driven sustainability of low-risk markets, low-risk money markets. At times, the yields on larger platforms such as Morpho have reached 12-15% APY for USDC loan, which surpasses 4-5% offered by US Treasury. This premium is not found from excess risk taking or complex financial technique, but from genuine market demand for stablecoin borrowing.
You read Crypto Long & Short, our weekly newsletter with insight, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.
Market dynamics that drift yield
The increase of high -interest agricultural strategies, especially those involving Ethena’s synthetic dollar (Susde) product, has been an important driver behind elevated stableecoin loan rates. Over the past year, Etaas USDE and stacked USDE (SUSDE) have provided yields in the 20-30% APY area, which burned a significant demand for stablecoin borrowing. This demand comes from geared dealers aimed at catching the spread created by these high yields.
What separates ethena is its ability to catch financing fees traditionally claimed by centralized stock exchanges. By offering Susde allows Ethena Defi participants the opportunity to exploit profits generated from traders who pay high financing rates to go long on larger assets such as ETH, BTC and SOL. This process democratizes access to these profits, enabling defi participants simply by keeping Susde.
The rising demand for SUSDE drives more capital into the stableecoin economy, which in turn raises the basic yield on platforms such as Aave and Morpho. This dynamic is not only for the benefit of lenders, but also strengthens the wider defi ecosystem by increasing the yield and liquidity of stableecoin lending market.
Risk adjusted return in perspective
While double -digit yields may raise the eyebrows, the risk profile of these lending options has matured significantly. Leading money market protocols have shown resilience through several market cycles with robust liquidation mechanisms and time -tested smart contracts. The primary risks – smart contract vulnerability and stableecoin DEPEGGING – are well understood and can be controlled through portfolio sightsification across protocols and stableecoin types.
Annual dividend — comparison – traditional fixed income versus defi loan returns
30-day average per February 1, 2025
Source: Traditional Market Data from Bloomberg Terminal, Defi Market Data from Vaults.fyi
Implications for traditional funding
For wealth managers and financial advisers, these developments provide both an opportunity and a challenge. The ability to access stable, transparent yields that significantly surpass traditional fixed income products require attention. As the infrastructure of institutional participation in DEFI continues to improve, these yields may become increasingly relevant to income -focused portfolios. While the yields are very responsive to market cycles, especially financing speed dynamics, fluctuations are still common. However, the effectiveness and transparency of the money markets on the chain suggests that meaningful yield prizes of traditional alternatives can be sustainable in the long term.
When defrastructure matures, these money markets on the chain may not only act as a viable alternative to fixed income products-they could become the new standard for transparent, risk-adjusted yields in the digital economy, leaving traditional economy to play catch.
