Aave stablecoin yields fluctuate in line with the Federal Reserve interest rates over the long term, with bank deposit rates becoming the lower bound for DeFi returns.

PANews March 31st, DefiLlama recently compared data on Aave stablecoin APY, the US Federal Reserve Federal Funds Rate (FFR), and the median US bank deposit rate. Historically, the lending rate for Aave stablecoins has fluctuated around the FFR multiple times, while US bank deposit rates have generally established a "floor" for DeFi yields. When bank deposit rates approach zero, DeFi stablecoin yields may also approach zero. Several industry participants have pointed out that DeFi yields must compete with traditional financial deposit rates, and the portion higher than bank rates mainly reflects the on-chain credit and liquidity risk premium.