TL;DR
BlackRock’s institutional digital liquidity fund, BUIDL, was used as collateral in a derivatives trade, generating an 18% APY yield.
This strategy allows investors to leverage BUIDL’s tokenized treasuries, transforming them into more flexible and profitable assets.
The adoption of tokenized treasury products has grown by over 400% since early 2024, reflecting the boost in the crypto market.
BlackRock’s tokenized treasury product, known as BUIDL, has been used as collateral in a derivatives trade for the first time, according to QCP Group, a trading firm based in Singapore. This transaction was executed through a “basis trade”, an arbitrage strategy that exploits the differences between spot prices and futures prices, using BUIDL as collateral, enabling investors to generate a cumulative yield of up to 18% APY. The trade involved Securitize Credit and QCP, who executed a trade with $50,000 put options, which added an additional 3.6% yield to the total return. This innovative use of tokenized assets opens up new possibilities for institutional investors, allowing them to unlock the potential of their digital assets beyond traditional yield-generating methods.
BUIDL’s Role in the Institutional Market
BUIDL, currently the second-largest tokenized treasury product with a market capitalization of $650 million, represents almost 16% of the global tokenized treasury market, which totals $4.1 billion. Using this product in derivatives trades allows investors to transform their positions into more profitable assets without taking on additional risk, as its low-risk profile in the cryptocurrency markets provides a solid foundation for implementing advanced trading strategies. By utilizing BUIDL, investors gain access to enhanced flexibility and the opportunity to improve their overall portfolio performance.
Reid Simon, Head of DeFi and Credit Solutions at Securitize, pointed out that this move represents a significant step for institutional trading desks in the crypto space. Simon explained that the “basis trade” is a commonly used strategy, and by activating BUIDL, investors can go beyond its base yield and integrate it into strategies used traditionally in institutional markets, expanding the use cases of tokenized treasury products.
Boost to the Tokenized Treasury Market
Since early 2024, the tokenized treasury market has experienced over 400% growth, driven by the adoption of products like BUIDL. Unlike traditional markets, where there are more outstanding treasuries than available cash, in the crypto ecosystem, stablecoins act as available capital that can flow into tokenized products like BUIDL as exchange integrations expand. According to Simon, exchange support for these products is expected in the coming months, which could further accelerate their adoption, positioning tokenized treasury products as a significant player in the financial landscape.