BlackRock’s BUIDL Enabled as Collateral for Enhanced Yield Strategies

Blackrock’s USD Institutional Digital Liquidity Fund’s (BUIDL) was used as collateral in a derivatives trade for the first time, opening up to investors more ways to use the on-chain fund, according to QCP Group, a trading and market-making firm in Singapore

The trade, which was executed by Securitize Credit and QCP, was done through a long-spot, short 6-month futures trade using BUIDL as collateral to yield a cumulative 15%. The return was enabled by BUIDL’s low-risk standing across marketplaces, which allowed Securitize to sell $50,000 puts against the position for an additional 3.6% yield.

Through the BUIDL-collateralized Bitcoin basis trade, Securitize transformed its balance sheet BUIDL, which was earning 4.25%, into an open position with more than 18% APY without adding risk.

The basis trade is an arbitrage strategy that takes advantage of the difference in spot prices, and futures prices.

By using BUIDL as collateral, investors gain greater asset flexibility and the ability to activate their tokenized Treasuries for more than just collecting a base yield. The tokens can be used in standard institutional trade setups, such as the basis trade.

BUIDL’s Advanced Applications

BUIDL is the second-largest tokenized treasury product, with a market capitalization of $650 million, accounting for nearly 16% of the $4.1 billion tokenized treasury market.

Reid Simon, the Head of DeFi and Credit Solutions at Securitize, says that the new activation enables a step forward for institutional trading desks involved with crypto.

“The basis trade is pretty common to put on. We are showcasing the basis trade to think of BUIDL as not just an investment for its yield and safety, but as a way to enhance common trading strategies across the institutional level,” said Simon in an interview.

The enhanced capabilities of BUIDL may also spark additional growth to tokenized treasury space, which has grown more than 400% since January 2024.

“If you think about why tokenized treasury products have taken on growth in crypto relative to stablecoins - In traditional markets if you look at the equivalent products, they are completely inverted,” Simon said, referring to the fact that there are more outstanding treasuries than there is cash.

“But in crypto, it's the complete opposite."

With outstanding cash available in the form of stablecions, idle capital may flow into tokenized Treasury products like BUIDL as available integrations expand.

“Exchange support is coming within the next couple months to a top five exchange”, said Reid.