Crypto credit markets are increasingly resembling traditional cash-management infrastructure, with deeper liquidity dampening volatility even as demand continues to set records, according to market maker Flowdesk.
In its 2025 crypto credit report, Flowdesk said the decline in easy yield reflects a structural shift rather than a cyclical downturn. Returns across staking, stablecoin lending, and bitcoin-backed credit have compressed not because activity has slowed, but because liquidity has expanded and arbitrage opportunities have narrowed.
Participation has risen across onchain money markets, derivatives funding, and futures basis trades, Flowdesk noted. The broader pool of capital has reduced volatility and flattened returns, even as overall usage climbed to all-time highs.
Onchain data illustrates the transition. Ether staking yields have stabilized around 2.5%, well below the double-digit returns seen in earlier market cycles, despite total value locked nearing $30 billion. Stablecoin lending has followed a similar pattern. Borrow demand for USDC surged to record levels in 2025, but an even larger influx of supply kept lending rates compressed. According to Flowdesk, the balance between strong demand and abundant liquidity has tempered volatility rather than amplifying it.
Derivatives markets reinforce the trend. Perpetual funding rates rarely reached euphoric levels even as asset prices moved to new highs, while futures basis spreads remained narrow as traders increasingly favored delta-neutral strategies over directional exposure. The outcome has been a flatter yield curve across crypto markets, leaving fewer pricing dislocations to exploit.
Bitcoin-backed lending highlights the downstream effects of this maturation. BTC’s liquidity and collateral profile has attracted a wider range of lenders, including traditional financial institutions, transforming what was once a bespoke trade into a more standardized balance-sheet business. As competition increased, margins tightened, loan-to-value ratios became more conservative, and excess returns diminished.
Flowdesk concluded that crypto credit now behaves more like a mature financial system. Returns from ETH staking and USDC lending increasingly cluster in the mid-single-digit range, comparable to money market funds, savings accounts, and short-dated U.S. Treasuries. Deeper liquidity, tighter arbitrage, and broader participation have turned core yield products into financial plumbing rather than sources of alpha.
With baseline yield now crowded and efficient, Flowdesk said future opportunities are likely to emerge from more complex strategies, including bespoke credit structures, altcoin-backed lending, and hybrid on- and offchain products—often described as CeDeFi.
Market movement
- Bitcoin (BTC): Bitcoin was little changed at the start of Asian trading, slipping about 0.3% to around $91,000, while remaining nearly 4% higher over the past week.
- Ether (ETH): Ether eased roughly 0.4% to about $3,150, trimming gains after rising more than 6% over the past week.
- Gold: Gold stayed under technical selling pressure despite a weaker-than-expected U.S. private payrolls report showing 41,000 jobs added in December. Spot prices fell 1.26% to roughly $4,436 an ounce, as steady wage growth limited the report’s impact on markets.
