When you deposit $UST on Anchor Protocol, you get aUST.
aUST is a yield-bearing-collateral.
1 aUST = 1.12 $UST
Back to our numbers.
If you have $100,000 $UST and deposit this on @anchor_protocol, you'll get 89,286 aUST back.
So how do you go from 19,5% to 160% APY?
3/
Let me introduce $MIM (Magic Internet Money) which is another stablecoin.
$1 MIM = $1USD.
What's magic about $MIM is that you can borrow/mint it with aUST.
You have 89,286 aUST and you want to borrow $MIM for 80% of the aUST.
89,286 aUST x 0,80 = 71,428 $MIM
4/
With your 71,428 $MIM you can convert this to $71,428 $UST.
Why?
Because 1 $UST = $1 MIM
You deposit it back to Anchor Protocol and you now have your original $100K + $71,4K = $171,4K working for you.
You increased your APY from 19,5% to 33,42%.
But it gets crazier...
5/
This was only one loop.
You can take your $71,4K $UST and its equivalent 63,75K aUST, borrow $MIM, convert $MIM back to $UST --> deposit to Anchor.
You can do this process 10 times!
How?
6/
1. Deposit $UST into Anchor Protocol for $aUST 2. Borrow $MIM against your $aUST at a set LTV (80% in this example). 3. Convert $MIM to $UST 4. Repeat the steps above another 9 times.
After doing this 10x, it will be possible to increase your 19,5% to 160%.
Crazy ain't it!?
7/
I know what you're thinking:
"Should I sell my #BTC and go full degen on these stablecoins?"
"WTF is the point of owning anything other than stablecoins if you can get 160% per year by just chilling at a beach?"
As always, there are some risks.
Let's talk about them
👇
8/
There are 3 main risks I can see:
1. Smart contract risk 2. Peg risk and leverage risk
1) Smart contract risk: When you deposit money into Anchor Protocol, you’re putting your money in a smart contract.
Smart contracts may be vulnerable to cyber-attack and tech failures.
9/
2) Peg risk and leverage risk
$1 UST represents $1 fiat.
But what if $UST loses peg?
Let’s say we enter a bear market and the market drops 50%
How does the Terra ecosystem avoid that $UST losing its peg?
And what about $MIM? How do we know for sure that 1 $MIM = 1 USD?
10/
The honest answer is that we don't know for sure what will happen.
If $UST or $MIM trades below $1, market makers would quickly trade any coin for $UST or $MIM for a quick profit.
Anyway, without @NexusProtocol I think it's a huge risk borrowing $MIM with a 97% LTV.
In this example I've used 80% LTV as an example, meaning that you'll get liquidated if stablecoins go lower than $0,80.
You won't get 160% APY, but around 100-120% which is also great.
15/
Will I use this strategy myself?
Yes, sir!
I'll keep you posted, so follow me on Twitter for more alpha around this strategy and all Terra Luna strategies in general.
16/
Why do I think this is bullish for crypto?
Think about all the money that currently sits in the stock market.
The US Stock Market alone has a market cap of approx. $50 trillion dollars.
Imagine what will happen if 5% find out that they can get 19,5% APY almost risk-free?
17/
Remember I was one of them.
I was a Wall Street bull.
Wouldn't listen to anything other than stock market talk.
If @PrestonPysh could change his view. Why couldn't I?
The easiest way to increase the crypto total market cap is by presenting easy products for the masses.
18/
Anchor Protocol is so simple that even a 5-year old would understand the concept easily.
The leverage yield strategy with $MIM is a little bit harder for freshmen to grasp, but I believe that the masses would be more than happy with 19,5%.
19/
DeFi has made incredible opportunities for everyone and you can get wealthy no matter how much you start with.
I would love it if you could share this thread by retweeting as many of the tweets as possible.
27% APY on a stablecoin - how sustainable is Ethena?
My first thread in a long time.
What is it?
Ethena is a synthetic dollar protocol built on Ethereum that will provide a crypto-native solution for money not reliant on traditional banking.
Ethena's synthetic dollar, USDe, will provide the first censorship-resistant, scalable, and stable crypto-native solution for money achieved by delta-hedging staked Ethereum collateral.
The 'Internet Bond' will combine yield derived from staked Ethereum as well as the funding & basis spread from perpetual and futures' markets.
Why are stablecoins so important?
All major trading pairs across spot and futures markets in centralized and decentralized venues are denominated in stablecoin pairs with >90% of orderbook trades and >70% of onchain settlements being stablecoin denominated.
Stablecoins settled >$12 trillion onchain this year, constitute 2 out of the 5 of the largest assets in the space, >40% of TVL in DeFi, and are by far the most utilized assets across decentralized money markets.
AllianceBernstein, a global asset management firm with $725B AUM, predicts that the stablecoin market cap will reach $3T by 2028.
If we examine today's market, the stablecoin market cap is currently at $138B, peaking at $187B. That's a 2000% potential increase!
USDe is aiming to meet this demand by being censorship-resistant, scalable, and stable (hopefully).
How does it work?
1) A user deposits let's say 1 ETH = $3,000 in stETH and receives ~$3,000 USDe atomically in return
2) Ethena opens a corresponding short perpetual position for the approximate same dollar value on a derivatives exchange.
3) The assets received are transferred to an "Off Exchange Settlement" provider. Backing assets remain onchain and off-exchange servers to minimize counterparty risk.
Ethena generates two sustainable sources of yield from the deposited assets.
The returned yield to eligible users is derived from:
Staking Ethereum to receive consensus and execution layer rewards (3,5% APR)
The funding and basis spread from the delta hedging derivatives positions. (0-20% APR). Note this is variable and might also be negative (more about this later).
This will keep me accountable and force me to think through my investments even more purposefully, plus should be interesting for us to look back on as 2023 progresses to see how smooth-brained vs giga-brained I am :)
A lot has changed for the Fantom Opera network and the ecosystem built on top of it since the parabolic run in 2021.
Let's take a look at what they have built in the bear market, the current narratives, and all the opportunities in the $FTM ecosystem going forward.
Thread👇
Long-term followers of my content may remember that I’ve written threads about $FTM in both 2021 & 2022, but since then, there have been some major upgrades in the works
If you want to look at my earlier Fantom threads, you can find them here:
Fantom captured the attention of many DeFi degens in 21', and it was among my favorite chains due to how easy, cheap, fast, and stable it was to use.
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