Stablecoin Yield Strategies: Grow your Money at a Low Risk

logos of stablecoins for yield farming

Stablecoins are a solid ground if you don’t want to experience heartbreaks with crypto investments. The crypto market is highly volatile; every crypto investor that has been in the market for a while has experienced that.

In 2018, the price of Bitcoin fell by 65% and then later on by 80%. In 2020, it fell by about 30%. In May 2021, it fell by about 50% and counting (along with several other coins).

Screenshot from Twitter with a funny tweet on crash of cryptocurrencies

The market can fall pretty low, but it can rise pretty high as well. So, crypto investments are great. However, it’s helpful to diversify your portfolio to prevent total loss when the market falls. Also, for those who can’t handle the volatility of Bitcoin and other coins, stablecoins are better.

What are Stablecoins?

Stablecoins are crypto assets whose value are tied to a fiat, like the US dollar or gold.

Because their value is tied to an external asset that is quite stable, they don’t experience much fall or rise in value.

Stablecoins and Yield Farming

There are various ways to earn interest on your USD or EUR. However, most of them still go with high risk, high rewards and low risk, low reward. The lowest risk is probably leaving them in the bank.

Keeping money in banks doesn’t make you anything substantial; you only give banks your money to make more money while you probably get 0.01% – 0.50% APR. 

With yield farming, you can earn more than that; the market is usually 10%-80% APR for stablecoins. Also, it’s pretty safe in the sense that stablecoins don’t fall a lot in value.

We have discussed yield farming a couple of times. You can read our yield farming guide if you are a newbie to yield farming.

Why do Yield Farming with Stablecoins?

You can do yield farming with your high-risk cryptocurrencies and get high rewards. For example, looking at our Celo yield farming article, you can see APRs at almost 700% and about two weeks before that article was written, it was 2000%.

However, with yield farming, you run the risk of impermanent loss. If you don’t know what impermanent loss is, click on the Celo yield farming guide link or the yield farming guide link above. We have explained impermanent loss in detail in both articles.

In summary, impermanent loss is the bane of every yield farmer.

Meme on impermanent loss in yield farming.
Source: Medium

When you do yield farming with stablecoins, you can minimize your risk to a large extent. 

Stablecoins don’t fall in value so much because they are tied to fiat money. Even when the Bitcoin and other coins fell by much in May 2021, stablecoins only fell slightly (around 0.45% – 3%) and moved back up pretty quickly.

So, not only will you not have to deal with high impermanent loss, but you will also be able to earn at least 10% on your money.

How to do Yield Farming with Stablecoins

You can provide liquidity and farm yields on pools with stablecoins. On Ubeswap, there are some stablecoins, including the Moola market mcEUR and mcUSD coins. As seen in our tutorial, you will need to have some of those coins and then provide liquidity in that stablecoin pair or a pair with one stablecoin.

Also, as you earn high APRs on your other assets, you can swap your earnings to stablecoins and farm yields on them.

Top Stablecoin Yield Farming Platforms

PoolTogether

A screenshot of PoolTogether - a platform where you can do stablecoin yield farming

Estimated return: 8% – 32% (depending on the coin) + chance to earn weekly prize.

There are over five pools on PoolTogether, including the DAI and USDC pools.

By depositing DAI in the DAI pool, you get a chance to win the weekly prize, which was $66k at the time of this writing and earn 13.93% in POOL tokens. By depositing USDC into PoolTogether, you get 15.37% in POOL tokens and a chance to win a part of the $37k grand prize of the total $58k weekly prize.

Even if you don’t win the weekly prize ever, the returns on your stablecoins are a lot given the value of POOL tokens. You can not get that with a savings account in a traditional bank.

Curve

A screenshot of Curve's website - a platform where you can do stablecoin yield farming

Estimated return: 20% – 50% APY

Curve is a leader in the stablecoin yield farming scene. It was designed to ease swapping between stablecoins like USDC and DAI and Ethereum-based bitcoin tokens like WBTC. If you want to earn high yields on your money, Curve is a platform to pool stablecoins.

With Curve, you get a percentage of trading fees, as usual with liquidity mining, but you also get other incentives on top of the trading fees. Companies including Synthetix will give rewards to people providing liquidity to pools with their coins. Also, there is the CRV token (governance token for Curve) for all those who participate in the Curve pools.

As a result, you can get high APY for your stablecoins. One pool to look out for is the sUSD pool (DAI+USDC+USDT+sUSD). In that pool, you can earn an 11% APY on trading fees, CRV (token) rewards of up to 18% and about 3% in SNX. Another notable pool is the 3pool.

KeeperDAO

A screenshot of KeeperDAO - a platform where you can do stablecoin yield farming

Estimated return: 9% – 10+%

KeeperDAO is a protocol for managing liquidations, rebalances, and arbitrage in DeFi. There’s an opportunity to earn a sizable yield on your stablecoins (USDC and DAI) by leveraging KeeperDAO. There are opportunities for ETH and BTC on the platform as well.

KeeperDAO uses its pool of deposited crypto assets to earn profit by taking advantage of arbitrage profits and returning that back to the protocol’s liquidity provider tokens. Also, assets are lent on other DeFi protocols to gain interest, ensuring that the platform is consistently earning profits for its liquidity providers.

Although its APY for stablecoins isn’t as high as Curve’s, it’s pretty great for returns on fiat-based assets.

mStable

A screenshot of mStable - a platform where you can do stablecoin yield farming

Expected return: 18% to 68%

mStable is a protocol that combines lending income with trading fees to produce yields. Users can save their assets for high interests or add them into a liquidity pool.

For its pools, there are two sections: the pool section and the earn section on its app. In the pool section, you can find the stablecoins: currently mUSD and other stablecoins in pairs. You can find some of the pools that reward MTA (mStable’s governance token) in the crypto ecosystem in the earn section.

mStable offers high APR, but only 33% of the MTA earned in the stablecoin pools are claimable immediately. The remaining 67% are locked and streamed linearly over the following 26 weeks.

Conclusion

Aside from the platforms mentioned in this article and our liquidity mining articles, Yearn Finance and Rari Capital are two other platforms you can leverage to grow your USD, Euros, and other currencies.

You can always find a stablecoin yield farming platform or one for yield farming in general that’s offering something worth investing in. However, be careful so you don’t pool all your money into a scammer’s app.

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