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DeFi Yields Flip TradFi

With all the attention on the fun stuff (ETFs! SOL and AVAX rallies! ATH in OP and ARB!), one meaningful shift in the market has flown slightly under the radar: DeFi yields have flipped TradFi yields.

For most of 2023, USDC on Aave yielded between 2.5 and 4%. This was below the yield on short-term US T-bills, which ranged between 5 and 5.5%. The unfortunate arbitrage here was to take dollars out of DeFi and move them back into TradFi brokerage accounts.

And this is exactly what we saw in 2023. During 2023, the market cap of stablecoins dropped from 137b to 130b, despite the rally in crypto, despite new use-cases for stablecoins, and despite new entrants into the space, including PayPal, a major US payments...