Trump-linked stablecoin USD1 hits 99% APR on Binance Chain
In March, Emirati state-owned investment firm MGX invested $2 billion in Binance via Donald Trump’s World Liberty Financial stablecoin USD1.
Now, Binance Chain is distributing USD1 and generously incentivizing its use at rates that reached 99% APR (as of 3:20 UTC, July 15).
Crypto yield farmers were quick to find ways to cash in on the sudden partnership, and have already unearthed an incredible and possibly irresponsible annual percentage return (APR) available to early users of the stablecoin.
By looping Binance Chain-based USD1 on Euler Finance against the world’s largest stablecoin, tether (USDT), yield farmers have earned 99% APR on the presidential stablecoin.
That number is not a typo. Nowhere close to the 4% APR available in savings accounts or the 10% variable average return of the S&P 500, USD1 has launched on a decentralized finance (DeFi) platform at an APR that would double a user’s money if that rate persists for 12 months.
Of course, the APR is currently subsidized by Binance and other protocol incentives, so it’s not guaranteed nor even likely to remain this elevated.
Still, the figure is high enough to be newsworthy even during this debut.
Loop USD1/USDT loans to goose up yields
Achieving the APR of 99% requires looping — using loan proceeds as collateral for additional loans. This common practice by DeFi yield farmers increases leverage by inflating their principal for yield payout calculations.
Euler Finance is one protocol among many that simplifies the multi-step process.
Read more: Trump-affiliated USD1 has $0 in excess reserves
Of course, leverage is tantamount to risk. The higher the leverage, the higher the likelihood of a forced liquidation by platform market-makers if prices fluctuate.
In addition to hair-trigger sensitivity to price fluctuations, users are also exposed to a host of third-party smart contracts as well as custodial and managerial risks by Euler Finance, Tether, World Liberty Financial, Binance Chain, and other Binance entities.
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