Aug 14, 2025
Arrakis Alpha
Key Takeaways
Yield-bearing stables have grown into a $13.89B market, paying ~$750M in cumulative yield, but adoption also raises systemic risk.
In stress scenarios, yield matters little if holders can’t redeem quickly into dollars.
Buffers help, but aren’t enough: Even with direct redemptions or instant withdrawal lines, thin DEX liquidity can still create slippage.
Among yield-bearing stables, dollar-side liquidity depth defines resilience under stress.
Exit strength today ranks: syrupUSDC > sUSDe > sUSDS > USDY, reflecting the availability of consistent, usable, dollar-side liquidity.
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Data powered by StableWatch.
This week’s Arrakis Alpha focuses on how the four largest yield-bearing stablecoins behave when the market turns against them. We look beyond yield numbers to see how quickly, and at what cost, holders can actually redeem.
Yield is appealing, but the ability to convert back into dollars without severe slippage is what makes a stablecoin truly functional as collateral within DeFi.
The Rise of Yield-Bearing Stables
Over the past 18 months, yield-bearing stablecoins have grown from niche products into $13.89B in Market Cap. The appeal is clear: stable USD exposure with yield. This yield component gives room to DeFi composability plays like yield trading on Pendle, farming yield arbitrage on Morpho and Aave, etc.
Historical supply of the assets (USD). Source: StableWatch
To date, yield-bearing assets have paid $750M in cumulative yield. Out of this, the big four - sUSDe, sUSDS, syrupUSDC and USDY have the lions share.
Weekly yield paid out by the assets. Source: StableWatch
But as adoption rises, so does systemic exposure. In stressed markets, yield means little if the asset can’t be quickly converted back to dollars without major losses.
Why Exit Liquidity Matters
In times of stress, whether caused by huge leverage unwinds or broader liquidity shocks, stables face a race for exits. When liquidity depth is thin, prices can break from the peg, setting off a chain reaction:
Liquidations at poor execution prices
Collateral haircuts or freezes
Delistings from major lending markets like Morpho, Aave, Euler and Moonwell
Market panic that cascades into a bank-run scenario
A stable with instant, reliable redemption channels and deep DEX liquidity can absorb shocks far better than one dependent on slow withdrawal queues.
Stablecoin Profiles
sUSDe by Ethena
Backed by synthetic delta neutral positions of spot long ETH or stETH, and short perp ETH, sUSDe generates around 8-12% through staking rewards and funding rates from perp positions.
Liquidity: $103M on Fluid ($61.5M USDT side), $92M on Curve (mostly paired with other exotic stables), $1.7M on Uniswap.
Redemption: 7-day cooldown for direct withdrawals (KYC required); instant via secondary DEX markets.
Risk Lens: Large pool on Fluid supports stability, but synthetic peg and redemption delay could amplify stress during sharp downturns.
Listed as collateral on Morpho, Fluid, Aave v3 and on Pendle.
sUSDS by Sky
An RWA-backed stable earning around 5% from short-term US T-Bills and cash-equivalent assets.
Liquidity: $50.8M reserve pool on Curve paired with USDT ($9.2M on USDT side) plus smaller markets with other exotic stables.
Redemption: Instant protocol conversion from sUSDS to USDS; no cooldown or fees.
Risk Lens: Direct redemptions support peg stability, yet limited market depth can mean slippage for large swaps.
syrupUSDC by Maple
Yielding around 8–9% through private credit to vetted institutional borrowers, supplemented with Maple incentives.
Liquidity: $20M managed on Uniswap v4 with Arrakis Pro (with $16M USDC within -0.35% deviation), $28M on Orca ($14M USDC), plus a $200M instant withdrawal buffer for vault redemptions.
Redemption: Near-instant (under five minutes) if buffer is available.
Risk Lens: Combines tight-range, multi-chain liquidity with rapid withdrawals, but introduces offchain credit exposure.
Listed on Morpho, Kamino, Euler and has active markets on Pendle.
USDY by Ondo
Holds short-term US Treasuries and bank deposits, offering up to 5% APY.
Liquidity: $6.2M on Orca single sided in USDC, $6M on Camelot single sided in USDC, $2M on Osmosis.
Redemption: Queue-based for whitelisted (non-US based) users, thin secondary markets.
Risk Lens: Strongest reserves of the group, but onchain liquidity is shallow and fragmented, limiting its usefulness as a composable DeFi collateral.
Very sparse utilization as a collateral asset within DeFi due to thin DEX liquidity.
Comparative Takeaways
SyrupUSDC: Most robust exit profile, deep liquidity, multiple chains, and a large instant withdrawal buffer, however offchain credit risk is a tradeoff.
sUSDe: Attractive yields and deep Fluid pool, but synthetic peg and redemption cooldowns on the vault could be a weak link during depeg events.
sUSDS: Decentralized RWA exposure with immediate protocol redemptions, yet thin secondary market depth causes higher price impact on large trades.
USDY: Highest-quality reserve backing but least composable in DeFi due to minimal onchain depth.
Liquidity Depth vs Reserve Robustness for the assets.
When stress hits, speed of redemption and dollar-side liquidity matter more than advertised yields. For stables, exit friction is often the difference between maintaining parity and spiraling into a depeg.
