How to earn yield on USDC

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.

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.

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.

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.

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.

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Name	Product	Loans
Binance Savings		50% LTV ratio Borrow US$100 minimum ~10% APY	Buy 360+ cryptocurrencies, earn different returns depending on coin holdings and get up to 8% cashback when spending with a Binance card through this world-wide known exchange.	Go to site View details	Compare	loading Fetching your data...
Crypto.com App 2.8★★★★★(76)		50% LTV ratio Borrow US$250 minimum 8-12% APY	Buy 260+ cryptocurrencies, earn up to 14.5% p.a. on holdings, pay with your crypto for cashback at stores, get loans and more with this complete crypto-finance platform.	View details	Compare	loading Fetching your data...

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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.