The combination of stablecoins and yield farming — a way to earn interest on crypto assets — means that there are now high-yielding currencies that claim to have no risk of depreciating against the U.S. dollar. The ingredients for an enormous carry trade are in place.

The big picture: The carry trade is the lifeblood of the FX markets. You borrow cheaply in one currency, invest at a higher interest rate in another, and so long as your funding currency doesn’t devalue too sharply against your target currency, you make easy money.

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How it works: Coinbase issued $2 billion of dollar bonds this week, paying 3.375% on the seven-year tranche and 3.625% for the 10-year.

  • The pricing was expensive by U.S. corporate bond standards, and even expensive by junk-bond standards: Coinbase ended up paying about 0.65 points more than most other companies carrying the same BB+ credit rating. But by crypto standards, the funding was dirt cheap.

By the numbers: Coinbase in June promised to pay a 4% yield on USDC, the dollar-linked stablecoin it’s associated with. Other companies pay much more: BlockFi, for instance, pays as much as 8% interest on USDC, which is roughly what Gemini Source…