Binance Announces 4% USDC Loan Promotion Starting August 15
Binance announced a limited-time 4% USDC borrowing interest rate starting at 16:00 on August 15, lasting for one month. Currently, there is also a 12% USDC savings promotion. Is there an arbitrage opportunity in the annualized interest rate difference?
(Background: Binance Charity will airdrop $1.2 million worth of BNB to victims of the flooding in southern Taiwan.)
(Further context: $500 million bet on BNB! Pharmaceutical company Liminatus Pharma establishes a subsidiary “US BNB Strategy”: optimistic about the returns from the Binance Chain ecosystem.)
Details of the August Promotions
Binance is offering a dual promotion in August with “4% borrowing and 12% savings.” Investors can complete a seamless arbitrage process by collateralizing mainstream assets such as Bitcoin and Ethereum on the exchange.
The annualized interest rate difference of up to 8% may seem lucrative, but it is crucial to consider various details and risks while taking advantage of the overlapping time window from August 15 to September 10.
Promotion Conditions: 4% Borrowing Plus 12% Savings
According to Binance’s announcement, the USDC borrowing promotion will start at 16:00 Taiwan time on August 15 and end at 07:59 UTC on September 16, with a fixed annual interest rate of 4%.
The ongoing USDC savings promotion offers an annual yield of up to 12%, running from August 11 to September 9, with a maximum purchase limit of 100,000 USDC per account (for amounts exceeding 100,000 up to 300 million, the annualized rate is 2%).
The overlapping period of the two promotions is approximately 25 days, providing a closed interest rate spread for arbitrage strategies.
Arbitrage Process: Collateral, Borrow, Invest, Redeem
The operational logic is not complex:
- First, use mainstream cryptocurrencies like BTC and ETH as collateral to borrow USDC at a 4% annual interest rate on the lending interface. The current collateralization ratio is approximately 78%; to borrow 100,000 USDC, about 1 BTC is needed.
- Second, invest the obtained USDC into the savings project to earn 12% annual yield (currently about 11.6%).
- Third, redeem the USDC after the promotion ends and repay the principal and interest.
It is worth noting that Binance has recently included USYC and cUSDO in the collateral range, increasing fund allocation flexibility.
Key Risks: Price Volatility
The most apparent risk is the decline in the price of collateral leading to a liquidation trigger due to LTV (Loan-to-Value) ratios. If BTC or ETH experiences significant corrections, investors may not only fail to lock in the arbitrage spread but could also incur losses due to forced liquidation.
Additionally, centralized platforms face liquidity risks such as system failures and withdrawal controls. Regulatory changes or even a brief decoupling of USDC could compress the interest rate spread or extend the recovery period. Although the likelihood is low, it should be considered.
Operational Recommendations
If you decide to arbitrage using this method, it is essential to set a conservative collateralization ratio and reserve additional USDC or collateral as a margin buffer, while closely monitoring cryptocurrency prices and lending rate fluctuations. When calculating net profits, transaction fees, redemption waiting times, and exchange costs should also be taken into account.
A rough estimate indicates that borrowing 100,000 USDC could yield a profit of over 500 USDC during the overlapping 25-day promotional period. Whether this is more profitable than capital rate arbitrage depends on future market responses.
＊The above is not investment or arbitrage advice; it is for reference only. Please conduct thorough research before making financial decisions.
