Is DeFi season back? Stablecoin ‘yield’ deposits nearly doubled last month even as Bitcoin crashed

During May, the wealth management platform YIELD App, saw net deposits of Tether (USDT) increase 15.5%, while net deposits of USD Coin (USDC) more than doubled, increasing 155.5%, compared to April.

This upward trend proved similar across the industry with the total stablecoin supply crossing $105 billion, while the number of addresses metric suggests their user base in DeFi is flourishing, data shows.

Time to shine for stablecoins

Stablecoins are cryptocurrencies that peg their market value to a fiat currency, such as the US dollar. This sector of DeFi, as CryptoSlate data shows, accounts for 6.82% of the entire crypto space. They became a staple primitive in the ecosystem and constitute the core of the high yield opportunities, which attract investors to the DeFi market.

The stablecoin landscape is dominated by Tether and USD Coin, reserve-backed tokens, outshining due to their US Dollar peg. Tether, currently with $62 billion and USD Coin, with $23 billion, hold the lead by market capitalization, while Binance USD (BUSD) with $9 billion and Dai (DAI) with $5 billion follow.

By daily volume metric, Tether is undeniably the number one cryptocurrency with $75 billion, followed by Bitcoin (BTC) with $59.6 billion and Ethereum (ETH) with 29.3 billion.

But what’s fueling growth of the niche space considering the recent market crash? For some, it’s the ability to earn on idle funds that is powering a mini stablecoin revolution. 

“The ability to earn yield in crypto has been an interesting phenomenon that really developed and, through decentralized finance, has become extremely popular,” shared Tim Frost, CEO of YIELD App,during an interview with CryptoSlate.

“People love the idea of putting their money to work and their crypto to work, and just earning yield on their crypto assets,” he added.

What’s earning yield and where?

Frost noted that earning an attractive annual percentage yield (APY) with depositing stablecoins, as well as Ethereum and soon, Bitcoin and Filecoin (FIL), on YIELD App, attracts users looking to hedge, as his platform is set to go after Celsius Network, Nexo and SwissBorg’s market share.

APY is a broadly used metric for measuring returns in DeFi, which assumes compounding rewards.

While stablecoins provide a secure buffer, passive income on assets whose prices are plunging is valued particularly by long term investors.

“Over 1% of Bitcoin now is wrapped onto Ethereum – the reality is, it allows you to put your capital to work,” Frost said, referring to the statistic that revealed the percentage of Bitcoin’s circulating supply locked up to be utilized on the Ethereum blockchain. 

The use of stablecoins on other blockchains has been growing very fast as Tether’s issuance/supply on the Tron blockchain surpassed the one on Ethereum, data shows.

“This is a trend that is not going to stop. I think Ethereum is going to be a minority player in stablecoin issuance,” said Frost in regard to stablecoins migrating to new, up and coming chains like Tron, Solana, Polygon, and Avalanche, to name a few, that are becoming more attractive due to lower transaction fees and growing utility as more DeFi products keep opening up.

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editorial staff