Mid-Q1: A State of Yield Basis

The recent market volatility showcased Yield Basis capacity as a key onchain liquidity source for wrapped BTCs at Ethereum (see our previous YB 2026 Thesis report).

We tracked protocol operations in detail and provide this report covering the most important stats & observations:

• Protocol Performance (trading volumes, fees, veYB income)
• Yield Basis future trajectory explanation (proposed updates)

Key Stats TL;DR

• $BTC APY since pools inception ~26% (70% APY during 19 days of volatility)
• During recent volatility protocol generated $1.65M of protocol fees
• Protocol is net profitable (earned +$6.84M LP+veYB fees vs. emissions cost since v2 pools launch)

We begin with an updated conceptual framework outlining how Yield Basis operates.

Yield Basis: Conceptual Overview

Yield Basis represents a structured product that tokenizes a dynamically rebalanced, gamma-neutral leveraged LP strategy, rather than a standalone AMM design as it is frequently interpreted.

Depositing $BTC to Yield Basis, the user receives $ybBTC that must be considered as a tokenized share in the IL-elimination strategy.

Table 1. Comparison of Basic AMM design vs. Yield Basis LP position design.

Strategy basics:

1. User deposits 1 wrapped $BTC to Yield Basis
2. Protocol takes a 100k $crvUSD loan for that, forming 1 $BTC - 100k $crvUSD position in Curve Pool. This is the point where a 2x leveraged position is created.
3. Further, protocol automatically maintains 2x leverage updating it if $BTC price grows or declines (see below).

A dedicated contract - LEVAMM serves as the $crvUSD minting market and holds both unutilized (allocated but not deployed) $crvUSD and Curve LP tokens (minted at position inception).

$ybBTC holders effectively own a pro-rata share of this contract, which corresponds to the underlying $BTC exposure that can be redeemed from the LP positions.

LEVAMM operates as a dynamic leverage rebalancing mechanism:

• In rising BTC markets: as $BTC price increases, DTV falls below the 50% target, triggering additional borrowing of $crvUSD and deployment into LP positions (minting new LP tokens)
• In declining BTC markets: as $BTC price decreases, DTV rises above the 50% threshold, triggering debt repayment and LP unwinding (burning LP tokens)

If $BTC grows, it means the amount of $BTC owned by YB LPs ($ybBTC holders) decreases, so protocol adds new LP tokens (by motivating arbitrageurs to do that) and restores the amount of $BTC owned by $ybBTC.

We created a Visual Explainer for re-leveraging mechanism that explores this process step-by-step according to the real contracts logic.

Protocol Performance summary

General Performance Metrics

The major share of trading volumes and fees ($436M volume, 57% swap fees) was captured since 28 Jan when the sharp $BTC downtrend started.

The most trading volumes were captured during $BTC price drops and following short-term recoverings:

Note, that captured fees ≠ income of LPs and token holders since it is partly used for pools rebalancing and maintaining 2x leverage necessary for eliminating Impermanent Loss.

Liquidity Providers Stats

Since 28 Jan, LPs earned ~70% APY in $BTC during 19 days of volatility (counted by fundamental PPS):

Organic APY for Yield Basis LPs, measured via fundamental PPS growth since pool inception (12 Nov 2025), stands at ~26–27% for $cbBTC/$wBTC pools and ~11% for $WETH pools.

In contrast, staker APR (denominated in $YB emissions) has declined significantly, primarily driven by the decrease in $YB token price.

However, fundamental price per share is only one metric reflecting the value of LP positions. The Redemption PPS significantly declined, reflecting disbalance in Curve Cryptopools:

These disbalances are reflected in TRD (Temporary Redemption Discount) value meaning LPs which exit positions withdrawing exact amounts of assets according to fundamental PPS.

The Fundamental vs. Redemption LP value (TRD) needs additional explanation since it is commonly misunderstood. A good review on this topic is available here.

YB revenue & emissions analysis

Yield Basis captures substantial yields from volatility both for LPs and token holders.

Protocol fees are captured in $BTC and $ETH YB LP tokens so this amount reflects ~$70k $BTC/$2k $ETH price and -13% TRD. It means that these amounts can be much bigger depending on pools' balance and $BTC/$ETH prices.

As a result, $YB revenue multiplier (price of the future revenue, calculated using average token holders' revenue during the entire protocol operation, not just recent weeks) dropped to ~1x.

All captured fees will be claimed over four weeks, so weekly APY has ~150% benchmark:

This was reflected in increased veYB locks (61M -> 70.56M YB was locked to earn protocol fees):

One of crucial questions for any protocol with ongoing token emission is fees vs. emissions efficiency or does protocol actually earn, and not just subsidise LPs?

Table 2. YB Emissions vs. captured fees analysis since v2 pools launch (12 Nov 2025)

It means that during all market periods (volatile and non-volatile ones) Yield Basis earned $6.84M of profit (fees after subtracting emissions cost) for LPs and veYB holders combined.

It is a truly outstanding result for emerging Defi protocol during the first months of operating taking into account that these months have the highest inflation rate. Every following month YB emission is algorithmically reduced.

Upcoming updates to decrease YB influence on the $crvUSD Peg

Swaps in Yield Basis pools influence $crvUSD peg since every arbitrage or liquidation swap $BTC->$crvUSD requires further conversion $crvUSD -> $USDT/$USDC in corresponding Curve pools. It means constant pressure on $crvUSD peg during the $BTC downtrends.

Scaling Yield Basis to multi-billion TVL requires enhanced peg stability and reduced $crvUSD sensitivity to protocol-triggered $crvUSD swaps, which has led to a series of governance proposals.

Table 3. Proposals focused on enhancing $crvUSD peg stability and ensuring safe Yield Basis scaling.

In addition to proposals targeting $crvUSD peg stability, a separate set of proposals focuses on increasing LP earnings & veYB fees during upcoming pools rebalance.

They are available at the YB governance section:

The first proposal increases the fee in LEVAMM to 5% (already executed) and then the following ones decrease it: 5% -> 3% -> 2% -> original fee.

Expected results of mentioned proposals implementation:

• Higher LEVAMM fees lead to a decreased loss of value by the LEVAMM during routine re-leveraging operations
• As a result, the regime in which admin fee accrual is temporarily disabled in order to recover losses sustained to re-leverage premiums is shortened
• Therefore, the YB LPs and veYB holders will receive generally higher and more consistent fee returns

We made a backtesting of Proposal #29 (5% fee) and our data confirms the theoretical explanation above.

Feedback appreciated

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Disclaimer: This article and the accompanying analysis are provided by Valueverse for research and educational purposes only. All token valuation frameworks, metrics, comparisons, and conclusions discussed herein are experimental in nature and may rely on incomplete, estimated, delayed, or incorrect data, as well as subjective assumptions and methodologies.

The presented analyses do not represent definitive valuations, forecasts, or assessments of financial performance, and should not be interpreted as statements of intrinsic value. Digital assets and tokens are highly volatile, and their economic characteristics may change over time.

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