Make Money in USDC: Best Interest Rates

Cryptocurrencies are often associated with high-risk investments due to their price volatility. However, there are also low-risk investment products centered on stablecoins. Stablecoins are blockchain-based digital currencies whose prices are pegged to fiat currencies or commodities, thereby reducing volatility risk. Here we discuss how to earn interest or “yield” with USDC, a stablecoin fully backed by the US dollar.

What is USDC?

USDC is a digital currency issued by Circle, a US-based fintech company. It is based on the US dollar at a 1:1 ratio and is based on a multi-chain infrastructure. USDC started as an ERC-20 token and then expanded to other major blockchain platforms, including Algorand, Solana, Avalanche, Stellar, and Tron.

To maintain the peg, Circle maintains reserves consisting of USD cash, equivalents, and U.S. Treasury bonds. Reserves are monitored monthly by third party auditor Grant Thornton.

USDC’s stable peg and Circle’s prominence have increased demand for this digital dollar token, making it the fastest-growing stablecoin. It is currently the fourth largest cryptocurrency with a market capitalization of over $50 billion.

USDC: Staking vs Lending

Cryptocurrency staking and lending are two ways to profit from your cryptocurrency assets without selling them. Moreover, this passive income mechanism allows USDC holders to put their money to work, especially in today’s low interest rate environment as most dollar stablecoins fetch higher interest rates than traditional savings accounts.

The key difference between the two is that USDC staking requires digital dollars to be lent to a blockchain or cryptocurrency network for rewards, while USDC lending involves lending them to a borrower in return for interest.

USDC lending platform

The simplest way to earn passive income in USDC is to deposit it in a centralized lending platform that offers the highest Annual Percentage Yield (APY). Here are our top picks for lending platforms:

connection point

Nexo offers up to 12% APY on USDC deposits, which is well above average. Additionally, Nexo has an intuitive interface that makes it suitable for beginners.

Investors love Nexo because it offers compound daily payouts and flexible returns. The platform has $375 million in insurance for all assets under management, covered by BitGo and Ledger.

By using Nexo, the platform’s native token, you can enjoy better interest rates, more free cryptocurrency withdrawals, and more.

US customers are no longer accepted.

hoddle nut

Hodlnaut is a cryptocurrency platform that allows users to diversify their cryptocurrency investments across six major digital assets, including Bitcoin, Ethereum, and USDC. APY on USDC deposits can reach up to 9.40%.

Users can deposit stablecoins at any time without lockups or deposit limits. You also receive weekly payouts and can withdraw your funds at any time. The withdrawal fee is $10 USDC.

Advantages and disadvantages of lending platforms

USDC exchange lending

Another way to earn interest on USDC loans is through centralized cryptocurrency exchanges that use your funds to lend to traders. In most cases, your USDC funds will need to be locked up for a certain period of time. The most popular exchanges where USDC funds can be used are:

Binance

Binance is the largest cryptocurrency exchange by trading volume. In addition to its flagship exchange terminal, it offers many cryptocurrency products. Binance Monetization is your one-stop hub for earning possibilities, including interest earning on USDC. Although it offers generous interest rates on most digital assets, the APY on USDC liquid deposits is currently only 1.20% as Binance trusts other stablecoins for its ecosystem. Nonetheless, investors can be assured that their funds are safe.

Kucoin

Kucoin is a fast-growing cryptocurrency exchange founded in 2017. Following its latest funding round conducted in May 2022, Kucoin expanded its global presence and reached a valuation of $10 billion. The company raised $150 million from a pool of investors. Including Circle Ventures

Kucoin supports USDC lending so that users can earn interest. Unlike other exchanges, Kucoin allows users to lend directly to counterparties, and counterparties determine the interest rate themselves. Therefore, APY figures can vary from 1% to over 50%. Users can lend their USDC holdings for 7, 14, or 28 days.

Crypto.com

Founded in 2016, Crypto.com has become one of the most trusted cryptocurrency services. It provides exchange, non-fungible tokens (NFTs), payments, and lending services to over 50 million users worldwide. It also boasts $750 million in insurance coverage across all of its assets. Last year, the company chose Visa to settle transactions on its payment network.

Crypto Earn on the platform supports USDC and offers an average APY of 8%. You can choose between flexible and term deposits, but the former offers lower returns. Interest compensation is paid weekly.

Pros and Cons of Exchange Loans

USDC DeFi Lending

Decentralized finance (DeFi) is one of the most important trends in the cryptocurrency industry. DeFi apps allow users to access financial services powered by algorithms and delivered via blockchain instead of being managed by a centralized authority. The best lending protocols currently are:

ghost

Aave is one of the largest DeFi marketplaces, with a total value locked (TVL) figure of nearly $10 billion. The protocol specializes in lending services, with USDC playing a leading role, accounting for over 20% of Aave’s total assets.

The interest rate contributing to USDC liquidity is 1.50%.

Complex finance

Compound is a direct competitor to Aave. Lending protocols are the main catalyst that sparked the DeFi craze in 2020. With a TVL figure of over $5 billion, Compound is the third largest lending protocol after Maker and Aave.

APY on USDC deposits currently does not exceed 0.65%, but USDC remains the leader here, down from 2% in March 2022.

curve finance

Unlike Aave and Compound, Curve is a decentralized exchange (DEX) focused on stablecoins. It acts as an automated market maker (AMM). This means there is no centralized order book to match buyers and sellers. Instead, it relies on a liquidity pool made up of stablecoins. Liquidity providers are incentivized for their efforts. For example, one of the largest pools on Curve requires users to lock DAI, USDC, and USDT to earn approximately 2% APY.

Pros and Cons of DeFi Lending

Why are USDC yields so high?

USDC yields are much higher than those offered by traditional savings accounts, despite the parity between digital and fiat dollars. How is that possible? While traditional high-yield savings accounts rarely reach 1% APY, cryptocurrency lending platforms can exceed 10% while eliminating volatility risk.

It all comes down to the business model that the cryptocurrency company implements. In particular, users can use cryptocurrencies as collateral, allowing them to lend their digital currencies to borrowers willing to pay higher interest rates. This is something traditional banks cannot do. As a result, demand for loans against cryptocurrency collateral drives up interest rates and provides cryptocurrency investors with the opportunity to generate better returns than money market instruments.

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