Your Next Yield Strategy Might Not Be Lending or Staking, It's From Volatility
Over the past few months, the crypto market has taken a turn toward caution. Bitcoin, which peaked above $109,000 in early November 2025, has since plunged to $85,000 at the time of writing, marking its first sub-$90,000 close in over six months amid renewed macroeconomic headwinds. Ethereum has fallen under $2,800 while DeFi TVL has contracted to $188 billion, and the once ubiquitous 10–20% APYs on stablecoin lending have settled into the low single digits. Restaking, once known as the next exponential layer, is now showing the same compression that staking exhibited two years ago.
For the first time since 2020, the dominant sources of DeFi yield (think lending interest, staking issuance, and incentive farming) are simultaneously constrained by the same variable: declining on-chain risk appetite. When fewer participants are willing to borrow, stake more, or chase emissions, the entire yield stack deflates.
This reveals that most of what we have called “DeFi yield” is not yield in the tradifi sense. It is a closed-loop redistribution of capital and token supply. It is, in short, circular.
Key Takeaways
DeFi’s traditional yield engines like lending, staking, and incentives are compressing simultaneously as on-chain risk appetite declines, revealing how circular and internally dependent these models are.
Volatility-driven yield, the backbone of TradFi’s derivatives markets, scales with uncertainty and remains resilient across cycles, offering sustainable returns even when borrowing demand and emissions shrink.
Dual Currency Investments (DCIs) introduce this volatility-monetisation model on-chain, generating yield from real hedging demand rather than leverage loops or token emissions.
Prodigy.Fi operationalises DCIs through fully collateralised, short-dated vaults, where Vault Creators pay premiums for strategic positioning and Vault Subscribers earn those premiums by underwriting defined market risk.
As lending APYs fall and staking approaches structural limits, DCI volumes are rising, signaling a shift toward yield sources grounded in genuine economic activity and positioning DCIs as a durable primitive for the next phase of DeFi.
The Limits of Circular Yield
Lending yields are a direct function of leverage demand. When risk appetite collapses, utilisation ratios fall, and interest rates follow. For example, Aave’s USDC pool is currently at 3.89%, down from 12–15% earlier in 2025.
In addition, staking and liquid-staking yields are governed by issuance schedules and staking ratios. With about 30% of ETH now staked and issuance trending toward its terminal rate, consensus-layer rewards have converged to 4–5% and are structurally capped. This explains why DeFi yields broadly trended downward in November 2025 where TVL dipped 5–7% week-over-week as users rotated out of low‑return, yield‑dependent positions (lending/staking) toward safer or more demand‑driven strategies like stablecoin deposits, volatility‑ or structured‑product vaults, or cash-like holdings. This reflects a broader recalibration: real‑yield narratives backed by economic demand and transparent mechanics are gaining traction over previously inflated, incentive‑driven APYs.
Put simply, these models thrive on ecosystem hype but falter in reality, tying returns to DeFi’s internal health rather than broader market forces. The result? When BTC tests $88,000 and ETH slumps below $2,800, yields do not just dip, they signal a need for something more resilient.
TradFi’s Solution? Monetising Volatility as Yield
Contrast this with traditional finance, where yields endure market cycles by tapping into perpetual demand for risk management. Derivatives and structured products, whose markets exceed $10 trillion in notional value, do not rely on internal loops. Instead, they profit from volatility itself.
Option buyers pay upfront premiums to hedge downside (puts) or capture upside (calls), while sellers pocket those fees by assuming calibrated exposure, often hedging dynamically to limit losses. During the 2020 Covid crash, for instance, VIX-linked premiums surged 300–500% as hedging demand exploded, generating 20–40% annualised yields for sellers even as equities plunged. Structured products extend this as banks bundle options into packages offering fixed payouts, pricing them against implied volatility (IV) that routinely hits 40–80% in crypto equivalents like Deribit’s BTC options.
The best part? These yields scale with uncertainty. Low volume means modest premiums while high volume (say, during November 2025’s bond yield spikes) means richer fees, as traders pay more to protect portfolios amid 50%+ BTC IV swings. Premiums here flow from genuine economic needs into providers’ pockets, sustaining returns through bulls, bears, and sideways markets. DeFi has replicated this through options protocols, but most require a deeper understanding of derivatives or complex interfaces. Prodigy.Fi bridges that gap, offering a more accessible, user-friendly way to earn yield from structured positions.
A New Primitive for Volatility-Driven Yield
In traditional markets, structured products and short-dated options are used to turn volatility into income. Unlike lending’s borrow-lend imbalance or staking’s issuance dependency, the yield comes purely from market participants’ willingness to pay for defined risk transfers.
- A Vault Creator deposits USDC and creates a Buy Low BTC/USDC vault, offering a premium (yield) for the opportunity to buy BTC at a favourable Linked Price if the price of BTC drops.
- A Vault Subscriber then subscribes to this Buy Low vault, earning that premium (yield) and only swapping into USDC if the Linked Price is hit.
Read: Why Are Prodigy.Fi’s Yields So High? Let’s Break Down The Mechanics
These premiums are not inflated by emissions or recycled incentives. They are pure market pricing, driven by volatility, time to expiry, and how close the Linked Price is to spot. Because the vaults are fully collateralised and involve no leverage, they settle automatically on-chain with no liquidations, no hidden mechanics, and no counterparty risk.
The result is a new type of yield primitive in DeFi, that has been long used in tradfi: one that turns volatility into an income engine especially when traditional yields dry up. In other words, yields built on volatility, powered by structured crypto products that feel as simple as a single click.
And this is exactly where Prodigy.Fi fits in. The yields on Prodigy.Fi are not powered by token incentives or opaque mechanics. They come from a transparent, on-chain exchange of risk and reward that works like reverse insurance. Instead of paying premiums for protection, users earn premiums by agreeing to take on defined risk. Vault Creators pay yields to position themselves strategically in the market, while Vault Subscribers earn those yields by underwriting that risk. It is a mutually beneficial, market-driven system backed entirely by real economic activity.
By focusing on short-dated, transparent trades, Prodigy.Fi unlocks a vertical absent in lending or staking: volatility arbitrage for the masses. In today’s thinned liquidity where ETH staking yields hover around 4% and restaking TVL growth stalls, DCI vaults have seen 20% week-over-week volume upticks, proving demand for yields that thrive on market motion.
Why DCIs Outlast the Cycle
DCIs’ edge lies in their detachment from DeFi’s loop and aligns with real market behaviours.
- Genuine Demand-Backed: Yields stem from hedgers and speculators. Traders paying premiums for convexity in a $88,000 BTC landscape where downside protection feels urgent. This mirrors TradFi’s annual options volume of billions of contracts, unaffected by protocol TVL.
- Volatility-Responsive Scaling: Premiums rise with IV, ensuring yields adapt without inflationary crutches. In bear markets, hedging surges, often boosting returns more than in bulls.
- Cycle-Independent Resilience: While lending APYs dipped in the 2022 winter, options premiums held firm at 10–30% amid heightened fear.
- Non-Circular Economics: No token farming or restaking loops and yields are zero-sum transfers from creators to subscribers, backed by locked collateral. This avoids dilution, fostering long-term protocol health over short-term hype.
November 2025’s market pullback — BTC dipping below $88,000, ETH sliding under $2,800, and DeFi yields thinning across the board — reads less like a collapse and more like a reset. Lending and staking are straining under their circular mechanics, but this contraction is clearing space for primitives that draw strength from market volatility instead of emissions. DCIs are one of the few that perform better because of uncertainty, not in spite of it. Prodigy.Fi exemplifies this, channeling hedging premiums into real, guaranteed fixed yields that do not vanish with the next rate hike or liquidation wave.
DeFi yield is diversifying. When borrowing slows and incentives fade, attention turns to the premiums exchanged in the churn of market swings. Your next strategy might not recycle old rewards. It might create new ones from the market’s unyielding demand for certainty in uncertain times.
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