On-chain secondary markets

Bitcoiners miss out on three key stable yield sources as their funds remain locked with custodians due to counterparty risk.

Funding Rate Arbitrage

During the bull market, funding rate arbitrage yielded as much as 20% in December 2024. The rise in open interest across centralized exchanges drove a surge in funding and basis trade yields, paving the way for innovative lending strategies on platforms like Morpho and Aave. However, only Bitcoin in the form of cbBTC or wBTC was able to capture these opportunities.

Stablecoin Rewards

Coinbase now offers a 4.7% yield to USDC holders, while Spark provides 6-12% for USDS lenders. Recently, the Aavethena strategy gained traction among sUSDe holders, capitalizing on rising USDC interest rates. As risk-curated lending vaults grow in popularity, more Bitcoin capital than ever is seeking stable yield opportunities.

ETH Consensus Rewards

With the rise of stETH, cbETH, rETH, and other staked ETH representations, these assets have often traded at a premium relative to the base asset and have been used as margin on centralized exchanges. During periods of market volatility, significant arbitrage opportunities emerge between Curve/Uniswap prices and those on centralized exchanges.