25 February, 2024



Stablecoins Hints Caution Amid  Pre-Fed Anxiety

1 year ago

21 Nov, 2023

As the gap widens between Curve’s 3pool and U.S bond yields, Stablecoins become less attractive

Over the last 44 days, the stable economy depreciates more than $3 billion. However, tether’s market valuation surged by 2% over the last 30 days. As per the statistics, usd coin (USDC) lost 4.1%  inthe previous month, and BUSD depreciated 5.19% in a month. As of press time, BUSD’s overall market cap in U.S. dollar is $13.8 billion.

Top five stablecoins by marketcap on January 31,2023.

Stablecoin is a digital currency that is designed to minimize volatilotu by pegging to a stable asset like USD, gold or any Fiat currency. 

In the recent development, the returns received by depositing stablecoins on decentralized exchange Curve’s 3pool and the U.S. Tresury yields widens, indicating the growing attractivness of traditional fixed market assets.

What is Cureve’s 3 pool

It is the largest liquidity pool designed on the Curve decentralized exchange. The job is to provide deep liquidity for swaps among the three largest stablecoins: USDT, USDC, and DAI.

As of writing, the seven-day moving average of 3pool’s APY is 250 bps less tha 10-year U.S. government bonds yield, which stood at 3.54% as per DeFiLlama, and crypto services provider Matrixport.

The situation hints at the lesser attractivens among investors for the Stablecoins. As a year earlier, the spreed between the two assets was negligible. However, as the Fed tightening begins the 10-year yield almost doubled on Y-o-Y basis. Fed increased the interest rates by 425 basis points to 4.25%  in less than a year. On the other hand, Defi’s yields melted in early 2021.

Market is gearing up for the 2023 first Fed decision due on Wednesday that could affect the further prospect of the stablecoins.

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