Money market funds are traditionally the go-to investment option whenever there is economic uncertainty. The low risk and stable income model of these funds provide some level of shield against unforeseen negative market movements. As such, it comes as no surprise that money markets have become one of the most revered investment options since the market bottomed in March. According to a report from Business Insider in June, the total assets placed in money markets reached the $4.6 trillion mark – the highest since 1992. This record-breaking run is indicative of the growing demand for investment opportunities perceived as safety nets from the unpredictable and recession-prone economies.
However, things are not as they seem. As noted by Brian J. O’Connor in an article published in The New York Times, there is commotion brewing in the historically stable money market funds. A majority of this stems from the diminishing returns of such funds. Recently, short-term interest rates are near zero, and this has forced multiple prime money market funds to shut down. Moreover, the ones that are determined to keep running are increasingly flirting with unorthodox strategies, including implementing negative yields. As it is, the walls are closing in on investors caught between distributing funds to risky investment options and sticking with increasingly unprofitable money markets.
Digital asset provides an escape from non-yielding money markets
At the heart of this tense conversation is the growing importance of cryptocurrency as a safe haven. Trends show that more institutional investors are adopting crypto reserve assets like Bitcoin as there is no saying when to expect the economy to stabilize. “Bitcoin is a unique investable asset with compelling differences relative to traditional asset classes as well as conventional alternative investments that could make it a beneficial addition to a portfolio,” according to a recent report by Fidelity Digital Assets. The report explained that it has become imperative to capitalize on cryptocurrency as an alternative to traditional money markets:
“Additionally, the interest in bitcoin and other non-yield-generating alternative investments could also increase in response to the Federal Reserve (and many other central banks) cutting their benchmark interest rate to zero (or below zero) this year. In a world where benchmark interest rates globally are near, at, or below zero, the opportunity cost of not allocating to bitcoin is higher.”
Herein lies the importance of decentralized finance-enabled money markets designed to amplify the yield-generating capability of cryptocurrency. It is exciting to see these projects record significant progress amidst the intensified demand for unconventional investment strategies. While there is a broad variant of such protocols, only a few have the infrastructures that help investors directly capitalize on the liquidity of a broad range of crypto assets. A notable mention in this regard is Harvest.io, the cross chain money market that couldn’t have launched at a better time. This platform is rightfully placed to alleviate the failings of the global financial market and capitalize on the rising visibility of established digital assets.
The first cross-chain money market
Remarkably, Harvest is a money market in itself, similar to what investors are used to in the traditional scene. Nonetheless, its differentiating factors are its systemic reliance on decentralized governance and processes as well as its propensity to deliver high yields. Unlike the shrinking benchmark interest rate of the Federal Reserve, Harvest.io thrives as a profitable money market. Not only do investors have access to significantly high-interest rates compared to what we have now in traditional markets, but they also receive bonus rewards in the form of a cryptocurrency, termed the HARD token which is responsible for governance on Harvest. With this, they get voting rights to implement changes to the protocol.
Brian Kerr, CEO of Kava Labs, stressed, in a recent publication, that this governance model is integral for the establishment of a truly decentralized money market:
“As seen in all decentralized money market applications today, a governance token is necessary for proper decentralization and to ensure the ongoing evolution of the application. To compete in the current environment, it’s also critical to have incentives to bootstrap liquidity and incentivize user participation.”
What can be the other side of the issue?
Users are locking up their existing funds to stake HARD tokens. While they retain control of the tokens being supplied, the tokens cannot be used for any other purposes at the same time. This is a common approach among DeFi platforms and services, yet Harvest allows users to retain a certain degree of control. It is not an ideal solution yet, but certainly a step forward.
Harvest is the first DeFi-oriented money maker platform of this type. Being a first-mover often grants a competitive advantage, but it will also make people wary. A lot of people will explore the solutions that are better-known. Kava's team opts to build first and create a social buzz after, whereas the opposite approach is actively maintained by popular DeFi protocols.
Tagged as the world's first cross-chain market, Harvest.io is interoperable with more than one blockchain network. Hence, its design supports multiple assets, including BTC, BNB, KAVA, XRP, BUSD, and USDX. What this means is that investors that have embraced Bitcoin because of its safe haven functionality can multiply their earning power by engaging in the Harvest money market directly. This approach will largely eliminate the need to tokenize bitcoin or exchange it for a more DeFi-compatible token. Instead, investors can allocate a fraction of their bitcoin holding to the Harvest money market seamlessly, evade unnecessary fees and processes, and start earning interest instantly.
In light of the modalities of the infrastructural makeup of Harvest and its focus on alleviating the flaws of established money markets, the timing for its launch is in sync with the demand for versatile and profitable money markets.