The Case for Credit Assets

Credit is boring. And that’s exactly why it’s attractive.

Fixed income products, or credit markets, are the single largest global asset class, hovering between US$130-150 trillion (source: Bank for International Settlements, McKinsey Global Institute, IFC / World Bank Group). Credit instruments are financial contracts, such as bonds, loans, or notes, where one party lends money to another in exchange for a promise to repay with interest over time.

At their core, credit agreements signal the following pact: "Pay me what you owe me. Or else I take claim of your assets." No tokenomics wizardry. No "APYs" inflated by unsustainable trading fees. The investment is backed by a contractual agreement, real-world enforcement, and cold hard cash flow.

Credit investments offer:

1. Predictability All types of credit investments - including bonds, loans and private credit - spell out when and how much you get paid. No praying for transaction volumes, no guessing which governance vote will slash your payout.

2. Risk-Adjusted Returns Over decades, credit has delivered returns competitive with equities. Barclays data shows U.S. high-yield bonds returned ~7% annually from 1990–2020, with far fewer gut-wrenching drawdowns than the S&P 500. The yields offered in faster growth regions such as APAC are much more attractive.

3. Seniority When business performance goes sideways, creditors stand in front of the line. They have senior asset claims in the scenario of bankruptcy or asset liquidations. In DeFi, you're lucky if you even know where the exit is when the music stops.

Credit Assets vs. DeFi Yields: Know What You’re Betting On

DeFi yields can look sexy, until they aren't. When the cycle turns, vapor yields disappear faster than a rugpull.

Here's the real comparison:

	Credit Assets	DeFi Yields
Return Source	Contractual debt payments	Trading fees, token inflation
Risk Profile	Credit risk, default cycles	Difficult to assess - Smart contract hacks, liquidity death spirals
Transparency	Audited financials, public ratings	Often opaque, DIY disclosures
Liquidity	Moderate (depends on market)	Nominally high, but can vaporize in stress events
Track Record	100+ years of tested performance	5–7 years of experimental volatility
Yield Stability	Tethered to contracts and real cash flows	Tethered to market mood swings and incentive programs

DeFi yields are reflexive by design: they soar in bull markets when everyone’s greedy and collapse the second fear hits. They're built on flows, not fundamentals.

Credit, on the other hand, is built on legally binding promises to pay. Even when spreads widen and asset prices dip, your contractual cash flow keeps coming; unless there's an outright default (and even then, creditors get first crack at the leftovers).

Changing the Paradigm

At Mu Digital, our focus is on asset selection. We bring over 30+ years of collective experience in origination of credit investments. Our mission is to source the most attractive yields across Asia Pacific and deliver these to the onchain economy.