{"id":237167,"date":"2026-10-08T10:48:15","date_gmt":"2026-10-08T10:48:15","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=237167"},"modified":"2026-10-08T10:48:15","modified_gmt":"2026-10-08T10:48:15","slug":"what-is-yield-chasing-and-why-it-ends-badly","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=237167","title":{"rendered":"What Is Yield Chasing (and Why It Ends Badly)?"},"content":{"rendered":"

In early 2022, one number pulled in more than fourteen billion\u00a0dollars.<\/em><\/p>\n

A protocol called Anchor promised around 20% APY on a stablecoin. Most stablecoin yields at the time sat below 2%. So money flooded in. At its peak, Anchor held about three-quarters of all the UST in circulation<\/a>.<\/p>\n

Then the math showed up. A 20% payout on more than ten billion dollars needs over two billion a year to fund it. The borrowers on the other side never came close. The reserve\u00a0drained.<\/p>\n

In May 2022, the whole system unwound in a matter of days, and roughly forty-five billion dollars in value evaporated in a single\u00a0week<\/a>.<\/p>\n

Real people lost real money. Some had moved everything they had into it, pulled in by a rate that felt safe precisely because it was everywhere you\u00a0looked.<\/p>\n

That is yield chasing. And it tends to end the same way every\u00a0time.<\/p>\n

This piece is about why. Not to scare you off yield, but to help you tell a durable yield from a trap, before your money is the one funding someone else\u2019s\u00a0exit.<\/p>\n

What is yield chasing in\u00a0crypto?<\/h3>\n

Anatomy of a yield trap: a subsidized ~20% APY line collapses while a modest revenue-funded line stays steady. Illustrative, based on the 2022 Anchor \/ UST collapse.<\/p>\n

Yield chasing is simple. You move your money to whatever protocol advertises the highest yield, and you keep moving it as bigger numbers\u00a0appear.<\/p>\n

The headline APY becomes the entire decision. Where the yield comes from, and whether it can last, barely get a\u00a0glance.<\/p>\n

It feels rational. A bigger number looks like a better deal. In crypto, though, the number on the banner is often the least reliable thing about the whole\u00a0offer.<\/p>\n

You can watch the cycle happen in real time. A new yield farm launches, the APY spikes, money rushes in over a weekend, and within weeks the same wallets have moved on to the next banner. The yield was never the point. The exit\u00a0was.<\/p>\n

Here is the rule sitting underneath all of it: markets price risk. If one option pays far more than everything around it, that extra yield is usually paying you for extra risk you cannot see\u00a0yet.<\/p>\n

Why does the highest APY almost always end\u00a0badly?<\/h3>\n

The cost of not asking where the yield comes from: crypto stolen by year, with 2025 topping $3.4B. Sources: Chainalysis 2026 Crypto Crime Report; Immunefi.<\/p>\n

Because the biggest advertised yields are usually the least sustainable.<\/p>\n

A yield that looks too good to be true tends to break in one of a few predictable ways.<\/p>\n

It is printed, not earned. <\/strong>Many flashy rates are paid in a protocol\u2019s own token. New tokens get minted to fund the reward. Supply dilutes, the token price slides, and the \u201creal\u201d yield quietly drifts toward\u00a0zero.It attracts money that leaves. <\/strong>Big incentives pull in fast, mercenary capital. When the rewards fade, that money exits just as fast. The rate collapses, and whoever showed up last is left holding a falling\u00a0token.It hides a fragile design. <\/strong>Sometimes the high number is buying you thin liquidity, an untested contract, or a straight-up scam.There is a line that gets repeated in DeFi for good reason: if you don\u2019t know where the yield comes from, you are the\u00a0yield.<\/p>\n

The risk backdrop is not hypothetical. Crypto hacks drained more than 3.4 billion dollars in\u00a02025<\/a>.<\/p>\n

Inside DeFi, 89% of protocol losses that year<\/a> traced back to flaws in the protocol logic\u00a0itself.<\/p>\n

Regulators logged over eleven billion dollars in crypto-related fraud complaints in the US\u00a0alone.<\/p>\n

Chasing the highest number often means walking straight into that risk with your eyes locked on the\u00a0banner.<\/p>\n

Printed or earned: where does crypto yield actually come\u00a0from?<\/h3>\n

Two sources of stablecoin yield, side by side: printed (token emissions) versus earned (real protocol revenue). One\u00a0lasts.<\/p>\n

This is the question that separates a real yield from a\u00a0trap.<\/p>\n

Broadly, stablecoin yield comes from one of two\u00a0places.<\/p>\n

Printed yield is funded by token emissions. <\/strong>The protocol creates new tokens and hands them out to attract deposits. It can post huge numbers for a while. It cannot post them forever, because the funding is inflation, not\u00a0income.<\/p>\n

Earned yield is funded by real revenue. <\/strong>The protocol actually makes money, from things like over-collateralized lending, exposure to short-term US Treasury bills, and providing liquidity to lending markets. That revenue pays the yield. It is usually more modest. It is also far more\u00a0durable.<\/p>\n

Modest and durable beats spectacular and temporary. Every\u00a0time.<\/p>\n

This is not a fringe idea anymore. Yield-bearing stablecoins have grown into a category worth more than 300 billion dollars<\/a>, and they now drive a large share of all stablecoin growth. The market is slowly learning to ask the right question.<\/p>\n

How do you spot sustainable stablecoin yield?<\/h3>\n

What earned yield looks like: Sky Protocol gross protocol revenue of $338M in 2025 versus a ~$429M annualized run-rate in 2026, with $250M+ paid via the Sky Savings Rate and zero exploits since 2017. Sources: Sky Frontier Foundation; sky.money, Oct\u00a02026.<\/p>\n

Stop reading the yield as a score. Start reading it as a claim that has to be backed\u00a0up.<\/p>\n

Before you supply a single dollar, ask five\u00a0things.<\/p>\n

Where does the yield come from? <\/strong>Real revenue, or freshly minted tokens? If nobody can explain the source in one plain sentence, that is your\u00a0answer.Is it paid in dollars or in a reward token? <\/strong>A rate paid in a volatile token is not the rate you think it\u00a0is.What is the track record? <\/strong>How long has the system run, and has it survived stress without an\u00a0exploit?How is it governed and verified? <\/strong>Can you check the numbers onchain, or are you trusting a screenshot?What happens if I need my money tomorrow? <\/strong>Liquidity you cannot access is not really\u00a0yours.<\/p>\n

Run any offer through those five questions and most traps fall apart on the first\u00a0one.<\/p>\n

Notice that none of these is \u201cwhat is the APY.\u201d The number comes last, after the source has earned your\u00a0trust.<\/p>\n

That is the whole difference between chasing yield and choosing\u00a0it.<\/p>\n

A revenue-funded example: the Sky Savings\u00a0Rate<\/h3>\n

Here is what earned yield looks like in practice, using one system I know\u00a0well.<\/p>\n

On Sky.money, you can put your stablecoins to work<\/a> through sUSDS, the largest yield-bearing stablecoin<\/a>.<\/p>\n

sUSDS gives you access to the Sky Savings Rate. USDS itself pays no yield. It is the entry point. sUSDS is where the yield\u00a0accrues.<\/p>\n

The important part is the source. The Sky Savings Rate is funded by real protocol revenue, not by minting\u00a0tokens.<\/p>\n

That revenue comes from things like collateralized lending, US Treasury bill exposure, and lending markets. The rate is set by Sky governance and can be verified\u00a0onchain<\/a>.<\/p>\n

The numbers behind it are not small. Sky Protocol booked more than 107 million dollars in gross protocol revenue in a single quarter of 2026, its fifth straight quarter in surplus, on an annualized run-rate near 429 million\u00a0dollars.<\/p>\n

Cumulative Sky Savings Rate paid to holders has crossed 250 million dollars since inception.<\/p>\n

USDS is backed by more than 16 billion dollars in collateral against roughly 9.9 billion in supply. And the protocol behind it has operated since 2017 without a single\u00a0exploit.<\/p>\n

Zoom out and the pattern holds. Across all of 2025, Sky Protocol generated more than 338 million dollars in gross protocol revenue, while USDS supply grew by roughly 74% over the\u00a0year.<\/p>\n

This is a system that earns and shares real revenue, not one that prints tokens to look\u00a0busy.<\/p>\n

The demand is real, too. In early 2026, sUSDS drew more new capital than the next several yield-bearing stablecoins combined<\/a>.<\/p>\n

Instead of a single variable rate, you can also lock a fixed rate to a maturity date<\/a>, or spread across curated, diversified vaults<\/a>, depending on your risk tolerance. The point is not the specific product. It is that you can see the machinery.<\/p>\n

None of this makes it a sure thing. The Sky Savings Rate is variable and can change. sUSDS carries risk, like anything onchain, and it is not a way to earn a high, guaranteed return.<\/p>\n

But it is the sustainable style of yield, the earned kind, and every claim is one you can check yourself. That is what matters. You are not chasing a number on a banner. You know where it comes\u00a0from.<\/p>\n

Stablecoins are moving into a more serious, institutional phase<\/a>, and the projects that last will be the ones whose yield can survive daylight.<\/p>\n

\u2022 \u2022\u00a0\u2022<\/strong><\/p>\n

The takeaway<\/h3>\n

Yield chasing ends badly because it optimizes the one thing built to mislead you: the headline\u00a0rate.<\/p>\n

Judge the source, not the size. Favor revenue over emissions. Favor dollars over reward tokens. Favor verifiable over \u201ctrust\u00a0me.\u201d<\/p>\n

A durable, moderate yield you actually understand will almost always beat a spectacular one you\u00a0don\u2019t.<\/p>\n

The best question in DeFi was never \u201cwhat is the highest yield?\u201d It is \u201cwhere does this yield come from, and can it last?\u201d Ask that first, every time, and you stop being the exit liquidity for someone else\u2019s\u00a0number.<\/p>\n

This is educational content, not financial advice. All yields mentioned are variable and carry risk. Do your own research before supplying any\u00a0funds.<\/em><\/p>\n

What Is Yield Chasing (and Why It Ends Badly)?<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":"

In early 2022, one number pulled in more than fourteen billion\u00a0dollars. A protocol called Anchor promised around 20% APY on a stablecoin. Most stablecoin yields at the time sat below 2%. So money flooded in. At its peak, Anchor held about three-quarters of all the UST in circulation. Then the math showed up. A 20% […]<\/p>\n","protected":false},"author":0,"featured_media":237168,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-237167","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/237167"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=237167"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/237167\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/media\/237168"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=237167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=237167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=237167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}