Spark is deploying $100 million into Superstate’s crypto carry fund to capture basis trade yields as returns from its traditional Treasury holdings begin to soften across the market.

According to an announcement on Oct. 23, the DeFi lending protocol Spark has allocated $100 million from its reserves to the Superstate Crypto Carry Fund, or USCC. USCC generates returns through a market-neutral arbitrage strategy, capitalizing on the price difference, or “basis,” between crypto assets like Bitcoin (BTC) and Ethereum (ETH) and their futures contracts on the CME.

The move positions a portion of the protocol’s $9 billion USDS stablecoin reserve to capture a yield that currently clocks in at 9.26%, a significant premium to compressing U.S. Treasury returns.

Spark turns to crypto basis as Treasury yields falter

Spark’s $100 million allocation to Superstate’s Crypto Carry Fund underscores the protocol’s growing focus on diversified reserve management. Yields on U.S. Treasury bonds, a cornerstone of the crypto yield economy for the past two years, have recently hit six-month lows.

For DeFi protocols like Spark and major stablecoin issuers who have relied heavily on tokenized T-Bills, this compression poses a direct threat to their ability to offer competitive returns.

The 9.26% 30-day yield USCC claims to offer presents a compelling alternative at a time when traditional avenues are constricting, allowing Spark to potentially maintain the attractiveness of the sUSDS savings rate, which is currently funded by protocol revenue.

Notably, Spark has recently demonstrated a pattern of large-scale investments to bolster its position as a core component of the Sky ecosystem. Earlier this year, the protocol announced a $1.1 billion deployment to Ethena’s USDe and sUSDe tokens, a $25 million participation in Maple Finance lending pools, and the launch of a $1 billion Tokenization Grand Prix aimed at advancing tokenized asset adoption.