Project yield on stablecoin holdings without the volatility of other crypto

Why stablecoin yield is different

Most crypto yield calculators have to wrestle with price volatility — you can earn 8% staking rewards but lose 40% on the underlying asset value. Stablecoins remove that variable. Because the peg is designed to stay near 1:1 with the underlying fiat currency, yield on stablecoins is roughly fiat-denominated — similar in behaviour to interest on a savings account, but typically paid by DeFi lending protocols or centralised exchanges rather than banks.

How the math works

Final balance = Principal × (1 + APY)^years for annual compounding, or Principal × (1 + APY/n)^(n × years) for more frequent compounding. Because stablecoins maintain a peg, the final number is roughly equivalent in fiat terms throughout — no volatility adjustment needed. This makes the math close to a standard high-yield savings calculation, which is the right mental model for planning purposes.

Where stablecoin yield comes from

Three main sources produce most stablecoin yield. Lending protocols (Aave, Compound, Morpho) earn interest from borrowers who post collateral. Centralised platforms pay interest funded by lending the deposited stablecoins to institutional clients. Delta-neutral strategies (like Ethena's USDe) earn funding rates from perpetual futures markets. Each source has different risk characteristics — lending yields are relatively straightforward but subject to smart-contract risk; centralised platforms add counterparty risk; delta-neutral strategies have complex risk profiles tied to derivatives markets.

The peg risk that makes stablecoins not-quite-fiat

A stablecoin at 1:1 peg functions like cash. A stablecoin at 0.92 functions like a 8% loss. De-peg events happen — USDT has traded at 0.95 during stress events, USDC dropped to 0.88 during the Silicon Valley Bank crisis, and multiple smaller stablecoins have broken their peg permanently. For yield calculations on held positions, small transient de-pegs usually reverse. For positions held through a major banking or protocol event, de-peg risk is a real tail scenario that the yield math ignores.

Yield levels to expect

Stablecoin yields move with broader fixed-income rates. When central-bank rates are 5%, stablecoin lending yields typically cluster around 4-8%. When rates are 0-1%, stablecoin yields are often 2-4%. The spread above short-term government-bond rates compensates for platform, smart-contract, and peg risks. High yields (12%+) on stablecoins usually signal elevated risk somewhere in the stack — new protocols, aggressive delta strategies, or platforms that cover shortfalls from token emissions.

How stablecoin yield compares to savings accounts

At current fiat-denominated rates, top high-yield savings accounts offer 4-5% fully insured. Top stablecoin lending yields offer 5-9% uninsured. The yield premium reflects the risk premium — smart-contract risk, counterparty risk, peg risk, and regulatory risk. Whether the premium is worth the risk depends on the specific protocol and the user's risk tolerance. For most households, the bulk of cash savings belongs in insured fiat accounts with small allocations to stablecoin yield as an experiment rather than a core strategy.