Yield Generation

Earn yield from collaterized XAUm on lending platforms by arbitraging stablecoin deposit/borrow rates across venues

1. What yields can users expect from arbitrage opportunities involving XAUm?

Yields depend on market conditions and strategy execution but typically range from 5% to 20% APR for stablecoin positions (3-15% on XAUm). Users employing sophisticated strategies can achieve higher returns, particularly in periods of bullish market sentiment.

1. What are potential strategies for generating returns with XAUm?

Users can use stablecoins borrowed against XAUm for arbitrage opportunities across CEXs and DEXs, as well as staking opportunities across DeFi protocols. Examples include:

• Interest Rate Differentials: Borrow at low rates on XAUm-backed loans and lend stablecoins at higher rates across CeFi or DeFi platforms.

  • Example: Borrow at 10-15% and deposit at OKX Flexi-Earn products (APR 30% as of Nov 29)

• Yield Farming and Liquidity Provision: Deploy stablecoins into DeFi protocols offering rewards for liquidity contributions.

  • Example: Provide USDT/USDC to farm sUSDe rewards at Ethena (APR 25% as of Nov 29)

• Stablecoin Arbitrage: Borrow stablecoins against XAUm and trade across exchanges where pricing inefficiencies exist, especially in volatile markets.

  • Example: Borrow USDT and sell at regional CEXes with peg variances ie Upbit.

Strategy Usecase

Examples of a yield opportunity on 18 Nov 2024:

XAUm	Borrow	Borrow APY	Deposit APY	Nett APY
$200,000	$120,000	7% (Kinza USDC)	16% (Aave USDC)	USDC Nett APY 9.0% XAUm Collateral Nett APY 5.4%
$200,000	$120,000	7% (Kinza USDC)	20-31% (OKX USDC)	USDC Nett APY 13.0-32.0% XAUm Collateral Nett APY 7.8-14.4%

As deposit/borrow rates fluctuate across different venues, yield opportunities arise. With the strategy of using the generated stablecoin yield to periodically buy additional XAUm, this provides an effective return in XAUm denomination.

Moving forward, Matrixdock will be launching tools to simplify the entire process, in areas of monitoring markets to spot yield opportunities or provide the convenience of bundling the actions into an automated execution flow.

Disclaimer: This article serves as an illustration of potential yield opportunities, and does not constitute as financial advice or recommendation of any actions. Users should exercise their own discretion when executing their positions, and are aware that lending market rates might be volatile.