The stablecoin protocol Level has successfully secured a new round of venture capital funding aimed at enhancing its $80 million yield-generating stablecoin, which has seen rising popularity amidst a recent slowdown in crypto prices.
Peregrine Exploration, the company behind Level, has garnered an additional $2.6 million led by early supporter Dragonfly Capital, with contributions from Polychain. Founders David Lee and Kedian Sun shared this information during a recent interview. New investors include Flowdesk, Echo syndicates Native Crypto and Feisty Collective by Path, as well as angel investors Sam Kazemian from Frax and Albert Chon from Injective.
This latest funding round follows an earlier raise of $3.4 million in August, bringing the total venture capital investment to $6 million thus far.
Level’s stablecoin, represented by the lvlUSD token, is competing in the rapidly expanding stablecoin sector, which is emerging as one of the most attractive areas in cryptocurrency and a favorite among venture capitalists. Stablecoins, which maintain a fixed price and are primarily linked to the U.S. dollar, are essential for trading and transaction infrastructures on blockchains. However, the major issuers usually do not provide yields to users from the assets in their reserve. For instance, Tether reported profits of $13 billion last year partly due to the U.S. Treasury yield backing its $143 billion USDT token.
This gap is fueling interest in a new generation of yield-generating stablecoins among crypto investors. Ethena’s USDe, which offers yield through a market-neutral carry trade strategy that capitalizes on futures funding rates, surged past $5 billion in supply in just over a year. Meanwhile, tokenized money market funds and Treasury bills, which serve as alternative stablecoins, achieved a $4.6 billion market capitalization.
The Level stablecoin allows investors to earn yields by deploying the backing assets to decentralized finance (DeFi) lending platforms like Aave, all while managing its reserves automatically. Users can mint lvlUSD by depositing Circle’s USDC or USDT stablecoins and can stake these tokens to generate yield on-chain. Last week, the annualized yield for the staked version of lvlUSD reached 8.3%, surpassing yields from tokenized money market funds. lvlUSD has also been integrated with various DeFi protocols, including Pendle, Spectra, and LayerZero, and can be used as collateral on Morpho.
Sven Wellmann from Polychain, one of the investors, noted, “Their fully on-chain, transparent method of yield generation distinguishes them from competitors that rely on non-transparent, centralized approaches.”
According to Level’s assessments, the protocol has outperformed competing stablecoins in yield over the past month, contributing to its supply exceeding $80 million within five months of its beta launch.
With the recent funding, Level aims to grow its team and enhance marketing efforts while continuing to broaden the utility of lvlUSD beyond just staking, as explained by Kedian Sun. The protocol also plans to leverage Morpho for yield generation in the coming weeks.
Through these initiatives, lvlUSD is targeting a market cap of $200-$250 million, a significant milestone that the team is eager to reach, according to Sun.