Crypto has a reputation as a savings vehicle about as reliable as a chocolate teapot. The reputation is earned; so many crypto assets have gone to zero, excessive yields masking great risk have been peddled, and the platforms to buy and store crypto have gone bankrupt. Can crypto be used as a stable savings vehicle? The answer is yes, but you need to know what you are doing.
First, the problems. On the asset side, many crypto assets have gone to zero and almost none have gone to zero faster than stablecoins, coins that are supposed to maintain their value. The Luna/UST collapse is the most notorious example; the UST stablecoin collapsed from a $1 to basically zero in a matter of weeks, wiping out billions of dollars of savings. Algorithmic stablecoins like UST are backed by nothing but an algorithm.
On the yield side, many crypto platforms have peddled yields that were too good to be true and were. Celsius Network famously offered yields of 18%+ on stablecoins, which was not sustainable and the company went bankrupt. BlockFi also offered high yields and went bankrupt. These platforms were essentially borrowing crypto from retail customers and re-lending them to institutions, at rates that proved unsustainable.
On the platform side, the FTX bankruptcy is the most notable. FTX was one of the largest crypto exchanges in the world and it went bankrupt in November 2022, wiping out billions of dollars of customer assets. The assets are now being returned but it took over two years. Knowing the asset and the yield sustainability is not enough; you need to know the platform.
Despite these problems, there are two relatively new crypto products that have the potential to provide stable savings in crypto: stablecoins backed by US government securities and tokenized government bonds. Stablecoins backed by US government securities, like USDC, PYUSD, and USDT, have the advantage that the underlying asset, US government bills, is the safest asset in the world.
Tokenized government bonds are similar to stablecoins backed by government bonds, but they pass the yield on to the holder. Products like BUIDL and FOBXX, backed by US Treasuries, are the most well-known. But EM tokenized government bonds offered by Etherfuse—Cetes (Mexico), Tesouro (Brazil), and KTB (South Korea)—offer higher yields than US Treasuries.
Part 2 will focus on the framework to identify the most stable and highest yielding crypto savings vehicles and identify the ones that best meet those criteria.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
