Are USDC Yield Funds The New TIPS?

How Modern Inflation-Protection Alternatives Can Complement Your Portfolio

by Alex Broudy, Technical & Financial Writer
Jun 17, 2022

This week, the Federal Reserve raised interest rates by 75bps, the biggest rate hike since 1994. This move follows May’s Consumer Price Index (CPI) report, which landed the United States at a 40-year high of 8.6% inflation. With near-record inflation persisting and monetary policy in flux, investors want more options. And rightly so. Fortunately, full-reserve stablecoin yield funds present a new way to combat inflation, and a modern alternative to Treasury Inflation-Protected Securities (TIPS).

"Digital asset havens such as our USDC Yield Fund are a great place to preserve capital while waiting for the inevitable buy opportunities to emerge, once the carnage is over."

— Adil Abdulali, Chief Investment Officer at Securitize Capital

Historically, TIPS have enabled investors to moderate inflation. Matured TIPS return investors’ principal adjusted for inflation in exchange for earning less yield than traditional treasuries. However, as 40-year inflation highs carry the cost of goods and services even higher than recent CPI estimates anticipated, the benefits of TIPS are getting tested, as well as the ultimate returns they offer. And this is where full-reserve stablecoin yield funds come into play.

Because U.S. Dollars are considered safe haven assets for investors around the globe, the demand for dollars and full-reserve stablecoins like USD Coin (USDC) remains strong. This strong demand can translate into yield-generating lending opportunities, and a new way to preserve capital during the present downturn.

With USD’s relative strength over other fiat currencies and USDC’s global popularity persisting, lending USDC has the potential to generate positive yield. While USDC is composed of short-term U.S. Treasuries and cash equivalents, there remain regulatory, market, and liquidity risks that do not make USDC yield funds as risk-free as TIPS. With that in mind, using modern USDC yield funds gives accredited and institutional investors the ability to save long-term and redeem USDC yield monthly, a striking alternative to traditional investments.

To learn more about digital assets and stablecoin yield funds, connect with Securitize Capital’s CIO, Adil Abdulali.

Check the background of Securitize Markets on Finra BrokerCheck.

Securities are offered through Securitize Markets, LLC, (“Securitize Markets”) a registered broker-dealer and member FINRA/SIPC. Neither Securitize Markets, nor any of its affiliates provide any investment advice or make any investment recommendations to any persons, ever, and no communication through herein or in any other medium should be construed as such. Securities offered on the Securitize Markets ATS have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Assets listed herein, such as digital assets or tokens using blockchain, are speculative, involve a high degree of risk, are generally illiquid, may have no value, have limited regulatory certainty, are subject to potential market manipulation risks and may expose investors to loss of principal. Investments in private placements, start-up investments in particular, are also speculative and involve a high degree of risk. Investors must be able to afford the loss of their entire investment. Eligibility to buy and sell securities on the Securitize Markets ATS is determined by Securitize Markets in its sole discretion. Offers to sell, or the solicitations of offers to buy any security can only be made through official offering documents that contain important information about risks, fees and expenses associated with the applicable securities available for trading on the Securitize Markets ATS. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed herein, and are encouraged to consult with a financial advisor, attorney, accountant, tax advisors, and any other professional that can help you to understand and assess the risks associated with any investment opportunity. Past performance is not indicative of future results. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided herein or through any references/links herein. Any financial projections or returns shown herein are provided by the issuer of the relevant security and Securitize Markets has not verified the accuracy. Further, there can be no assurance that any valuations provided by issuers are accurate or in agreement with market or industry valuations. Securitize Markets and its affiliates make no representations or warranties as to the accuracy of such information. Securitize Markets may collect certain information about you that helps us comply with various securities regulations and rules and the USA PATRIOT Act, a Federal law that requires all securities firms to obtain, verify, and record information that identifies each applicant. The information also helps us more fully understand your investment profile and identify what types of investments or strategies may be suitable for you. The term “Investors” used on this website, typically refers to accredited investors where applicable. Please note: if we cannot verify the information you provide, we may be required to restrict or deny your account. Trading during Extended Hours Trading Sessions carries unique risks, such as greater price volatility, lower liquidity, wider bid/ask spreads, and less market visibility, and may not be appropriate for all investors. There is no guarantee that a diversified portfolio will enhance overall returns, outperform a non-diversified portfolio, or prevent against loss. By accessing this site and any pages thereof, you agree to be bound by our Terms of Service and Privacy Policy.