As the cryptocurrency market gradually recovers from the winter of 2022, investors are rethinking how to generate more stable returns in this highly volatile asset class. With Bitcoin and Ethereum still below their historical peaks, stablecoin financial products are becoming the preferred tool for an increasing number of investors seeking passive income. Recently, crypto asset research firm BlockInsight launched a series of innovative stablecoin financial solutions, offering new options for investors looking for optimal yields at the intersection of centralized finance (CeFi) and decentralized finance (DeFi).
“The value proposition of stablecoin finance lies in combining the stability of traditional finance with the higher yield potential of cryptocurrencies,” BlockInsight noted in its latest research report. “Especially in the current environment of increasing macroeconomic uncertainty, investors desire returns higher than traditional bank deposits while avoiding the extreme volatility of the cryptocurrency market.”
Stablecoins are a category of cryptocurrencies that maintain a 1:1 peg with fiat currencies (usually the US dollar), primarily including USDC, USDT, and BUSD. In recent years, as the crypto industry has developed, the market capitalization of stablecoins has exceeded $150 billion, becoming an important bridge connecting traditional financial systems and the crypto ecosystem.
However, the cryptocurrency market crisis of 2022, particularly the collapse of the Terra/Luna stablecoin system and the bankruptcy of FTX exchange, exposed potential risks in stablecoin investments. These events raised investor concerns about the safety and sustainability of stablecoin finance, creating an opportunity for market participants to reassess risk management mechanisms.
“Last year’s market turbulence was an important cleansing process,” noted senior fintech analyst Robert Zhang. “It forced the industry to return to fundamentals and rethink how to provide competitive yields without sacrificing security.”
BlockInsight’s new generation of stablecoin financial solutions are designed specifically for this market need. Unlike traditional stablecoin products, BlockInsight employs a multi-layered risk management architecture and hybrid yield strategies, aiming to provide investors with more transparent, secure, and competitive rates of return.
“Our core philosophy is to rebuild investor confidence through diversifying risk sources and increasing transparency,” explained Sarah Johnson, BlockInsight’s product manager. “Each investment clearly informs users of the specific use of funds, associated risks, and expected returns, with no black-box operations.”
BlockInsight’s stablecoin product portfolio primarily includes three tiers:
First is the “Safety Tier,” mainly investing in highly liquid, low-risk yield sources such as leading exchange liquidity pools and collateralized loans. This tier offers annual yields between 3%-5%, primarily targeting risk-averse investors.
Second is the “Balanced Tier,” adopting a diversified strategy portfolio including cross-platform arbitrage, futures basis trading, and quality protocol staking, providing a target annual yield of 6%-8%, suitable for most investors seeking a balance of moderate risk and return.
Third is the “Enhanced Tier,” designed for investors with higher risk tolerance, combining liquidity mining in DeFi protocols, automated market maker (AMM) strategies, and regulated structured products, with a target annual yield of 9%-12%.
“The key innovation lies in our dynamic risk allocation system,” BlockInsight emphasizes. “This system adjusts the funding ratio of different strategies in real-time based on market conditions and risk indicators, automatically shifting toward safer asset classes when market volatility increases, while moderately increasing yield potential when markets stabilize.”
BlockInsight also places special emphasis on asset reserves and transparency. All participating stablecoins undergo rigorous risk assessment, the platform regularly issues third-party audit reports, and provides real-time proof of reserves, allowing users to check fund reserve status at any time. These measures directly address investor concerns about fund safety following last year’s FTX collapse.
“In crypto finance, trust must be established through transparency and verifiability,” blockchain governance expert Michelle Li stated. “By disclosing fund flows and risk exposures, BlockInsight is setting a new industry standard.”
Although stablecoin yields have declined from double-digit levels during the 2021 bull market to single digits currently, they still offer significant advantages compared to traditional bank savings. As of March 2023, the average annual interest rate for savings accounts at major US banks is only 0.23%, with even high-yield savings accounts rarely exceeding 4%.
BlockInsight’s market research has also found that the user base for stablecoin finance is expanding and diversifying. Beyond early crypto adopters, an increasing number of traditional financial investors, corporate finance departments, and emerging market users are incorporating stablecoins as part of their asset allocation.
“For users in emerging markets, stablecoins not only provide a tool against local currency devaluation but also create access to global financial services,” BlockInsight noted. “Particularly in countries with high inflation rates, stablecoin finance is becoming an important tool for wealth protection and income generation.”
However, BlockInsight also frankly acknowledges that stablecoin investments still face multiple risk factors. First is regulatory risk, as global attitudes and policy frameworks toward crypto assets continue to evolve. Second is technical risk, including the possibility of smart contract vulnerabilities and hacking attacks. Third is market risk, where extreme market conditions could lead to temporary depeg or liquidity contractions.
“There is no absolutely risk-free investment, and stablecoins are no exception,” BlockInsight cautions. “Investors should rationally allocate funds according to their risk tolerance and financial goals, avoiding excessive concentration in a single platform or product.”
As crypto financial infrastructure continues to mature and the regulatory environment gradually clarifies, BlockInsight expects stablecoin finance to further integrate into the mainstream financial system in the coming years. The institution is working with several traditional financial institutions to explore introducing stablecoin financial products to a broader retail and institutional investor base.
“What we’re seeing is a trend of gradual convergence,” crypto finance strategy analyst David Chen stated. “CeFi’s institutional-grade security standards and DeFi’s innovative yield mechanisms are borrowing from and merging with each other, creating a more balanced value proposition for users.”
BlockInsight plans to further expand its stablecoin financial ecosystem in the second half of 2023, including launching institutional-grade custody solutions, cross-chain yield optimization tools, and customized portfolio management services, providing more personalized stable income solutions for different types of investors.
“The future of stablecoin finance lies in providing users with flexible, transparent, and personalized yield paths,” BlockInsight concluded. “Throughout market cycles, stablecoins are becoming a value anchor and yield cornerstone for many investors, a trend likely to strengthen further in the coming years.”