In Part 1 of "Yes You Can Save in Crypto", we highlighted the difficulties in having stable crypto savings in the face of volatile crypto assets, excessive yields that are unsustainable, and platforms that go bankrupt. We also introduced products that might help savers: stablecoins and tokenized bonds.
This is Part 2, focusing on the framework for sustainable crypto savings vehicles. There are several criteria to assess the safety of crypto savings vehicles:
First, asset safety. The safest stablecoins are those backed by US government securities, like USDC, PYUSD, or USDT. These coins are backed by US government assets, so they can't go to zero unless the US government defaults. Decentralized stablecoins, backed only by crypto assets like USDC or Ethereum, are less safe because the backing assets can decline rapidly in value. Algorithmic stablecoins, backed by nothing except an algorithm, are the most risky as the Luna/UST collapse showed.
For tokenized bonds, the safest are those backed by government securities: US Treasuries (e.g. BUIDL and FOBXX), Mexican Cetes (e.g. Etherfuse Cetes), Brazilian Tesouro (e.g. Etherfuse Tesouro), and South Korean Treasury bonds (e.g. Etherfuse KTB). Corporate-backed tokenized bonds are less safe than government-backed tokenized bonds.
Second, platform safety. Even if the asset is safe, if the platform goes bankrupt the assets may be frozen for a very long time, as FTX investors know. The safest platforms are those that are the most regulated; in the US, FINRA-registered, SEC-regulated are the safest. Platforms that hold crypto assets that are separate from the operational funds of the company, which is most often done through a licensed custodian, are the safest.
Third, yield sustainability. The yield should be tied to the asset backing. USDC is backed by US Treasury bills, so its yield, when it generates one, will move with US Treasury bill yields. If the yield is above the underlying yield by a lot it is likely that the excess yield is coming from somewhere else. This somewhere else could be risky.
Applying these criteria leads to the following stable savings vehicles with the approximate yields: USDC 0%, Etherfuse Cetes (Mexico) 8.5%, Etherfuse Tesouro (Brazil) 13%, Etherfuse KTB (South Korea) 2.25%, BUIDL (US Treasuries) 4.2%, and FOBXX (US Treasuries) 4.2%.
Given these criteria, you CAN save in crypto. You can earn yields on your savings in crypto if you pick the right vehicle. The highest risk-adjusted returns are in the Etherfuse products, where yields are above US rates and the underlying bond is a government bond.
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.
