Where to park your profits this cycle 🚗

Top 3 recommendations for stablecoin yields 💸

January 11, 2025

GM. This is Milk Road PRO – the newsletter that not only helps you build wealth, but preserve it too!

You ask, we answer. That’s what we do. 

We’ve been hearing from many of you about planning ahead—especially figuring out what to do with your profits once the bull cycle peaks. Smart thinking! 🥳

But deciding what to sell into can feel overwhelming.

Stablecoins? Great start. But which ones? And what if they just sit idle in your wallet, collecting dust? That’s old-school. 

It's 2025—stablecoins now offer an effortless 15-20% yield. So why miss out on this massive opportunity to grow your wealth?

Check out the chart below to see the yields our favorite stablecoins provide to its holders.

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Source: MilkRoadPRO/Dune

How do you feel about a 12.5% yield with manageable risk? Because it seems quite appealing to us!😍

Think of stablecoins as your employees. They should always be working for you—earning, growing, and hustling 24/7.

Not sure where to start? You’re in the right place. Today, we’re diving into our game plan for the post-bull cycle era. 

Here’s what we’re covering: 

• Why stablecoins are a must-have in your strategy 

• Which stablecoins we’re choosing and why 

• How to make them work harder with yield opportunities 

• Risks, rewards, and everything in between 

P.S. - We’re hosting a Monthly PRO Portfolio Update next week — scroll to the bottom for more info. 👀

Sound good? Let’s get into it!

A few months ago, we shared our bullish thesis on stablecoins (read it here), and now it seems the big names are starting to take notice too. 

Influential figures like Billionaire Chamath Palihapitiya or leaders from Y Combinator are beginning to pay attention and talking about huge opportunities here too.

Not familiar with them? Not a problem. 

What’s important is that these individuals are now vocal advocates for stablecoins. 

Alongside all the impressive tech advancements (we dive deeper in this report), it’s possible that someone also shared this chart with them. 

Plus the change in US politics also play a key role.😉 

[

Source: DefiLlama

The total circulation of stablecoins has recently exceeded an impressive $200 billion. 

Even more exciting, this growth shows no signs of slowing down.

Industry predictions, including our own, suggest that figure could reach $400 billion or even $500 billion by the end of the year.

But today, we’re not here to discuss our bullish outlook on stablecoins. Instead, we’ll focus on how stablecoins can play a tactical role in your portfolio when the market begins to overheat.

Here’s why stablecoins are a game-changer for your portfolio: 

• Stability you can count on: They hold a steady $1 value, even when the market gets wild. 

• Earning potential: You can rake in up to 20% yield in a bull market and maybe about 10% in a bear market. 

• Complete control: No paperwork, no banks—your funds, your rules. 

But with so many stablecoins out there, how do you choose the best fit?

While “best” depends on your goals, knowing all your options and understanding the backing strategy is critical if you’re planning to park a chunk of your assets in stablecoins. 

This is a step you can’t afford to overlook.

Got your attention? Perfect. Let us show you how to make the most of it—continuing to earn money, even when prices stay steady or go down!

Without further ado, let’s dive right in.

STABLECOINS ARE YOUR BEST FRIEND

The widespread adoption and growing popularity of stablecoins is evident from their recent market cap exceeding $200 billion. This achievement underscores the trust that users place in these digital assets, and their increasing use demonstrates that stablecoins provide reliability and peace of mind.

But not everyone fully understands stablecoins and their various types, so let’s start by breaking that down.

Which stablecoins exist today?

Stablecoins can generally be divided into two major categories:

1/ Centralized stablecoins ($USDT, $USDC) - 90% marketshare

These are managed by centralized institutions and backed by actual dollars held in reserve.

For example, if there is $40 billion worth of $USDC in circulation, Circle—the company behind $USDC—must maintain $40 billion in reserves, either in cash or cash equivalents. 

By cash equivalents, we mean assets like U.S. treasuries. But instead of holding $40 billion in cash, Circle might allocate a significant portion to U.S. treasuries, which yield around 4% annually. 

Doing the simple math, that's a $1.6 billion profit. Not too shabby.

That’s a solid business for Circle, which is why they’re planning to go public and launch an IPO this year. 

The downside? Stablecoin users don’t receive any of the yield generated. That sucks.😤

Some people aren't just concerned about missing out on yield—they also dislike centralized systems. 

What if Circle were shut down or pressured by regulators to freeze your assets? Fears like these have driven the rise of decentralized stablecoins.

2/ Decentralized stablecoins ($USDS, $USDe) - 10% market share

This category represents stablecoins managed by decentralized organizations, meaning no single entity has full control over them. 

These stablecoins are typically backed by tokenized assets, such as US treasuries (similar to $USDC) but also crypto assets like $BTC or $ETH.

While we’ve seen past attempts to create stablecoins using alternative mechanisms like algorithmic models, the market today is overwhelmingly dominated by fiat-backed stablecoins (supported by real dollars in a bank) and crypto-backed stablecoins (collateralized by assets like $BTC or $ETH), which together account for 99% of the market.

Simply put, stablecoins must be backed by collateral of equal or greater value, whether in fiat currency or cryptocurrency.😉

There is, however, an important distinction to note: while some stablecoins automatically generate yield, others do not.

• Non-yield bearings stablecoins

  Remember when we mentioned that Circle, the company behind $USDC, earns a 4% annual yield from US Treasury holdings? That yield benefits Circle—not the holders using their stablecoin. So $USDC (or $USDT, which works very similarly) are great examples here.

  They might be great for e-commerce payments, but when it comes to people chasing higher yields, they’re not exactly the star of the show. That's what brings us to the next category. 

• Yield-bearing stablecoins

  By simply holding these stablecoins, you can automatically earn a return. Some stablecoins offer yields tied to US Treasury rates (currently around 4%), while others boast returns as high as 10% or even 20%.

However, higher returns often come with higher risks. 

That’s why it’s important to carefully evaluate both the potential rewards and the risks of each yield-bearing stablecoin before deciding how to allocate your funds.

The appeal of yield-bearing stablecoins is clear. While you can find yield opportunities for non-yield-bearing stablecoins like $USDC in DeFi or CeFi, doing so can be time-consuming and often requires trusting third-party platforms to manage your deposits.

Yield-bearing stablecoins eliminate much of this hassle, providing a simple and convenient way to earn returns without the extra effort of searching for opportunities elsewhere.

So, it probably won’t shock you when we say we’re planning to stick with these—because why mess with a good thing? Talking about good things, we are going to share our best picks with you. 

STABLECOINS WE LOVE AND USE

We’re not into maximalism—let’s be honest, it rarely nails it. That’s why we focus on giving you just the right amount of options, so you can pick what works best for you. 

Here is what we’re going to do next:

• Analyze and compare the top three stablecoins that we selected. 

• Explore each stablecoin in greater depth. 

• Outline our strategy for utilizing each one effectively.

PS: No need to worry if you’re not familiar with them yet.

Below is a table showcasing our selected stablecoins along with a detailed comparison.

We’ve picked our top 3 stablecoins: $USDC, $USDS, and $USDe. Curious why they made the cut? Just give us a second as we’ll explore each of them in detail shortly. 

For now, check out our table—it breaks down how long they’ve been around, what backs them, integrated yield features, how they generate yield, and which chains they’re on. 

But here’s the kicker: the one thing not in the table is the most exciting part—expected yield. 

That’s what we’re all after, right? Yields can swing wildly—today it might hit 20%, but tomorrow? Who knows. 

The game-changer? With tokenized US treasuries being available on blockchains, you could enjoy access to US treasury yields 24/7. 

Analysts are expecting two rate cuts in 2025, which means the minimum yield for your stablecoins could still hover around 3.5%-3.75% this whole year. 

Remember, that’s the bottom line (If analysts are correct)! 

And what about 2026? The future’s a mystery for now. Nobody knows at this point. 

But hey, what if you could lock in a “fixed” yield instead? That would be dope. And luckily there is one solution we like, which we are going to introduce in a bit. 

For now, let’s kick things off by exploring these handpicked stablecoins!

1/ $USDC by Circle

$USDC, the second-largest centralized stablecoin, stands out for a reason. Managed by Circle—a company anticipated to go public next year—it benefits from a layer of regulatory oversight, keeping operational risks relatively low. 

By contrast, the largest stablecoin, $USDT, is managed by Tether, an Asia-based entity with limited financial transparency, raising concerns about its reliability.

Circle’s partnership with Coinbase further enhances $USDC’s reputation as one of the safest stablecoins on the market. Launched in 2018, it has been thoroughly battle-tested and remains a stable and accessible option for users.

Currently, approximately $44.3 billion worth of $USDC is in circulation.

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Source: Circle

Sure, $USDC is super safe (thanks, Uncle Sam!) and easy to access (it’s practically everywhere). But here’s the catch—it doesn’t come with built-in yield. 

Yep, no free money just for holding it.

The good news? 

Coinbase now offers $USDC holders the chance to earn yield on their holdings. 

Their retail customers can earn around 4.1% APY on $USDC in their Coinbase account, while users of Coinbase Wallet can earn up to 4.7% APY through $USDC Rewards. 

This program is available globally and is rolling out in the U.S.

You might have heard of higher yields being available elsewhere but you would need to roll up your sleeves, do some digging, and manage it yourself. 

Think of it like a treasure hunt—except the treasure is more $USDC! 

But not everyone is willing to take that approach, and while AI may eventually handle this ‘yield hunting’ for us, we’re not there yet. 

That said, if you prefer $USDC and are looking for some attractive yield, here’s what we recommend.

$USDC + Morpho Vaults = 15%+ APY 

To turn $USDC into a productive asset, you need to deposit it on the right platform. Enter Morpho, which transforms your boring $USDC into a profit-generating machine.🥳 

How does it work? 

Morpho is a yield optimizer powered by industry risk experts who act as curators, managing curated vaults to help grow your stablecoins. 

Each curator transparently shares their strategy, detailing the collateral assets they use, so you always know how your assets are managed. 

This gives you the ability to balance risk and reward based on your preferences.

By leveraging trusted platforms like Compound and Aave, Morpho ensures your investments are guided by informed decisions, empowering you to optimize your earnings with clarity and control.

Rather than locking your $USDC into a single protocol, this approach diversifies your funds across multiple lending platforms. 

The advantage? You gain access to some of the highest risk-adjusted yields available.

Pros: 

• Automated optimization for maximum returns. 

• Risk mitigated through diversification across platforms. 

• You don’t have to lift a finger once it's deposited.

• Available on all chains.

Cons: 

• Returns often depend on market conditions. 

• Requires some trust in Morpho's code (though it is audited).

• Relies on trusting the chosen risk operator to effectively monitor and manage risks.

Want to see your $USDC stretch its legs? Here is what you will see on Morpho app if you go on their websites and filter "$USDC" under the "earn" section.

[

Source: Morpho

You’ll come across multiple vaults with plenty of columns—don’t panic, we’ve got you covered! 

Here’s how to evaluate which vault you should deposit your stables into: 

Keep an eye on the total supply (aka TVL), who’s running the show (aka the curators), and the types of collateral allowed. 

Quick tip: the more types of collateral accepted, the spicier the risk. Proceed with caution! 🌶️ 

Make sure to check out the curators. Don’t recognize the names? Stick with trusted pros like MEV Capital, Steakhouse Financial, or Gauntlet. 

These risk management rockstars work with top organizations and DAOs across the space, so you’re in safe hands. 🤝 

Finally, let’s talk about yield. For each vault you can see the historical APY.

For example, the "Gauntlet $USDC Prime" vault is currently flexing an impressive 13.27%. 🎉 But don’t break out the champagne just yet—average rates for 2024 were around 9-10%.

[

Source: Morpho

But with 2025 projected to be a strong year for investors and rising crypto asset values, lending rates are also expected to increase. This could result in sustainable yields around 15-18%.🤩 

So how do you get into that?

Simply navigate to the "Earn" section on their app, select your preferred vault, and deposit your stablecoins.

Though keep in mind that while $USDC is available across multiple chains, Morpho is currently available on the Ethereum Mainnet and Base only.

Now, let’s shift our focus to decentralized competitors.

2/ $(s)USDS by Sky (expected 15% APY)

$USDS, a stablecoin issued by Sky, has roots dating back to 2018. 

If that sounds confusing—given $USDS officially launched in 2024—let us explain. 

The new $USDS is essentially a wrapper of the "old" DAI stablecoin, and therefore inherits DAI's established history and smart contracts, which have been running smoothly since 2018. 

(Hence why we reference 2018 as its origin).

$USDS is backed by a mix of fiat and crypto assets, but what sets it apart is its ability to generate yield.

By leveraging U.S. Treasuries, lending rates, and funding rates, $USDS offers one of the most competitive yields among stablecoins – currently 12.5%.

PS: Not sure what those applied strategies are and how they generate that yield? Learn more about Sky here.

[

Source: Info.Sky

Sky has spent the year diligently working to launch their stablecoin and introduce more yield-generating strategies to the ecosystem. 

For much of this time, their primary focus wasn’t on offering highly attractive yields. However, that has now changed—delivering competitive yields is their priority!

The best part? There's no need to transfer your funds elsewhere. 

Simply hold the staked version—or perhaps it's better described as the "savings version"—of the $USDS stablecoin, called $sUSDS.

We anticipate an average savings rate of approximately 15% this year, offering returns that are four times higher than those of U.S. Treasuries! 

We’re pretty confident you’ll leave your neighbors (and their traditional bank savings accounts) in the dust by a mile 🚀!

If you’re someone who loves passive solutions, $sUSDS might just be your best friend.  

So how does it work? 

You don’t need to overthink it; just stake your $USDS or buy $sUSDS (staked version) from the market, and yield starts flowing in automatically.

The value of $sUSDS grows over time as it generates yield.

For example, if you purchase 100 $sUSDS today at $1 each and it earns a15% yield over the course of a year, the price of a single $sUSDS will increase to $1.15.🤯

It’s as hands-off as it gets.

Pros: 

• Easiest way to earn yields without any manual effort. 

• Fully decentralized (no relying on single companies!). 

• Transparent, as rewards flow straight to your wallet.

• Deep liquidity.

• Available on Ethereum mainnet, Base, Solana.

Cons: 

• Yields might be slightly lower than more actively managed options like Morpho.

As investors in SKY, we strive to remain unbiased, but we can’t help but admire the exceptional product they’ve created.

Next question: How/where can you get it?

To earn yield, all you need to do is hold $sUSDS. 

If you're using a centralized exchange (CEX), your options may be limited by whether they offer the token or not. 

However, if you're familiar with buying tokens outside of CEXs through decentralized exchanges (DEXs) or aggregators like CowSwap, you can easily purchase $sUSDS there. 

For transactions on Mainnet or Base, simply use CowSwap. If you're on Solana, the process is slightly different. 

Yield is not automatically integrated unfortunately, so you'll need to first purchase $USDS and then deposit it into a protocol like Kamino to start earning. 

We understand how frustrating this experience can be.😤

Because of that we might suggest you consider bridging your stables to Base for a smoother process, allowing you to get that yield by simply holding $sUSDS.

You can use deBridge to bridge your assets.

All right, let’s move on to a similar stablecoin. While it’s still relatively new, it has been rapidly gaining traction and growing in demand.

3/ $(s)USDe by Ethena (expected 20% APY)

Meet $USDe, a promising new horse in the stablecoin race. 

Like $USDS, holding its staked version is all it takes to get started. Wondering how Ethena generates yield? Explore the details in this comprehensive report here.

In case you haven’t come across this chart before, it shows the $USDe supply. A growing supply indicates increased demand for this stablecoin.

[

Source: Ethena

It currently stands at $5.8 billion—impressive for a protocol that’s less than a year old. 

So, what’s the secret? Ethena has implemented a highly robust and innovative strategy that enables them to generate compelling yields, making it an attractive option in the market.

[

Source: Ethena

Although it may not be immediately obvious from the chart, Ethena has delivered an average yield of approximately 14% over the course of the year. Currently, the $sUSDe APY stands at 10%.

But looking ahead, we anticipate yields around 20%. Remarkable, no?

But there are both advantages and disadvantages to consider.

Pros: 

• Yield generation is fully automated—simply buy $sUSDe and enjoy peace of mind. 

• Managed by a decentralized DAO, ensuring no single entity holds control. 

• Regular fund attestations enhance transparency and trust.

Cons: 

• Still in its early stages, with less than a year of live operation. 

• The yield is very volatile.

• Currently limited to the Ethereum mainnet.

We believe Ethena and their stablecoin are exceptional innovations, which is why we’re proud to be investors in ENA. 

As we’ve often said, we love investing in products we genuinely admire—ones we use and trust ourselves.😎

P.S. Did you know that the Milk Road treasury uses $sUSDS and $sUSDe as its default currencies? 

Yep, our treasury manager is all smiles—who wouldn’t be with some extra yield and just the right sprinkle of risk?

But unfortunately $USDe is currently only available on the Ethereum mainnet. 

While it can also be found on Layer 2s and Solana, the lack of liquidity on these platforms often leads to significant slippage. 

For example, swapping 1000 $USDC might yield only $960 worth of $sUSDe—a 4% slippage, which is far from ideal.😢

That said, liquidity is likely to improve over time. However, it’s important to double-check the liquidity levels at the moment you plan to gain exposure.

These were our top three stablecoins, along with key insights about each. One common thread among them is the volatility of their yields. 

While $sUSDS offers a comparatively more stable yield—since adjustments require a governance vote—its savings rate can still change twice a month.

It’s tempting to predict double-digit yields for the entire year, but the reality is far from certain. 

Unexpected events, such as a black swan occurrence or worsening macroeconomic conditions, could easily drive yields down.

The solution? Opt for fixed yields—providing a stable and predictable return, regardless of market fluctuations.

Meet Pendle 

Now, if you really want to lock in some gains with stability, Pendle Finance has entered the chat. 

Pendle enables you to buy "fixed" yields on stablecoins upfront, giving you predictable returns rather than riding the highs and lows of variable APYs.

On Pendle, filtering for $sUSDe reveals three distinct pools, each with its own maturity date.

[

Source: Pendle

To discover the current fixed yield, refer to the Fixed APY column on the far right. There, you'll see for example an impressive fixed yield of 18.95% available for a duration of 139 days.

How does it work? 

Pendle splits yield-bearing assets into two parts—the principal and the yield tokens. 

You can buy these yield tokens at a discount or lock in fixed returns over time, freeing you from the constant question of "Is my yield going down?"

Pros: 

• Guaranteed fixed yields, no matter what. 

• Great for conservative investors who want stability.

Cons: 

• Fixed yields are (usually) lower than variable ones. 

• Requires initial familiarity with how yield tokens work.

It's good to know that option exists, even if we likely won’t use it ourselves. That said, it might appeal to others!

Let’s bring this to a close with some final reflections.

OUR STRATEGY

Taking all of the above into account, we’ve designed the chart below to clearly illustrate the options discussed.

Holding $USDC comes with minimal risk but offers zero yield. For those seeking yield, these are the options:

• $USDC held in your Coinbase account can earn around 4.1% while risks are still very minimal.

• $USDC held in your Coinbase wallet also earning around 4.7% but increases the risks since you have full custody of the funds.

• Morpho provides an attractive option, though it comes with significantly higher risks.

When comparing $sUSDe and $sUSDS, the risks are quite similar. However, $sUSDe is slightly riskier due to it being relatively new. 

It’s also worth noting that $sUSDS can hold up to 20% of its total supply in $sUSDe as a backing asset, creating a connection between the two tokens.

Interestingly, their yields are also quite comparable. $sUSDe may perform better during bull markets since its strategy benefits from traders leveraging their positions. 

Conversely, it might underperform against $sUSDS during bear markets. 

That said, this is not a hard-and-fast rule, but rather an observation of their underlying strategies and how they generate yields for users.

PS: An added incentive for $sUSDS holders is the upcoming SPK token rewards from Spark Protocol, which could enhance its appeal. Who doesn't like the additional yield without additional risks? 

👉 As we move toward taking profits later in the market cycle, our plan might involve allocating 70% into $sUSDS and 30% into $sUSDe. 

This balanced approach reflects our focus on sustainability over chasing the highest yield, as there will always be other high-yield opportunities.

Remember, if you don’t understand how a stablecoin generates its yield, avoid them. 

Many investors have fallen for Ponzi-like stablecoins offering unsustainable 20% returns, only to suffer costly losses once the scheme collapses. 

Always prioritize understanding over high promises.

That’s all for today. I hope this helps you prepare your mindset and shape your exit strategy. 

Remember, when the bull market ends, it’s not the end of the journey—it’s simply a shift in focus. 

You transition from building wealth to preserving it. And as you safeguard what you’ve earned, continue learning and preparing for the next bull run.

✍️ The market consistently rewards those who remain committed to investing, putting in the effort to avoid common pitfalls and resisting the temptation to chase overnight gains. 

Achieving 10x returns is possible—you simply need to stay focused, exercise patience, and play the long game, where your chances of success are significantly higher.

If there are any changes to our stablecoin strategy, we’ll be sure to update you. 

Otherwise, we’ll continue to follow the outlined approach. We hope you find inspiration in this strategy.

Wishing you the best of luck—take care!

AI-GENERATED PODCAST 🤖

We’ve turned this PRO report into an AI-generated podcast to make it even easier to digest. Head over to our website and give it a listen! 🎧️ 

You’ll find this episode, along with all our other AI-generated podcasts, waiting for you there.

Disclaimer: This podcast was created using AI and is based on the research report above. While we've done our best to ensure accuracy, the audio may contain minor errors, technical glitches, or mispronunciations. Please note that this podcast provides an overview of the report and is not a comprehensive or definitive take on the topic.

FRESH PRO PORTFOLIO UPDATE COMING UP 🥛 

We’re gearing up for another deep dive into the Milk Road PRO Portfolio, and we can’t wait to share the latest insights with you!

Kyle Reidhead, the Milk Man’s best friend, and m0xt, lead researcher, will be sitting down next Wednesday at 11 AM EST in our PRO Discord server for a live check-up on each token.

Wen? January 15th**.**

Where? In the Milk Road PRO Discord (meetup channel).

Here’s what we’ll cover:

• Current Prices 💸

• Latest top news for each protocol 📰

• Key Performance Indicators (KPI) for each protocol 📊

This is your chance to get the latest on the current state of each token we hold.

Not in the Milk Road PRO Discord yet? Join 2,300+ fellow members here & don’t miss out!

Note: Upon joining the Discord, you’ll be asked to fill out a form. Please, please pay attention to 2 things:

1/ Enter the exact email address you used to sign up to PRO with.

2/ Enter your exact Discord username (not your handle).

Do this with bomb-defusing precision—a single typo might lock you out! 😬

And heads up—this deep dive will be a regular event, happening on the second Wednesday of each month, so mark your calendar and keep the insights coming!

Join the PRO Discord Community Here

See you on the inside! 🥛

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