A 🧵on conservatively investing $UST
When @mirror_protocol v2 was released, @TerraBitesPod and @danku_r put out videos about delta neutral farming. For a few months the cool thing was try and generate the highest delta neutral APRs.
But what about generating the safest APRs?
When @mirror_protocol v2 was released, @TerraBitesPod and @danku_r put out videos about delta neutral farming. For a few months the cool thing was try and generate the highest delta neutral APRs.
But what about generating the safest APRs?
Imagine having $60,000 in @anchor_protocol. This generates an average of ~$1,000/month. After a year at 20% interest = $72,000.
Nice. But for a conservative investor who doesn’t want to enter LPs, can we increase rate of return without substantially increasing our risk?
Nice. But for a conservative investor who doesn’t want to enter LPs, can we increase rate of return without substantially increasing our risk?
The short answer is, yes. The answer is short farming.
At current rates, I could increase my 20% APY on Anchor to 30% using a combination of Anchor and Mirror with what I consider very little additional risk.
Below are the steps I would take (assuming I already have $60K)
At current rates, I could increase my 20% APY on Anchor to 30% using a combination of Anchor and Mirror with what I consider very little additional risk.
Below are the steps I would take (assuming I already have $60K)
1. Withdraw $20K from Anchor
2. Buy $20K mSLV on Mirror
3. Short mSLV using aUST collateral (my $40K from Anchor)
4. Start earning ~30% APR on short position (worth $20K)
5. After 2 weeks deposit short sale ($20K) into Anchor
2. Buy $20K mSLV on Mirror
3. Short mSLV using aUST collateral (my $40K from Anchor)
4. Start earning ~30% APR on short position (worth $20K)
5. After 2 weeks deposit short sale ($20K) into Anchor
This position is delta neutral. I owe Mirror $20K worth of mSLV, but I also own $20K worth of mSLV, so can close position any time.
I am earning 20% APY from Anchor on $60K and also earning ~30% on $20K on Mirror.
Total APY on $60K is now ~30%
I am earning 20% APY from Anchor on $60K and also earning ~30% on $20K on Mirror.
Total APY on $60K is now ~30%
As far as I am concerned, there are much better interest rates available on Terra ecosystem. But as far as risk is concerned, this is a great APY for such low risk.
A smart contract exploit or a massive spike in mSLV value are two potential worries. Neither of which I foresee.
A smart contract exploit or a massive spike in mSLV value are two potential worries. Neither of which I foresee.
The only caveat to this strategy is that Mirror rewards will soon be cut in half…so the ~30% APY may end up being ~25%.
Still, this would turn $60K into $75K after 1 year. Better than just Anchor Earn alone.
Not bad for a conservative investor!
Still, this would turn $60K into $75K after 1 year. Better than just Anchor Earn alone.
Not bad for a conservative investor!
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