Recently, Coinbase announced that it too will get into the APY game by offering USDC holders a 4% yield. Many are sleeping on this news because that's half the 7-10% you can earn by depositing your stablecoins on other platforms like BlockFi, Gemini, or Celsius (and 4% won't even beat inflation). But they're wrong and you should sign up to join their waiting list. Here's why:
First, while not FDIC insured (so there is extra risk vs. a bank account), Coinbase guarantees your principal, something no other platform does. So if Gemini lends out your coins to a hedge fund that vanishes, Gemini is under no obligation to pay it back to you. Coinbase, on the other hand, promises to make things right (so long as they're solvent). To me, losing a few percentage points a year is worth protection from catastrophic loss, no matter how remote the possibility.
Second, stablecoins are yielding less than 4% across major DeFi platforms now, so Coinbase is ahead of Aave and Compound (at the time of writing). If industry rates rise again, perhaps Coinbase will raise its own rates too; nothing is ever static with crypto yields.
Third, from their early marketing, there doesn't appear to be withdrawal or lock-up restrictions. On Gemini, once you begin earning interest, you have to wait a week to withdraw. The freedom to withdraw at any time in order to seize upon a great buying opportunity is worth a little less yield.
And lastly, remember that you don't have to put all your eggs in the Coinbase basket! If you put 50% in BlockFi earning 8% APY and 50% in Coinbase earning 4%, that's a blended return of 6% with much less risk attached. That, my friends, is the power play.
Sadly, I can't join the yield party with you; New Yorkers (and Hawaiians) are blocked.
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