How to earn high yield on USDC?

Whenever I come across any news regarding USDC or Circle, I can’t help but be reminded of my high school mathematics teacher! He had the ability to draw a perfect circle just like this man below👇

Another thing Circle reminds me of is the excellent yield potential of USDC and other stablecoins (up to 25% APY)!

Let’s talk about stablecoins, USDC yield farming, and how we can earn the best USDC yield rates.

Key Takeaways

→ Stablecoins are cryptocurrencies that are pegged to Real World Assets to create non-volatile crypto assets.

→ Stablecoins are excellent for staking as they are low-risk and low-volatility assets. Their price movement is also predictable, making it easy for you to manage your portfolio. However, their yield is generally low.

→ Multipli is a DeFi yield protocol that generates a yield of 10-25% APY on your USDC through Contango and Spot-Perpetual Arbitrage strategies.

What are stablecoins? What is USDC?

A stablecoin is a cryptocurrency that is pegged or tied to a specific asset, usually a fiat currency or commodity, to provide stability. It is great for people who seek the predictability and stability of TradFi along with the decentralisation and custody that crypto offers.

USDC, a USD pegged stablecoin issued by Circle, is widely used across the crypto landscape; it is trusted because it is regulated and audited frequently. Circle’s USD reserve is held at The Bank of New York Mellon and managed by BlackRock. It is preferred by exchanges and people who value its regulatory compliance and audits.

Now onto the next part.

Why should you generate yield on your USDC? Stablecoin yields vs other cryptocurrency yields

USDC is the 6th largest cryptocurrency by market cap- it is majorly used in exchanges. Subsequently, there are a lot of advantages of staking your USDC over other cryptocurrencies.

Because it is pegged to USD- it is more stable → less volatile → returns are more predictable → risk is lower.

Here is a tabular comparison of USDC vs other cryptocurrencies.

What are the disadvantages of USDC yields?

The disadvantages of stablecoins are byproducts of its stable nature:

→ Limited options on exchanges to earn yield

→ A certain level of regulatory uncertainty (even though it is regulated)

→ Lastly, relatively low yield. This is a big no no!

However, Multipli is able to generate a yield in the range of 10-25% APY on your USDC. Before we tell you how we do that, here’s a bit about Multipli. Feel free to skip to the next part if you know about multipli.

What is multipli?

Multipli is a zero-knowledge powered, multi-chain DeFi protocol that lets users earn yield on their crypto assets. It employs two low-risk and simple yield generating arbitrage strategies to generate yield on your USDC. But how does it work? Let’s dive right in.

When you deposit your USDC into Multipli, it’s locked into smart contracts, and with the help of custodians, mirrored on centralised exchanges- this ensures we have the required liquidity to carry out our strategies.

How will multipli earn yield on your USDC?

The first strategy in our Yield Generating Arbitrage strategies is:

• Contango Arbitrage: This strategy aims to capture the price difference between an asset’s spot price and futures price by shorting in futures and going long in the spot market simultaneously.

  
  

  Also note that the USDC you deposit will be converted to native and non-native assets to generate yield for you, in the example case below, we will be using BTC.

💡 Contango refers to the difference in the price between an asset’s spot price and futures price.

Example:

→ Market Scenario: Let’s say you have put 50,000 USDC into Multipli fi. We will use it in our arbitrage trading strategies such as:

We spot a contango in the Bitcoin market.

• Spot Price of BTC: $50,000

• 3-month Futures Price of USDC: $55,000

→ Strategy Execution:

• Buy Spot: Purchase BTC at $50,000.

• Sell Futures: Sell a futures contract at $55,000 for a 3-month expiry.

→ Outcome at Expiration:

• Profit: Earn $5,000 by delivering BTC bought at the spot to fulfill the futures contract.

💡 multipli’s USDC yield is one of the best in the DeFi yield landscape.

2. The second strategy is:

Spot - Perpetual Funding Rate Arbitrage: This strategy aims to profit from the funding rate generated by holding long and short positions in perpetual futures while maintaining neutral positions in the spot market.

💡 Funding rate is a payment mechanism between long and short position holders of perpetual futures assets to influence its price to stay in sync with the spot market’s price.

Essentially, if

or

Example:

→ Market Scenario:

• Spot Price of BTC: $50,000

• Perpetual Swap Price of BTC: $50,000

• Positive Funding Rate: 0.1% per day (paid by long positions to short positions)

→ Strategy Execution:

• Buy BTC at Spot: Purchase BTC at $50,000

• Short Perpetual Swap: Open a short position in BTC perpetual swaps to collect the funding rate.

→ Outcome:

• Profit: The funding rate is 0.01% per 8 hours. As a short position owner, you receive the funding rate payment.

  Over a day, you will make:

  Funding rate= 0.01% of $50,000 = $5.

  You receive 3 payments a day= $5 X 3= $15

  Over a month, you will make

  $15 X 30= $450

  If you’ve ventured 10,000 USDC = 10,000 X 0.01% X 3 X 30 = $90

You’ve made $90 by employing this strategy while ensuring that the risks are minimal due to your neutral position.

To dive deeper into these innovative strategies, go through our Docs.

How much yield will Multipli generate on your USDC?

Multipli will generate 10-25% APY on your USDC.Because our strategies are a result of extensive in-depth research and have been successfully back-tested with market data from the last 5 years.

Conclusion

Before we conclude, I want to thank Multipli’s expert trader for providing tips on how we could simplify this blog. I also want to give a nod to my mathematics teacher for inspiring the introduction (his chalk piece will find me otherwise).

USDC and other stablecoins are excellent assets for staking, and Multipli provides a straightforward way to earn profits from your USDC.

Learn more about stablecoins here. Learn more about USDC.

P.S. If you’re curious about what my teacher looked like, here’s a reference image. He looks cool, doesn’t he?