Even if you’ve been living under a rock, you probably still heard about the recent collapses/seizures of Silvergate, Signature, and Silicon Valley Banks. Unironically, these banks were all crypto-friendly. Many crypto firms did business with and had deposits in these banks. One of those firms was Circle – the co-creator, owner, and operator of $USDC – a stablecoin pegged to one dollar or a dollar-denominated asset held in accounts at regulated U.S. financial institutions.
When it became clear that Silicon Valley Bank was insolvent, this led to a bank run which led to the FDIC shutting down and taking over the bank. Part of the shutdown meant that for a time, anyone with assets in the bank was unable to withdraw them. Then it was revealed that Circle had $3.3B of its $USDC reserves in Silicon Valley Bank. That meant a portion of $USDC’s backing was technically nonexistent during the withdrawal freeze, which led to $USDC losing its peg to the dollar.
Stablecoins are experiencing risk due to current economic conditions. However, sometimes a slight change of approach can make all the difference in a strategy. Delta Prime DeFi recently opened up a new lending/borrowing pool with $USDT. To be honest, there aren’t many differences between the two coins, but the biggest difference is the market cap. At the time of writing, $USDT has a market cap of $73.1B versus $USDC’s market cap of $38.3B. Due to this larger market cap, if $USDT had the same $3.3B of reserves in a bank that collapsed, it would only represent a loss of 4.5% as opposed to 8.6% with $USDC. It’s possible that in this scenario, $USDT might not even lose its peg, and if it did it would be easier to regain with a little funding from an outside source or a government bailout (although definitely not ideal).
The Delta Prime Pool
The $USDT pool is pretty simple to set up. Just go to the protocol, click on “Depositor,” then click the + symbol to the right of the $USDT logo. You’ll have to approve a few MetaMask transactions to approve the USDT through the dApp, but that’s about it. Basically, borrowers of the coin pay interest which is auto-compounded back into your supplied tokens. At the time of this article, the $USDT pool is sitting at 7.28% APY which is pretty darn good. DeltaPrime also allows for one-click, single-sided deposits of other assets including $Avax, $USDC, $BTC, and $ETH.
The other cool feature of DeltaPrime is its Prime Account. This account allows users to deposit collateral and then borrow up to 4.5x that amount which can then be invested in several integrated protocols including Pangolin, YieldYak, Trader Joe, VectorFi, and GMX.
The last week or so has been insane. So many things happened all at once. There will be a lot of finger-pointing from various agencies and there could be more fallout in the near future. But one thing is clear; people need and want decentralized assets that don’t require banks. People want to be their own banks. The people have the power and we tell our elected officials what we want, not the other way around. We want decentralized systems that actually benefit the people, not the politicians and the bourgeoisie.
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