Original Title: The Missing Piece: Stables Liquidity on HyperEVM
Original Author: @0xBroze, @felixprotocol Member
Original Compiler: Rhythm Small 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% APY 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.

Here's the original text (edited for ease of reading):

In this article, I'll dive into the opportunities for stablecoin yield seekers on HyperEVM. Hopefully, this article will provide more motivation for those seeking stable income who are looking to join Hyperliquid (HL). Hyperliquid's traders are eager to use more leverage on their capital, and they're willing to pay you good returns for it.

The Cambrian Explosion

The HyperEVM mainnet alpha went live on February 18th, with only a handful of protocols ready to be deployed initially. Three months later, HyperEVM's ecosystem has grown rapidly, including lending protocols (Felix, Hyperlend, Hypurrfi, Sentiment, Hyperstable, etc.), decentralized exchanges (DEXes, such as Laminar, HyperSwap, Kittenswap, Curve), etc., with a total value locked (TVL) of 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 have witnessed the emergence of multiple new stablecoins, starting with CDP stablecoins such as @felixprotocol's feUSD and @hypurrfi's USDXL, followed by @ethena_labs's USDe and early May's USDT0. These stablecoins provide the foundation for more sophisticated stablecoin-based leveraged products in the HyperEVM ecosystem.

DeFi growth since HyperEVM's launch on February 18th - Alpha

Stable Income vs. Hyperliquid Exposure Seekers

However, one conundrum remains: as of this writing, we have attracted about 50 million feUSD, 21.5 million USDT0, 12.5 million USDe, and 4 million USDXL, but stablecoin liquidity on Hyperliquid is still insufficient to meet borrowing needs.

This imbalance presents an attractive opportunity for yield-seeking capital, as it reflects the real need for leverage, rather than the artificially driven borrowing and lending practices that are common in other ecosystems. On Hyperliquid, top traders with large holdings of HYPE and other major spot assets directly leverage HyperEVM as a source of liquidity to take profitable long and short positions on HyperCore. This has led to continued upward pressure on lending yields, as stablecoin lending liquidity is absorbed almost immediately.

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 brought to stablecoins from established ecosystems such as Ethereum, Optimism, Arbitrum, etc., but also traders on HyperCore. Those traders who hold USDC on HyperCore are missing out on another significant incentive season and real stable gains on HyperEVM stablecoins like USDT0, USDe, feUSD, USDXL, and more.

For those looking for higher yield potential and direct exposure to Hyperliquid – but don't want to fully take on the volatility and risk of HLP – HyperEVM's lending and stablecoin liquidity provision (LPing) is an opportunity to create alpha.

USDT0 Supply Change on HyperEVM Since Launch - How Does Purrsec

Price Stable Income Opportunities on HyperEVM?

While other ecosystems have attracted stablecoin liquidity through high-profile incentive programs, the Hyperliquid team has resisted this approach. This has led to some friction as lenders are unsure of the expected returns for borrowing or lending on HyperEVM or providing liquidity, which may be more attractive to other ecosystems with more explicit credits in comparison. However, it is important to keep in mind that there is still more than 38.888% of the HYPE supply to be distributed, more than $10 billion at current prices.

HYPE is one of the most productive assets in DeFi right now, with buybacks from the Hyperliquid Assistance Fund amounting to about $230 million in the last two months alone. At this rate, Hyperliquid buys back nearly $1.4 billion in its supply each year. Obviously, for large stablecoin lenders willing to step into the space, the rewards of this opportunity are extremely attractive.