The demand for yield is increasing as central bank interest rates remain at high levels. In the United States, the Federal Reserve has maintained interest rates at a 23-year high of 5.25% to 5.50%.
While rates in most countries are starting to fall, they are still elevated compared to the pandemic period. This situation has led investors to allocate cash to risk-free assets like government bonds to generate returns.
Yield-Generating Financial Services
High-Yield Cryptocurrencies
Cryptocurrencies are also offering significant yields. Solana has a staking yield of 7%, while Celestia, Cosmos Hub, and Injective offer yields over 10%. For instance, an asset yielding 10% means a $10,000 investment will generate $1,000 annually.
Ondo Finance Yields
Ondo Finance is revolutionizing the crypto yield industry. It is a major player in the Real World Tokenization (RWA) sector, with two funds: US Dollar Yield (USDY) and US Treasuries (OUSG), accumulating over $500 million in assets. These funds offer better alternatives than popular altcoins like Tether, USD Coin, and Dai by paying users for holding them.
USDY Fund
USDY, available for individuals and institutions, invests in bank deposits and short-term US Treasuries, distributing returns to investors. USDY’s yield is 5.7%, slightly higher than the 10-year bond yield of 5.35%. Its best use cases include cash management and yielding collateral.
OUSG Fund
OUSG is a tokenized asset providing access to short-term US Treasuries, primarily invested in the Blackrock USD Institutional Digital Liquidity Fund (BUIDL). However, OUSG has a minimum mint limit of $100k and a minimum redemption of $50k. It will start charging up to 0.35% in January next year and is only available to qualified investors.
Ethena’s Riskier Yield Approach
While Ondo Finance’s assets are backed by real assets, Ethena offers a riskier approach with its USDe stablecoin, which has grown into a $3.3 billion juggernaut. USDe offers a 7.4% yield, one of the highest in the crypto industry, with over 250k holders. However, its methods, involving staked asset consensus and complex derivatives trades, make it riskier. It also faces potential regulatory challenges, especially in the US and Europe.
Conclusion
The demand for yield has led to various investment options, from government bonds to high-yield cryptocurrencies. While USDY offers stability and decent returns, USDe presents higher risks. Investors should carefully consider their risk tolerance and investment goals when choosing between these options.