Investors can now earn a 6% annual yield on wrapped Bitcoin by depositing their cbBTC tokens on Umoja’s Base protocol, leveraging covered calls and arbitrage strategies.
Earning a 6% Yield on Wrapped BTC with Umoja’s Base Protocol
How It Works: Covered Calls and Arbitrage
Investors can now earn an annual yield of 6% by depositing their wrapped Bitcoin (cbBTC) tokens on the layer-2 network Base via Umoja. This is achieved through a combination of covered calls and arbitrage strategies, which involve buying an asset at one venue and simultaneously selling it for a higher price on another venue.
Umoja is a Swahili word that translates to 'unity' in English.
It represents the idea of oneness, harmony, and cooperation among individuals, groups, or nations.
In various cultures, 'Umoja' is celebrated as a symbol of strength, resilience, and collective progress.
The concept has been adopted by some organizations and communities as a guiding principle for achieving common goals and promoting social cohesion.
Umoja’s Yield Strategy
Umoja achieves its yield by deploying deposited capital on various trading strategies. These include purchasing put options and selling premium as the price drops. By leveraging this strategy, investors can earn a 6% annual yield without directly holding Bitcoin. It is essential to note that cbBTC is a wrapped token backed 1:1 by bitcoin held at Coinbase.
Supporting Yields Vault Tokens (YVTs)
The Umoja protocol supports a range of Yield Vault Tokens (YVTs) collateralized by cryptocurrencies, including real-world asset tokens. One such YVT is yBTC, which is minted once users deposit cbBTC on the protocol. This allows investors to earn yields while diversifying their portfolio.
DeFi Strategies and Bitcoin Maximalism
The use of DeFi strategies for earning yields on Bitcoin has been a contentious topic among bitcoin maximalists, who are generally opposed to the DeFi sector and Cryptocurrency“>altcoins[/highlight]. However, as Bitcoin’s price continues to fluctuate, investor demand for achieving yields to mitigate against spot value losses is likely to increase.
Bitcoin maximalists are a group of individuals who believe in the superiority and potential of Bitcoin as a digital currency.
They advocate for its use as a store of value, medium of exchange, and unit of account, often dismissing other cryptocurrencies as inferior alternatives.
Proponents of this ideology argue that Bitcoin's decentralized nature, limited supply, and secure protocol make it an attractive option for those seeking financial freedom and autonomy.
Recent Developments: Metaplanet’s Yield Strategy
A Japanese firm, Metaplanet, has recently started earning a yield on Bitcoin by purchasing spot assets and simultaneously buying put options. They then sell the premium on these put options as the price slumps. This strategy demonstrates how investors can earn yields on Bitcoin without directly holding it.
Increased Demand for Yield Strategies
As Bitcoin’s price continues to drop from above $100K to its current level of $74.8K, investor demand for achieving yields to mitigate against spot value losses is expected to increase. Umoja’s Base protocol offers a viable solution for investors looking to earn a 6% annual yield on their wrapped BTC holdings.
- coindesk.com | Wrapped BTC Holders Can Now Secure 6% APY on Base via Umoja
