Where should you park your stablecoins?
A volatile market will push people to stable up. But where?
Most will seek a yield on their favorite stablecoin, but not all yields are created equal.
There is no yield without risk!
Time to look at the best protocols where you can farm yields with your stablecoins. Scroll down to start.
This newsletter is sponsored by IAESIR, the premier platform offering unmatched returns, transparency, and scalability for investors worldwide.
Create an account and let AI do the trading!
Considering the market is sending mixed signals and risks are increasing, it is wise to stable up and start building a nice bag of stablecoins such as USDT or USDC.
In February, I already spoke about how you should protect your money and manage risks in crypto. Today, I will guide you on how you should deploy those stablecoins while being mindful of risks.
Whenever a yield is involved, you need to assess risks and see if you’re comfortable with them. There is no yield without risks. Know them before you click deposit. Join our Patrons Pro group for more market alpha and ping me on discord in case of questions.
I start below with the risky protocols and end with the least risky. Pick your favorite!
Ethena - USDe
High risk, great APY.
This protocol offered over 10% APY on USDe for most of 2024, but has now dropped to around 5% in 2025 as the market turned somewhat bearish.
This APY is generated by farming the funding fees from shorting the market via delta neutral positions. In other words, traders that go short are paid by traders that go long.
The reasons Ethena is a high risk protocol are several:
You hold a synthetic dollar, not a stablecoin, in the form of USDe.
USDe is backed by volatile assets such as BTC, ETH, stETH.
A bear market can make the protocol lose money = USDe depeg.
The Bybit hack temporarily depegged USDe (more info here).
You have a cooldown of 7 days upon unstacking USDe.
Ethena involves a long chain with many stakeholders. A failure at any point can cause the chain to break (aka USDe).
Taken together, all the above will work against you as soon as something goes wrong, especially in a bear market. Since you need to stake your USDe, you won’t be able to do anything for 7 days even if USDe falls below $1.
While insiders exit, most users will be stuck for a week. The biggest risk here is a USDe depeg that can be caused by many factors, such as the Bybit hack. Luckily, there the CEO acted quickly and resorted solvency.
This protocol is a great place to park money during an uptrend in the overall market. The risks are the lowest then, but today, they have increased as the protocol will have a harder time making a profit if ETH and BTC continue to fall in price.
That is because USDe creates a yield by delta neutral strategies that only make a profit if the overall market is bullish, not bearish. A long bear market may lead to solvency problems for USDe if they start losing money on their strategy. The first red flag is the USDe market cap falling.
Hyperliquid - USDC
High to medium risk, great APY.
The Hyperliquid Vault (HLP) has consistently made a great return for its depositors. As you can see below, the APY on USDC was well over 50% in 2024 (annualized returns). This APY is generated by the trading activity on the platform (fees + liquidations).
However, in March 2025, HLP booked a loss of 3.6% after a $290 million ETH position had to be liquidated. The vault got drained of all its profits in the past 30 days which triggered a lot of withdrawals from its depositors.
The Hyperliquid vault has a different range of risks compared to Ethena and is somewhat less risky because it uses as a stablecoin USDC. USDC is fully backed by USD and not by volatile crypto assets. Therefore, the risks here are not related to the stablecoin used, but rather with the protocol mechanics:
The HLP vault is a counterparty to traders. If they are profitable, depositors into the vault lose money. The negative APY in March is explained by that.
On average, traders lose money over time, this is why the vault was consistently profitable, but this can also reverse at any time like in March.
Deposits into the vault have a 4 days lock time before you can withdraw.
The protocol itself is on a relatively new network which is quite centralized compared to Ethereum network.
The settings set by the team for the Hyperliquid exchange (like max leverage available, collateral needed, and positions size) can lead to situations like in March where some traders can drain the vault of its liquidity.
The negative APY in March could signal a top is in for HLP in terms of vault size and user trust. It’s the first time the vault booked such a big loss over a short time. This loss was socialized among all vault depositors. Everyone lost 3.6% in March.
No wonder, over 150 million USDC left the vault since this drop in APY.
If money keeps leaving the vault, the exchange may see less trading activity and less fees. Thus, reducing the performance of this decentralized exchange in the future. That also translates to a lower APY for any future USDC deposits into the vault.
AAVE - USDC / USDT / DAI
Low risk, good APY.
AAVE is the most secure place to park any of the major stablecoins to generate a steady APY. This varies from 3% to over 10% during peak market activity. The APY is dynamic and fluctuates daily. Below is the APY rate for USDC in the past year.
AAVE has many advantages in terms of risk. First, it uses only reputable stablecoins. Secondly, the fees are paid by borrowers which will be liquidated well in advance before the protocol solvency is at risk.
As the oldest protocol in this list, it is the most resilient to market stress and well optimized to face any risks. Plus, it is available on multiple networks, including Ethereum.
Nevertheless, there are still risks:
If for any reason a large borrower cannot be liquidated properly, lenders may suffer losses.
Any bugs or errors in their protocol smart contract can lead to losses or exploits.
AAVE relies on third-party oracles for price feeds which can be abused or fail, especially for less reputable assets.
The above risks are considered low and well mitigated against. Considering the size of AAVE, any impact would likely be minimal on any one individual and their assets. Plus, you can deposit and withdraw at any time.
A quick comparison to Ethena today shows that AAVE is much better positioned in terms of risks even if it provides a 3% APY on USDC vs 5% on USDe. In my opinion, Ethena is not worth the risks for 5% APY today. However, Ethena’s APY can go quite high if market improves while AAVE will rarely exceed 10%.
In this sense, Hyperliquid offers a nice middle point with a strong APY performance, but higher volatility which can also go negative on bad months as we’ve seen. If you don’t mind the volatility and your horizon is more than a month, Hyperliquid may be the winning bet.
BONUS - 6.5% APY on USDC!
There is one more protocol that I covered in Alpha Post #50 which is currently providing a fixed 6.5% APY on USDC that is closer to AAVE in terms of risks at twice the APY rate! Be sure to check it out, it’s one of the best rates on the market right now.
This newsletter is made possible with the generous support of our Patrons and partners. Upgrade your experience by becoming a Patron for lifetime access to our exclusive private alpha! Details are available on our Patrons page. All info is provided for educational purposes only and is not financial advice.