The tokens use sophisticated delta hedging market strategies to generate double-digit yields for investors.
Yield-Focused Stablecoins Debut on Avalanche
Defi platform Avant launched its yield-focused stablecoin pair AVUSD and SAVUSD on the Avalanche blockchain on Thursday. The tokens made their debut after a five-month whitelisting period where they generated a double-digit yield, according to a release provided to Bitcoin.com.
The launch is part of a growing trend of defi-native stablecoins that exclusively use crypto assets as collateral to limit reliance on traditional finance (tradfi) infrastructure. They tend to leverage advanced financial techniques such as delta-neutral or delta hedging strategies to generate oversized yields that attract savvy investors.
Each of Avant’s two tokens serves a slightly different purpose. AVUSD’s primary function is to act as a stable store of value. SAVUSD is the staked version of AVUSD that generates yield via delta hedging.
Ethena’s stablecoin USDE is a similar token that launched last year and is now the third largest stablecoin by market capitalization at nearly $6 billion. Avant is looking to enjoy similar success by implementing the same idea – using crypto-native assets and delta hedging to generate attractive yields.
“Both assets are fully backed, with funds held in strategies across different blockchains,” Avant CEO Rhett Shipp told Bitcoin.com. “We closely monitor markets and move funds into different strategies to maximize the on-chain yield we return to SAVUSD holders.”
Sophisticated stablecoin design has had disastrous consequences in the past. Algorithmic stablecoin TerraUSD skyrocketed to a $19 billion market capitalization in 2022 before imploding in one of the most notorious failures in the crypto industry.
“Our diversification requirements in addition to our insurance fund, the due diligence we perform on projects, and our Fireblocks setup which is overseen by Hyperliquid keeps funds as safe as possible,” Ship explained, when asked about risk management.
The current annual compounded yield for AVUSD is 24.04% according to Avant’s website.
