It is a rather simple and obvious question for anyone with a traditional finance background that apparently no one has asked thus far: Why stablecoins do not have a premium over fiat?
In the traditional financial world (all else being equal), higher real interest rates lead to the currency’s appreciation against its counterparts. For example, let’s assume at t=0, the exchange rate between the U.S. dollar and Swiss Franc is 1 to 1, and the real interest rates in both economies are 3%. A few months later, the Swiss Central Bank increases its main lending rate, and as a result, the real interest rate in Switzerland grows to 5%. We would expect the franc to appreciate against the dollar.
Currently, stablecoin holders can earn double-digit APYs on their deposits. For instance, Celsius is offering up to 16.54% on USDT deposits (the actual rates depend on the proportion of CEL tokens in one’s portfolio). And this is not an exception, other companies in the space as well as numerous DeFi projects have similar offerings. Meanwhile, fiat savings accounts and even money market accounts are offering interest rates of less than 1% or 20-30 times less. Shouldn’t stablecoins have a hefty premium over