We have just added a new interest feature to our service. You can now accumulate interest on your USDC –savings. The USDC interest account, launched in partnership with Tesseract, enables lower-risk participation in the crypto market. The low risk is possible due to a one-to-one peg between USDC and U.S. dollar exchange rates.
One USDC is the crypto equivalent of one U.S. dollar and Each USDC is backed by one dollar or an asset of comparable fair value, which is kept in accounts with US-regulated financial institutions by Coinbase. From this aspect investing in USDC is synonymous with a traditional fiat investment on the dollar. However, USDC investments have many advantages over traditional currency investments.
Significant interest returns without high volatility
Dollar-denominated bond yields in the current market environment are near zero or even negative. In contrast to the traditional currency markets, a unique disequilibrium between supply and demand exists in the cryptocurrency markets. The market demand for USDC comes mainly from hedge funds, cryptocurrency miners, and traders who use the asset to facilitate transactions and trading activities. The low supply is mainly explained by the inflows of the crypto market in general; most investors who are interested in the market are investing in more speculative assets such as Bitcoin and Ethereum. The pool of people who are aware of the cryptocurrency market, stablecoin yield opportunities, and have investable cash available is very limited. This disequilibrium between low USDC supply and high demand has created great yield opportunities for those with excess cash reserves.
USDC is globally accepted and recognized as the cryptocurrency equivalent of the U.S. dollar. This was showcased by, for example, Visa’s decision to settle USDC –denominated transactions on its own network. Grant Thornton has been auditing the USDC project for years and the entities behind USDC are the largest in the industry — Coinbase and Circle. The cryptocurrency industry has deepened its foothold considerably within the traditional institutions and wealth managers recently. For example, Fidelity, one of the largest asset managers in the world, submitted its registration of a Bitcoin ETF to the U.S. Securities and Exchange Commission just last month.
Interest account product is a co-operation with Tesseract Investment
The USDC interest rates products, built together with Tesseract Investment, will leverage the large amounts of cryptocurrencies that are held for savings. The interest is derived from lending out the pooled USDC savings to overcollateralized counterparties. In practice, Tesseract receives over 100 USD worth of collateral in other cryptocurrencies (such as BTC) when it lends out 100 USDC to e.g., a cryptocurrency mining business for equipment purchases. A typical borrower is a well-managed business that requires hard cash to expand its business. These thoroughly vetted counterparties and Tesseract’s automatic credit risk management system ensure a safe loan process from start to end.
The interest product, integrated into Coinmotion’s accounts, is made even more attractive by the recent declines in Bitcoin and Ethereum loan yields. The high rates on USDC deposits allow great investment opportunities without taking on the price risk of investing in assets such as Bitcoin. Henceforth, the money flows from USDC deposits are more predictable. The investments do not suffer from the high volatility inherent to other cryptocurrencies. The lower risk profile of USDC makes it a suitable investment even for low-risk portfolios with exceptional expected returns.
The Tesseract-Coinmotion partnership is highly synergetic where both firms benefit from each other’s respective strengths in finance, technology, and the cryptocurrency markets. Due to the agile and innovative partnership, Coinmotion is able to provide novel products like the USDC interest account to its clients.
How to get started with the USDC interest account on Coinmotion
Earning interest in Coinmotion is easy. All you need to do is buy USDC and deposit it to your interest account, which you can find under the “savings” tab. Deposit your USDC to the interest account and you are all set. At launch, the annual interest rate is 4.5% percent. The interest rate may change over time to reflect the demand for stablecoins.