Original Title: The Missing Piece: Stables Liquidity on HyperEVM Original authors: @0xBroze, @felixprotocol members Original compilation: Little Deep

Editor's note: This article explores the opportunities for stablecoin yields on HyperEVM, noting that the lending protocol and DEX ecosystem has grown rapidly since the launch of its mainnet alpha, with TVL reaching hundreds of millions of dollars. Although stablecoins such as feUSD and USDT0 have attracted some liquidity, they are still unable to meet Hyperliquid's leverage needs, providing stablecoin lenders with 8-26% annualized yield opportunities, far exceeding the 3-5% of platforms such as Ethereum. By bridging USDe or USDT0 to HyperEVM, users can earn high yields through lending or liquidity provision, while paying attention to risks such as smart contract security and collateral quality.

The following is the original content (for ease of reading and understanding, the original content has been reorganized):

In this article, I will delve into the opportunities for stablecoin yield seekers on HyperEVM. I hope this article can provide more motivation for those looking to join Hyperliquid (HL) as stable yield pursuers. Traders on Hyperliquid are eager to use more leverage on their capital, and they are willing to pay you generous returns for that.

The "Cambrian Explosion" of HyperEVM DeFi

The HyperEVM mainnet Alpha version was launched on February 18, with only a few protocols ready for deployment in the initial phase. Three months later, the HyperEVM ecosystem has rapidly grown, including lending protocols (Felix, Hyperlend, Hypurrfi, Sentiment, Hyperstable, etc.), decentralized exchanges (DEXes, such as Laminar, HyperSwap, Kittenswap, Curve), and the total value locked (TVL) has reached hundreds of millions of dollars.

Users utilize the HyperEVM protocol as a source of passive income when high-risk trading is suspended, as well as a liquidity venue for assets such as HYPE, UBTC, UETH, and HYPE LSTs that cannot be used directly as collateral on HyperCore. With the expansion of the HyperEVM lending market, DEXes, and LSTs, we are witnessing the emergence of multiple new stablecoins, starting with CDP stablecoins such as feUSD for @felixprotocol and USDXL for @hypurrfi, followed by USDe for @ethena_labs and USDT0 in early May. These stablecoins provide the foundation for more sophisticated stablecoin-based leveraged products in the HyperEVM ecosystem.

HyperEVM's DeFi growth since its launch on February 18 - Defillama

Alpha Opportunities for Stable Returns and Hyperliquid Open Seekers

However, a challenge still exists: as of the time of writing this article, we have attracted approximately 50 million feUSD, 21.5 million USDT0, 12.5 million USDe, and 4 million USDXL, but the stablecoin liquidity on Hyperliquid is still insufficient to meet lending demands.

This imbalance provides an attractive opportunity for capital seeking returns, as it reflects genuine leverage demand rather than the artificially driven lending behavior commonly found in other ecosystems through incentives. On Hyperliquid, top traders holding substantial amounts of HYPE and other major spot assets directly utilize HyperEVM as a source of liquidity, engaging in profitable long and short operations on HyperCore. This results in lending yields continuously facing upward pressure, as stablecoin lending liquidity is almost immediately absorbed.

Even excluding incentives such as protocol credits or potential Hyperliquid Q3 rewards, stablecoin lenders have reaped significant returns – 8-12% annualized yield (APY) on Felix, 18-20% on Hypurrfi, and up to 10-20%+ on stablecoin/stablecoin liquidity offerings on DEXs like HyperSwap and Kittenswap. In contrast, established platforms on the Ethereum mainnet such as Aave offer a sustainable yield of only 3-5% for stablecoins like USDT.

However, this opportunity is not limited to users bringing stablecoins from mature ecosystems such as Ethereum, Optimism, and Arbitrum, but also includes traders on HyperCore. Those traders holding USDC on HyperCore missed another important incentive season and the real stable returns on HyperEVM stablecoins such as USDT0, USDe, feUSD, and USDXL.

For those seeking higher yield potential and direct exposure to Hyperliquid without wanting to fully bear the volatility and risks of HLP, HyperEVM's lending and stablecoin liquidity provision (LPing) presents an opportunity to create Alpha.

The change in the supply of USDT0 on HyperEVM since its launch - Purrsec

How to Price Stable Yield Opportunities on HyperEVM?

Despite other ecosystems attracting stablecoin liquidity through high-profile incentive programs, the Hyperliquid team has resisted this approach. This has led to some friction, as lenders are uncertain about the expected returns of borrowing or providing liquidity on HyperEVM, while other ecosystems with more explicit incentives may seem more attractive in comparison. However, it is important to remember that there is still over 38.888% of the HYPE supply yet to be distributed, which amounts to over $10 billion at current prices.

HYPE is one of the most productive assets in current DeFi, with the repurchase amount of the Hyperliquid Assistance Fund totaling approximately $230 million in just the past two months. At this rate, Hyperliquid is repurchasing nearly $1.4 billion of its supply each year. Clearly, the returns on this opportunity are highly attractive for large stablecoin lenders willing to enter this space.

Hyperliquid Assistance Fund - HYPE holdings nearly 900 million dollars - Hypurrscan

Overview of Risks to Evaluate Before Moving to HyperEVM

The main risk of stable returns on HyperEVM revolves around the security of smart contracts. Protocols that have not undergone public audits should be completely avoided. Even with audits, investors should carefully investigate operational security (OpSec) practices, review audit reports, and consult third parties, considering capital deployment as at least as important a decision as purchasing a refrigerator, just as Peter Lynch has suggested. For stablecoin liquidity providers (LPs), impermanent loss is minimal, and the risk focus shifts to counterparty risk and bad debt risk.

Assessing collateral quality, Tier 2 liquidity, and conservative risk parameters such as maximum loan-to-value ratio (LTV), liquidation thresholds, and interest rate mechanisms are critical to making risk-controlled lending decisions. If there is a need for more discussion about a specific risk factor, please feel free to contact us directly.

Step-by-Step Guide: Earning Stablecoin Rewards on HyperEVM

If you are a user holding a large amount of stablecoins and wish to bridge some of them to HyperEVM to capture this value, how should you proceed? Here are the specific steps:

Step 1: Convert the stablecoin you plan to bring into USDe or USDT0. USDe is attractive for those maximizing points, as Ethena is also incentivizing the use of HyperEVM. USDT0 is suitable for loyal Tether users and large USDT holders. If you need to exchange these assets, it is recommended to use aggregators like Llamaswap directly for the best rates and deepest liquidity.

Step 2: Access TheHyperliquidBridge provided by LayerZero, where you can directly bridge from Ethereum, Base, Optimism, Arbitrum, etc. Choose the option to bridge directly to HyperEVM instead of HyperCore.

Step 3: Once you own a stablecoin on HyperEVM, there are several opportunities to explore, which are outlined in some of the following sections. First of all, it is recommended to explore stablecoin/stablecoin liquidity provision (LP) opportunities on HyperSwap, KittenSwap, and Curve. These pools are usually incentivized by multiple parties and have an annualized yield in the range of 10-15%+. If you're not interested in providing liquidity or prefer to lend yields, you can access lending protocols like Sentiment, Felix Vanilla, Hyperlend, Hypurrfi, and others to offer stablecoins to borrowers. However, due to the current lack of liquidity in automated market makers (AMMs), these protocols currently offer the highest yields.

Bridge USDT directly from Ethereum to USDT0 on HyperEVM via LayerZero - TheHyperliquidBridge

May Alpha be with you on HyperEVM

I hope this article can ring the alarm for passive stablecoin lenders who may be unaware of the opportunities of HyperEVM, as the core team of Hyperliquid has not prominently advertised it through points and incentives. We will build the ultimate stablecoin liquidity ecosystem on Hyperliquid step by step.

HyperEVM Stable Yield Opportunities Comparison Table with Other Platforms

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