This document is updated each month and provides information and a comparison of Coinchange yield against different comparable indexes. We selected the components within the indexes to be direct, indirect or closely related to yield generation (DeFi and CeFi) and interest generation while maintaining strict requirements on funds availability, little to no minimum investments and high liquidity for USDC, USDT, DAI.
We also provide a historical comparison of the rate across the indexes to provide some perspective on performance over time.
For the month of November, Coinchange has a higher average rate than the minimal and low risk indexes except for the 10 year treasury rate non-adjusted for inflation which is two tenth of a percent higher than Coinchange and has barely decreased since last month. Coinchange remain higher than the CeDeFi index while not having any lockups, minimum investments requirements and being fully liquid. DeFi lending index has gained two tenth of percent from October while the DeFi Minimum Risk Rate has increased due to USDT on AAVE recording high lending interest. The DeFi yield index has picked up from last month due to the increased volume and volatility caused by FTX/Alameda contagion in the market.
We also saw the ripple effect that FTX had on the centralized lenders and hedge funds with bankruptcy filings one after the other throughout the month. We have one blog covering the FTX/Alameda early debacle and one explaining the difference between CeFi lending and DeFi lending. This led our CeFi Yield index to lose some of its components, mainly BlockFi and Circle Yield. The remaining CeFi yield index components increase the average rate of 1.06% from last month.
The chart below provides a snapshot of the rate across indexes and standalone rate for the month of November. We then describe the component within each index and standalone rate via a legend. The methodology to calculate the rate is the monthly average over the time period (Nov 1-30) for USDC, USDT and DAI. The exceptions are the DeFi Minimal Risk Rate (DMRR) which uses a 30 day average TVL weighted 30 day average stablecoin lending rate, and Coinchange which uses a weighted average rate (explained dedicated section).
We organize the indexes into 3 categories of risk.
Comment on the index:
AAVE rates for July, August, September and October have changed by a few tenth of percent due to rounding errors in average calculations.
Below is the historical performance of the indexes mentioned above since January.
Comment on the index:
AAVE and Venus rates for July, August, September and October have changed by a few tenth of percent due to rounding errors in average calculations.
Below is the historical performance of the indexes mentioned above since January.
Comment on the index:
Yearn, Yield Yak and Autofarm rates for July, August, September and October have changed by a few tenth of percent due to rounding errors in average calculations.
Comment on the index:
Blockfi and Circle Yield have been removed from the index since the former filed for bankruptcy in November and Circle Yield stopped accepting new loans at the end of November. Starting in December, Maple Finance rate will not take Orthogonal lending pool rate into account as Maple stopped working with them due to a severe default and breach or agreement during November. TrueFi has seen 2 defaults on its BUSD pool late October and beginning of November.
Below is the historical performance of the indexes mentioned above since January.
DeFi related indexes (DeFi MRR, DeFi lending, DeFi Yield) had their rates decrease in April, continued in May with the Terra/Luna meltdown and then stabilized in July. DeFi Yield index, on the medium to high risk end, started its decrease in January due to the overall deleveraging in the markets (except for Terra related strategies) and continued to decrease until October, while it had a short lived uptick in July.
Regarding CeFi related indexes (CeDeFi Yield, CeFi yield, Coinchange) they followed the same pattern in general as the DeFi yield index except for Coinchange which saw its rate increase up until March. CeFi yield index rate started to stabilize in June and picked up in August. On the other hand, CeDeFi and Coinchange stabilized their rate in July/August.
Coinchange saw its rate increase 4 times in September and sustained this rate up until November. This was the effect of the new non-correlated strategy that was launched in September. During the month of November, the strategy’s algorithm determined that with current market conditions it should be rebalanced and thus led to the decrease recorded. We further explore our strategies diversification and allocation across protocol types in our Asset Allocation Report - October and Asset Allocation Report - November.
CeFi Yield index remains close to its rate from August, either showing continued borrowing appetite by hedge funds and traders or unsustainable rates that can soon turn into defaults (i.e TrueFi and Maple borrower defaults).
CeDeFi yield index barely makes it above the DeFi Minimum Risk Rate and the DeFi lending index rate. All three are recording a slow but steady increase in the rates since September due to borrowing activity slowly increasing again.
The chart below represents the comparison of historical rates across indexes since January 2022 and aims to provide some perspective on performance over time. For full historical performance of Coinchange Earn Account check here.
A benchmark is a standard against which something is compared. In finance, investors use benchmarks to measure the performance of securities, mutual funds, exchange-traded funds, portfolios, or other investment instruments.
Generally, broad market and market-segment stock and bond indexes are used for this purpose. If there is an investment instrument, there is a benchmark to compare it to, otherwise comparison across investment products alone does not provide the full picture.
In crypto, benchmarks do exist as well. The most common are the top 10 or 15 cryptocurrency indexes by market capitalization. DeFi benchmarks exist as well in the form of indexes, most of the time tracking the market capitalization of top DeFi governance token, which can be found for DeFi sub-segments such as DeFi yield, Oracle, GameFi, NFT marketplace, etc.
The benchmark we are seeking here, is one that could serve the same purpose as the “risk-free rate” that exists in traditional finance. In theory, the risk-free rate is the minimum return an investor expects for any investment while not accepting additional risk unless the potential rate of return is greater than the risk-free rate. Determination of a proxy for the risk-free rate of return will depend mainly on the credibility, liquidity size of the product, and availability. In practice, although a completely risk-free rate does not exist, the interest rate on a 10 year U.S. bond is often used as the benchmark for most investors while foreign investors might need to factor in the currency risk.
In DeFi we can’t name such a benchmark “risk-free rate” since the technology it is built on is rather new and hence does not carry the same credibility as US T-Bill. Hence using “DeFi minimal risk rate” is more suited. Like in the TradFi market, DeFi has large investors seeking low risk returns in non-derivative markets which have high levels of liquidity with full redemption intraday. Protocols that fit the requirement are lending and borrowing protocols as per Credmark research. We should only take into consideration the rate of return of stable assets as the risk-free rate in TradFi is denominated in dollars.
Hence the minimal risk rate in DeFi could be determined by taking the TVL weighted average rate for USDC, USDT and DAI - as they are the most stable with highest liquidity - on AAVE and Compound - as they are the most secure and longest standing protocols in DeFi with highest Total Value Locked (TVL).
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