Passive income is a key part of any investment strategy. The idea of putting digital assets to work has seen a serious uptick in activity within the cryptocurrency industry, and there is now a multitude of companies that offer passive income opportunities.
USDC, or USD Coin, is one of the most popular stablecoins in the crypto market. As the name suggests, USDC is pegged 1:1 with the US dollar. Stablecoins like USDC have a central component for investors looking to diversify and earn passive income without worrying about the volatility of cryptocurrency markets.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific
provider, service or offering. It is not a recommendation to trade.
Earn yield on USDC
The easiest way to earn USDC is through an exchange or specialised lending platform. These services lend your USDC to borrowers and pay you with yield (APY) for doing so, similar to a high-interest savings account with a bank. Although keep in mind that cryptocurrency lending services do not provide the same guarantees as traditional banks, and are not subject to the same rules and regulations.
Use the table below to compare rates on USDC then forecast your earnings using the calculator provided.
How to use the table and calculator
- Compare rates. The table and calculator display the annual percentage yield (APY). Rates vary depending on a number of factors like the provider, term length and whether or not the rates are variable or fixed. Keep in mind that cryptocurrency yields fluctuate each day. For a more accurate overview, we've provided an average rate based on data from the past month.
- Choose a variable or fixed rate. To protect against fluctuations, some providers offer a fixed rate. These rates stay consistent over time and do not fluctuate with the market.
Compare lock-up periods. Some accounts require you to keep your funds locked up for a set period, while others will let you withdraw at any time. - Calculate your returns. Use the calculator to project how much you could earn with each provider.
- Start earning. Once you've made your choice, click on the green "Earn now" button to go to the provider's website and create an account or log in.
Earn yield on USDC through an exchange or lender
Earning yield on a centralised cryptocurrency exchange or lender is a relatively straightforward process, with most platforms requiring a similar set of steps. Once an account has been created with a chosen exchange, deposit USDC and select your preferred yield-earning product. This may involve locking USDC for a set period of time.
The upside of using a centralised exchange is that it becomes a one-stop shop for all cryptocurrency needs. For the larger exchanges, trading, staking, lending and borrowing can all be completed via a single platform. Here are a few exchange options to consider:
- Binance. Binance has become the world's most popular exchange, hosting one of the widest ranges of cryptocurrencies and platform features. For most cryptocurrencies, users have an option of several passive income products.
Use our in-depth Binance guide to create an account. Once logged in, click on the "Finance" tab followed by "Binance Earn". Search for USDC products to see the options that are available. Transfer USDC funds into a product to start earning yield.
- Crypto.com. Since launching in 2016, Crypto.com has developed into a leading cryptocurrency exchange that offers multiple yield-earning products. After creating a Crypto.com account, click on "Products" and "Crypto Earn" to see the rates of different products. Use our in-depth Crypto.com guide to start using the platform and begin earning yield on USDC holdings.
- KuCoin. KuCoin is a slightly smaller cryptocurrency exchange, but one that still offers several yield-earning products through its platform. The cryptocurrency exchange offers a slightly different yield-earning structure for most products. Users can choose whether to lend USDC holdings for 7, 14 or 28 days. The 28-day lock-in period usually offers the highest APY rates. However, rates on the platform are constantly fluctuating. Click on "Finance" and "Crypto Lending" to see the rates on offer. Use our in-depth KuCoin guide to start using their platform.
- Nexo. Managing one of the largest portfolios within the digital asset space, Nexo helps users to "unlock the power of their crypto". The feature-full platform offers users the opportunity to buy, earn, borrow, exchange, and buy goods and services using a crypto card. Yield-earning rates are higher when holding the native NEXO token. Use our in-depth Nexo guide to create your account and start earning yield.
As with all investment options, it is important to consider both the potential upsides and downsides. Here are some of the advantages and disadvantages of using a cryptocurrency exchange or lender to earn yield on USDC holdings.
Pros
- One-stop shop. Cryptocurrency exchanges offer many services on top of lending, such as trading, staking and borrowing. Investors can use the platforms for cryptocurrency services other than just earning yield.
- Competitive rates. There are many cryptocurrency exchanges on the market that offer yield-earning products for USDC. This means APY rates for exchanges are often very competitive.
Cons
- Not your keys, not your coins. When using centralised cryptocurrency exchanges, you do not remain the custodian of your funds. If there are issues with the platform, whether hacks or regulatory crackdowns, there is a risk of funds being lost, even if only temporarily. For those interested in self-custody, a DeFi lending protocol may be more suitable.
- Varying rates. As exemplified by KuCoin, cryptocurrency exchanges will offer both fixed and dynamic rates. Often rates change on a daily or weekly basis. This can mean you don't always know what APY you are earning. Accounts might need frequent monitoring.
Earn yield on USDC with DeFi
Decentralised Finance (DeFi) has become a popular sector within the cryptocurrency industry. DeFi applications offer users access to traditional financial services but users remain in control of funds at all times. DeFi applications are usually run by a decentralised network rather than a single entity.
Whether users stake, farm yield, lend or borrow, this unique marketplace has cemented its position within the cryptocurrency industry. On the majority of DeFi applications, a user can lend cryptocurrency funds to the application and become a liquidity provider. Those funds are then used by other investors. In return for lending funds, liquidity providers earn rewards.
Ethereum remains the dominant blockchain within the DeFi sector and is where the majority of DeFi applications exist. However, there are now several competing blockchains, including Binance Smart Chain and Solana, that are developing their own DeFi ecosystems. Although innovating quickly, the most popular DeFi applications still reside on the Ethereum blockchain. A few of these include:
- Aave. Aave is a decentralised lending and borrowing protocol that is automated by smart contracts. USDC APY fluctuates based on user demands.
- Compound Finance. Compound Finance is another decentralised lending and borrowing platform that focuses on compounding returns. All yield can be compounded automatically over time – increasing returns.
- Curve Finance. Curve Finance is a stablecoin-focused decentralised exchange. The platform utilises an automated market maker coupled with user-supplied liquidity to complete exchanges. By targeting stablecoin exchanges, the platform offers minimal slippage and exceptionally low transaction fees.
DeFi continues to be a very experimental ecosystem. As a result, using DeFi applications comes with its own set of risks including rug pulls, impermanent loss and faulty smart contracts. However, DeFi applications also allow users to remain in complete control of funds. There is no need to trust an independent third party. Control remains with the user.
Pros
- Stay in control of your funds. Using a DeFi application requires the use of a Web 3.0 digital wallet. The wallet acts as a bridge between cryptocurrency funds and a DeFi application. When connecting to a DeFi platform, a user always remains the custodian of their own funds.
- Yield farming. Although some platforms require users to lock up funds, there is the opportunity to divert funds into multiple DeFi protocols in search of the best yield – otherwise known as yield farming. There are DeFi aggregators that automate this process.
Cons
- High fees. Given most of DeFi is built on Ethereum, users may have to accommodate high gas fees when interacting with certain protocols. Gas fees will be correlated to the congestion experienced on the Ethereum blockchain.
- Experimental. DeFi is still a young sector of the cryptocurrency industry. Many applications are still within the experimental phase. The risks of malfunction are higher when utilising young applications.
- Impermanent loss. The risk of losing value in comparison to holding cryptocurrencies within a crypto wallet. Learn more about impermanent loss here.
How much yield can I earn with USDC?
Both CeFi and DeFi offer exciting opportunities for those looking to earn yield on their cryptocurrencies. It's important to note the pros and cons of each ecosystem in order to properly assess risks and rewards.
CeFi offers higher rates, but users must renounce custody of their funds and go through KYC processes. For those that are more privacy/anonymity oriented, DeFi gives control back to individual investors, but requires a wider appreciation of the risks involved.
Expected returns from lending USDC tokens will depend on the platform and application chosen. APY rates can range from 1%-2% all the way up to 14%-15%. As USDC remains pegged to the US dollar, unlike other cryptocurrencies, an investor does not have to worry about market volatility affecting USDC's value.
Verdict
The cryptocurrency industry is brimming with passive income opportunities. For those looking to earn yield on USDC holdings, there are many user-friendly and intuitive platforms that offer excellent yield-earning products.
An investor will need to make a decision as to whether a centralised cryptocurrency exchange, a lending service or a DeFi protocol is the right decision for them. All 3 offer unique advantages and disadvantages. Before committing funds, complete thorough research on the platform chosen and enjoy putting those idle USDC assets to work.
Pros
- Portfolio growth. By earning yield on idle USDC assets, an investor has the opportunity to further grow a cryptocurrency portfolio.
- Not correlated with the market. As USDC is a stablecoin, there is no risk of market movement when locking tokens into a platform.
Cons
- Counterparty risk. Many platforms lend out deposited funds to try and create a profit. However, this adds a counterparty risk to the process. Other users and organisations that utilise the funds might become insolvent.
- Experimental DeFi platforms. DeFi is still a young sector within the cryptocurrency industry. Many applications should still be treated as experimental. Investors should only place funds into DeFi after understanding all of the risks involved.
- Not your keys, not your coins. To utilise a centralised cryptocurrency exchange or lending platform, a user must relinquish control of cryptocurrency private keys. Trust must be placed in the service provider offering the investment product.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
