New rate environment — 14%

The Sweep interest rate has moved to 14%.

Interest rates in DeFi soared over the past three months. DeFi rates are driven by the demand to borrow USD to buy crypto with leverage. As crypto demand escalated, DeFi rates went up.

Rising demand in DeFi pulled money away from lower-rate treasury funds. It sucked money out of sDAI, MakerDAO’s pass through for treasury funds, which was an attractive instrument because it reserved $400M in redemption liquidity. Their reserve was drained. On March 10 they moved the DAI savings rate from 5% to 15%.

At Sweep, we were slow to implement our promise to bring the best of CeFi and DeFi rates, which reduced our sales. We have deployed new Stabilizers to harvest DeFi yield:

• MakerDAO’s DAI DSR is paying 15%, and up to 19% on Gnosis Chain. This is a good source of fast liquidity. We can harvest some subsidies as long as MakerDAO stabilizes this rate. We are deploying to Gnosis.
• Ethena on Mainnet. Ethena pays more than 14%, but is controversial. We are requiring 20% capital and managing the position.
• Yearn V2 on Optimism and Yearn V3 on Polygon. We are using traditional yield aggregators for their local expertise. If our allocation grows, we can get back their 20% fee with direct investment in underlying assets.
• Silo on Arbitrum. This has reliably delivered the yields they publish.
• Yield Yak on Avalanche. Another yield aggregator with local expertise

We don’t know how long we will continue to get high rates in DeFi. Perp funding rates have already fallen back to the 10% range. However, we can see that DeFi rates are disconnected from off-chain money market rates. Increasing activity (and risk) in crypto should keep them somewhat higher than off-chain rates.

Sweep will be attentive to our mission:

Earn

We maintain flexibility to find yield with fully collateralized margin lending on many blockchains, including new and boosted blockchains. We seek reliably provide yield over time by changing allocations as the business cycle changes. Sweep has the capacity to place savings with DeFi (dynamic and potentially high rates), treasury-style money market funds (very large capacity), and commercial lending (benefits the real economy). We have an open door for borrowers with the expertise to bring us new assets.

Stabilize

We stabilize the rate with weekly interest rate adjustments. Rates are paid by borrowers who provide capital to buffer losses. Sweep can re-allocate protect savers from sudden rate moves that are instigated by governance at MakerDAO and similar protocols.

Distribute

Higher rates allow us to make a bigger contribution to our AMM channels. Our current goal is to replace zero-interest dollars in AMM pools with interest-bearing dollars. We can now add an extra 14% for swappers, and 7% for LPs that are holding SWEEP as the dollar half of a pool.

We are looping back to the AMM partners and getting their advice on the following roadmap:

• SWEEP/USDx pools as routes. We have these now in 9 AMMs.
• SWEEP/SWEEPR and SWEEP/AMM-coin pools that earn rewards
• SWEEP/<high volume coin> pools. This is the big challenge. We will develop a strategy to boost a few high-volume pools and make them competitive for LPs.

We will also be distributing SWEEP through bridges to new platforms.