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Stablecoins have been an essential part of the cryptosphere for more than a decade. Backed by collateral or algorithmic mechanisms and pegged to an established traditional finance asset, often the US dollar, they offer rate stability in the turbulent world of cryptocurrency. Traditional stablecoins, however, don’t generate yields. Their real value erodes over time due to inflation. Yield-bearing stablecoins have entered the market in recent years to combat this issue.
Yield-bearing stablecoins feature an operational mechanism that allows them to stay pegged to a traditional asset and generate returns on the principal amount. This enables crypto investors to enjoy low-risk returns on their investments.
The yield-bearing nature of these assets also opens up a way to optimize their returns via spread arbitrage, particularly the leveraged version.
In its most basic form, leveraged spread arbitrage allows you to profit from the difference in borrowing and earning interest rates. Bybit offers a great way to earn higher stablecoin yields using this technique. You can borrow funds at lower interest through the margin trading option in your account by using your USDT or USDC principal and invest the borrowed amounts for interest in USDe or USDtb, two yield-bearing stablecoins offered by one of the leading decentralized finance (DeFi) protocols, Ethena (ENA).
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