π§Ά DeFi 201: Intermediate-Advanced Strategies for Earning Yield on #Crypto
Last month, I wrote a #DeFi 101 primer, in which I covered some basic ways to earn yield on crypto.
This 𧡠covers advanced (riskier) strategies, explanations of concepts and instruments π
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Last month, I wrote a #DeFi 101 primer, in which I covered some basic ways to earn yield on crypto.
This 𧡠covers advanced (riskier) strategies, explanations of concepts and instruments π
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For reference, here is the DeFi 101 post:
https://twitter.com/shivsakhuja/status/1480336210887249921?s=20
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In this thread:
1. Leveraged LPs
2. Borrowing against Interest Bearing Tokens
3. Multi-token LPs
4. Single-sided staking
5. DeFi 2.0
6. DeFi 3.0
7. Pegged Assets
8. Autocompounders
9. Options
10. Liquidation strategies
11. Arbitrage
In this thread:
1. Leveraged LPs
2. Borrowing against Interest Bearing Tokens
3. Multi-token LPs
4. Single-sided staking
5. DeFi 2.0
6. DeFi 3.0
7. Pegged Assets
8. Autocompounders
9. Options
10. Liquidation strategies
11. Arbitrage
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Since we're talking about riskier strategies in this post, we might as well start with leverage.
I explained leverage in this post:
Since we're talking about riskier strategies in this post, we might as well start with leverage.
I explained leverage in this post:
https://twitter.com/shivsakhuja/status/1476283069753540608?s=20
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Leverage will amplify your risk and reward.
Be careful with leverage. Don't risk getting liquidated.
In #DeFi, you can leverage through:
β’ Leveraged LP farming
β’ Borrowing against assets, to farm elsewhere with borrowed funds
β’ Instruments like Futures / Options
+++
Leverage will amplify your risk and reward.
Be careful with leverage. Don't risk getting liquidated.
In #DeFi, you can leverage through:
β’ Leveraged LP farming
β’ Borrowing against assets, to farm elsewhere with borrowed funds
β’ Instruments like Futures / Options
+++
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1. Leveraged LP farming
You can use leverage to enter a liquidity pool.
For example, if you want to enter the AVAX-MIM pool, a leveraged LP protocol like Alpha Homora will let you borrow $MIM or $AVAX against your $AVAX, so you can enter the pool with leverage.
1. Leveraged LP farming
You can use leverage to enter a liquidity pool.
For example, if you want to enter the AVAX-MIM pool, a leveraged LP protocol like Alpha Homora will let you borrow $MIM or $AVAX against your $AVAX, so you can enter the pool with leverage.
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You risk getting liquidated if the price of the token pair goes up or down more than a certain amount.
The protocols will tell you the levels at which you get liquidated.
Crypto is volatile, so it's best to be conservative with the amount of leverage taken.
You risk getting liquidated if the price of the token pair goes up or down more than a certain amount.
The protocols will tell you the levels at which you get liquidated.
Crypto is volatile, so it's best to be conservative with the amount of leverage taken.
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If you do this, look for pair with correlated prices to minimize chance of liquidation.
And don't get greedy - always keep leverage low.
Here are a couple of platforms that allow leveraged LP positions:
β’ $FTM: @TarotFinance
β’ $AVAX: Alpha Homora by @AlphaFinanceLab
If you do this, look for pair with correlated prices to minimize chance of liquidation.
And don't get greedy - always keep leverage low.
Here are a couple of platforms that allow leveraged LP positions:
β’ $FTM: @TarotFinance
β’ $AVAX: Alpha Homora by @AlphaFinanceLab
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Here's a post I wrote explaining a leverage LP strategy:
Here's a post I wrote explaining a leverage LP strategy:
https://twitter.com/shivsakhuja/status/1476887685692231680?s=20
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2. Borrowing against Interest Bearing Tokens
I posted earlier about how borrowing against crypto on @CelsiusNetwork has a hidden cost (the opportunity cost of earning interest on your collateral)
2. Borrowing against Interest Bearing Tokens
I posted earlier about how borrowing against crypto on @CelsiusNetwork has a hidden cost (the opportunity cost of earning interest on your collateral)
https://twitter.com/shivsakhuja/status/1480648021763407872?s=20
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That's not the case when you're borrowing against an interest-bearing asset.
Here's an example:
1. Deposit $xBOO on market.xyz. $xBOO is a yield bearing token representing staked $BOO.
2. Borrow $MAI.
3. Use borrowed funds to farm for yield elsewhere.
That's not the case when you're borrowing against an interest-bearing asset.
Here's an example:
1. Deposit $xBOO on market.xyz. $xBOO is a yield bearing token representing staked $BOO.
2. Borrow $MAI.
3. Use borrowed funds to farm for yield elsewhere.
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Some tips to reduce risk when borrowing:
β’ Keep LTV low. $BOO and $xBOO are volatile assets.
β’ Borrowing an asset can be a way of shorting an asset. For example: borrow $BTC, and sell for $USDC.
If $BTC dumps, your debt reduces.
If $BTC pumps, your debt increases
Some tips to reduce risk when borrowing:
β’ Keep LTV low. $BOO and $xBOO are volatile assets.
β’ Borrowing an asset can be a way of shorting an asset. For example: borrow $BTC, and sell for $USDC.
If $BTC dumps, your debt reduces.
If $BTC pumps, your debt increases
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β’ Avoid liquidation at all costs. Liquidations will cost more than just the value of the debt - there is often a liquidation fee also.
Here's a strategy to get high APR on "safer" coins like $BTC, $LINK, $ETH, etc that typically have lower yields.
β’ Avoid liquidation at all costs. Liquidations will cost more than just the value of the debt - there is often a liquidation fee also.
Here's a strategy to get high APR on "safer" coins like $BTC, $LINK, $ETH, etc that typically have lower yields.
https://twitter.com/shivsakhuja/status/1482986398735024135?s=20
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3. Multi-token LPs
Multi-token LPs allow you to participate in a liquidity pool with more than 2 tokens.
A typically LP (as explained in past posts) has 2 assets split in a 50-50 ratio.
A multi-token LP like @beethoven_x or @BalancerLabs splits many coins into a LP.
3. Multi-token LPs
Multi-token LPs allow you to participate in a liquidity pool with more than 2 tokens.
A typically LP (as explained in past posts) has 2 assets split in a 50-50 ratio.
A multi-token LP like @beethoven_x or @BalancerLabs splits many coins into a LP.
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For example, @beethoven_x has an LP "Battle of the Bands" which has the following constitution:
β’ 20% $FTM
β’ 16% $MATIC
β’ 16% $SOL
β’ 16% $AVAX
β’ 16% $LUNA
β’ 16% $BNB
This means your funds will automatically rebalance into all of the L1s to maintain these percentages.
For example, @beethoven_x has an LP "Battle of the Bands" which has the following constitution:
β’ 20% $FTM
β’ 16% $MATIC
β’ 16% $SOL
β’ 16% $AVAX
β’ 16% $LUNA
β’ 16% $BNB
This means your funds will automatically rebalance into all of the L1s to maintain these percentages.
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This LP is currently paying 45% APR, (more if you go and deposit the tokens onto @beefyfinance)
Another good LP is A Late Quartet, currently paying 40% APR on @beethoven_x with an equal allocation into $FTM / $ETH /$BTC and $USDC.
This LP is currently paying 45% APR, (more if you go and deposit the tokens onto @beefyfinance)
Another good LP is A Late Quartet, currently paying 40% APR on @beethoven_x with an equal allocation into $FTM / $ETH /$BTC and $USDC.
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Here are the steps to deposit into a multi-token LP on #Fantom:
1. Go to beets.fi (@beethoven_x)
2. Deposit into an LP you like
3. (Optional) Deposit LP tokens to other platforms like @beefyfinance, @Reaper_Farm, @LiquidDriver, etc for higher rewards.
Here are the steps to deposit into a multi-token LP on #Fantom:
1. Go to beets.fi (@beethoven_x)
2. Deposit into an LP you like
3. (Optional) Deposit LP tokens to other platforms like @beefyfinance, @Reaper_Farm, @LiquidDriver, etc for higher rewards.
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Keep in mind that all LPs, even multi-token LPs come with impermanent loss risk.
Keep in mind that all LPs, even multi-token LPs come with impermanent loss risk.
https://twitter.com/shivsakhuja/status/1482188295488430086?s=20
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4. Single Sided Staking:
Some platforms will offer great rewards for single sided staking (especially on new farms).
These are safer than LPs as they don't have impermanent loss risk, but the yields are also usually lower.
Check @beefyfinance for single asset vaults.
4. Single Sided Staking:
Some platforms will offer great rewards for single sided staking (especially on new farms).
These are safer than LPs as they don't have impermanent loss risk, but the yields are also usually lower.
Check @beefyfinance for single asset vaults.
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Sometimes you can get high yields for brief periods (as with @0xDAO_fi) or genesis pools.
Usually these drop quickly as the TVL of the protocol rises.
Check the TVL before ape-ing.
The high APR might only last a few days, which might not be worth it with tx costs.
Sometimes you can get high yields for brief periods (as with @0xDAO_fi) or genesis pools.
Usually these drop quickly as the TVL of the protocol rises.
Check the TVL before ape-ing.
The high APR might only last a few days, which might not be worth it with tx costs.
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Speaking of transaction costs, here's a thread on how you can mitigate transaction costs:
Speaking of transaction costs, here's a thread on how you can mitigate transaction costs:
https://twitter.com/shivsakhuja/status/1487715969594126337
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5. DeFi 2.0
These are projects like $OHM and $TIME. I've explained these projects before, along with the risks.
Check out this tweet to understand the math and the risks behind them π
5. DeFi 2.0
These are projects like $OHM and $TIME. I've explained these projects before, along with the risks.
Check out this tweet to understand the math and the risks behind them π
https://twitter.com/shivsakhuja/status/1466714473318662145?s=20
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At this point, it seems #DeFi 2.0 was a failed experiment.
I'm not recommending investing in them. (especially given the recent debacles, and failure of these projects)
But it's worth learning about, because many other projects have borrowed ideas from their model.
At this point, it seems #DeFi 2.0 was a failed experiment.
I'm not recommending investing in them. (especially given the recent debacles, and failure of these projects)
But it's worth learning about, because many other projects have borrowed ideas from their model.
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6. DeFi 3.0: Farming as a Service (FaaS) projects.
These projects aim to offer yield farming returns to people who don't have the technical know-how or time.
Some notable names in the space include $ABC, $REFI, $CCF, $EXPO, $FFF & $MCC.
Here's how they work π
6. DeFi 3.0: Farming as a Service (FaaS) projects.
These projects aim to offer yield farming returns to people who don't have the technical know-how or time.
Some notable names in the space include $ABC, $REFI, $CCF, $EXPO, $FFF & $MCC.
Here's how they work π
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β’ Token buys and / or sells are "taxed".
β’ The tax (some % of tx) is added to the treasury and / or distributed to token holders as "reflections".
β’ The treasury is actively managed by yield farmers.
β’ Farming returns from the treasury are distributed as dividends.
β’ Token buys and / or sells are "taxed".
β’ The tax (some % of tx) is added to the treasury and / or distributed to token holders as "reflections".
β’ The treasury is actively managed by yield farmers.
β’ Farming returns from the treasury are distributed as dividends.
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These projects are too new to assess how they will do long run, but it's definitely an interesting concept I will be watching.
There's a lot of value in having experienced yield farmers manage a treasury for the benefit of others who don't have the knowledge or time.
These projects are too new to assess how they will do long run, but it's definitely an interesting concept I will be watching.
There's a lot of value in having experienced yield farmers manage a treasury for the benefit of others who don't have the knowledge or time.
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7. Pegged asset LPs:
Pegged assets can be a great way to earn high yield interest without exposing your positions to impermanent loss risk.
This would mean liquidity pools like:
β’ $ETH - $WETH
β’ $LUNA - $bLUNA
β’ $TOMB - $FTM
7. Pegged asset LPs:
Pegged assets can be a great way to earn high yield interest without exposing your positions to impermanent loss risk.
This would mean liquidity pools like:
β’ $ETH - $WETH
β’ $LUNA - $bLUNA
β’ $TOMB - $FTM
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This is effectively like single sided staking, but can often offer significantly higher yields.
For example, the $LUNA - $bLUNA LP is offering 18% APR on @loop_finance, whereas $LUNA staking offers only ~8%.
This is effectively like single sided staking, but can often offer significantly higher yields.
For example, the $LUNA - $bLUNA LP is offering 18% APR on @loop_finance, whereas $LUNA staking offers only ~8%.
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The $LunaX - $LUNA LP on @staderlabs is another great one, paying ~30% APR.
The $LunaX - $LUNA LP on @staderlabs is another great one, paying ~30% APR.
https://twitter.com/shivsakhuja/status/1487320083898765314?s=20
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Even more lucrative (though higher risk) are assets that are pegged through a seignorage mechanism like $TOMB.
I've explained @tombfinance before:
The APR on these pegged LPs is very high (100%+), and there are many strategies.
Even more lucrative (though higher risk) are assets that are pegged through a seignorage mechanism like $TOMB.
I've explained @tombfinance before:
https://twitter.com/shivsakhuja/status/1473991702926946304?s=20
The APR on these pegged LPs is very high (100%+), and there are many strategies.
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8. Autocompounders aren't really a #DeFi strategy, but they are a way to boost your returns.
Basically, these will take your staking rewards and automatically compound them at some optimal frequency.
Examples: @beefyfinance, @autofarmnetwork, @Reaper_Farm
8. Autocompounders aren't really a #DeFi strategy, but they are a way to boost your returns.
Basically, these will take your staking rewards and automatically compound them at some optimal frequency.
Examples: @beefyfinance, @autofarmnetwork, @Reaper_Farm
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Pros:
β’ Automatically reduce exposure to shitty farm tokens (they are automatically sold and re-invested daily)
β’ Reap the benefits of compounding passively
β’ Potential tax benefits
Cons:
β’ Added layer of vulnerability (hacks, exploits, etc)
Pros:
β’ Automatically reduce exposure to shitty farm tokens (they are automatically sold and re-invested daily)
β’ Reap the benefits of compounding passively
β’ Potential tax benefits
Cons:
β’ Added layer of vulnerability (hacks, exploits, etc)
https://twitter.com/shivsakhuja/status/1475421236477849601?s=20
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β’ If you do the math, autocompounders don't actually help that much, unless it's a very high APR pool. You could just compound manually once / week and get similar results without the added risk. See the math below:
β’ If you do the math, autocompounders don't actually help that much, unless it's a very high APR pool. You could just compound manually once / week and get similar results without the added risk. See the math below:
https://twitter.com/shivsakhuja/status/1475429923342798849?s=20
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9. Options Strategies
If you're familiar with Options in #TradFi, Options in #DeFi work pretty much the same way.
Options are basically a way to make a high-risk, high-reward bet on the price of an asset by a specific date.
Here's how they work π
9. Options Strategies
If you're familiar with Options in #TradFi, Options in #DeFi work pretty much the same way.
Options are basically a way to make a high-risk, high-reward bet on the price of an asset by a specific date.
Here's how they work π
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Let's take a call option as an example. When you buy a call option on an asset, you have the right to buy the underlying asset for the "strike price" on or before the expiration date.
In exchange for this right, you pay the seller of the option a "premium".
Let's take a call option as an example. When you buy a call option on an asset, you have the right to buy the underlying asset for the "strike price" on or before the expiration date.
In exchange for this right, you pay the seller of the option a "premium".
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Let's say $BTC is currently at $45k. You believe $BTC will be above $50k by March 4th.
β’ You buy a $BTC call option on @lyrafinance at $50k strike price expiring on Mar 4, and pay a premium of $800 for the option contract.
Let's say $BTC is currently at $45k. You believe $BTC will be above $50k by March 4th.
β’ You buy a $BTC call option on @lyrafinance at $50k strike price expiring on Mar 4, and pay a premium of $800 for the option contract.
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β’ Suppose $BTC is at $55k by Mar 4.
β’ You exercise your option to buy BTC for $50k, and sell it for $55k.
β’ Your profit is $5k - $800 = $4,200
β’ If $BTC is below $50.8k, you lose money. The max you can lose when buying a call option is the premium you paid ($800).
β’ Suppose $BTC is at $55k by Mar 4.
β’ You exercise your option to buy BTC for $50k, and sell it for $55k.
β’ Your profit is $5k - $800 = $4,200
β’ If $BTC is below $50.8k, you lose money. The max you can lose when buying a call option is the premium you paid ($800).
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β’ Betting on asset going up = buy calls or sell puts
β’ Betting on asset going down = sell calls or buy puts
You can also combine these in various way for more advanced strategies.
I recommend this YT channel to learn more about Options:
youtube.com/channel/UCfMiRβ¦
β’ Betting on asset going up = buy calls or sell puts
β’ Betting on asset going down = sell calls or buy puts
You can also combine these in various way for more advanced strategies.
I recommend this YT channel to learn more about Options:
youtube.com/channel/UCfMiRβ¦
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@phtevenstrong (The Calculator Guy) made a great video about using @lyrafinance to trade #DeFi options.
@phtevenstrong (The Calculator Guy) made a great video about using @lyrafinance to trade #DeFi options.
https://twitter.com/phtevenstrong/status/1488742529029881861?s=20&t=AG1VLmg1p3uZ7pRqepET8Q
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If you don't want to learn a ton about options, you can use automated option vault strategies through @ribbonfinance, @friktion_labs, @Katana_HQ, @DAOJonesOptions, @dopex_io.
Though you probably shouldn't mess around with options without understanding them.
If you don't want to learn a ton about options, you can use automated option vault strategies through @ribbonfinance, @friktion_labs, @Katana_HQ, @DAOJonesOptions, @dopex_io.
Though you probably shouldn't mess around with options without understanding them.
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@CryptoHarry_ wrote an awesome post about options strategies:
@CryptoHarry_ wrote an awesome post about options strategies:
https://twitter.com/CryptoHarry_/status/1478724805826203648?s=20&t=GR7ge3iYiObRbz-m2iwcyQ
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10. Liquidation strategies like @TeamKujira's Orca protocol are a great way to pick up some cheap crypto at discounts to the market price.
I covered it here:
10. Liquidation strategies like @TeamKujira's Orca protocol are a great way to pick up some cheap crypto at discounts to the market price.
I covered it here:
https://twitter.com/shivsakhuja/status/1468635649473331206?s=20
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@Route2FI covered it in more depth in his thread:
@Route2FI covered it in more depth in his thread:
https://twitter.com/Route2FI/status/1489643360298094597?s=20&t=txoaPxVW35ACSaNydm5Apw
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11. Arbitrage Strategies
With all the L1 chains, wrapped / synthetic assets, DEXes, etc, there are plenty of arbitrage opportunities in #DeFi.
11. Arbitrage Strategies
With all the L1 chains, wrapped / synthetic assets, DEXes, etc, there are plenty of arbitrage opportunities in #DeFi.
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For example, you can use the $LUNA - $bLUNA Slow Burn strategy to earn 20 - 60% on $LUNA with minimal risk
For example, you can use the $LUNA - $bLUNA Slow Burn strategy to earn 20 - 60% on $LUNA with minimal risk
https://twitter.com/shivsakhuja/status/1472621429690494976?s=20
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Examples of arbitrage plays:
β’ Buy a synthetic / wrapped asset for a discount and trade it in for the original asset elsewhere
β’ Take advantage of pricing inefficiencies to buy on one DEX and sell on another.
+++
Make sure to account for tx costs when arbitrage-ing.
Examples of arbitrage plays:
β’ Buy a synthetic / wrapped asset for a discount and trade it in for the original asset elsewhere
β’ Take advantage of pricing inefficiencies to buy on one DEX and sell on another.
+++
Make sure to account for tx costs when arbitrage-ing.
46/
Here's another thread by @CryptoHarry_ explaining some $LUNA arbitrage strategies:
Here's another thread by @CryptoHarry_ explaining some $LUNA arbitrage strategies:
https://twitter.com/CryptoHarry_/status/1469686840533815296?s=20&t=txoaPxVW35ACSaNydm5Apw
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If you spot the right kinds of arbitrage, you can use flash loans to make huge returns with minimal risk.
You can borrow millions of $ to profit from arbitrage opportunities.
This is significantly trickier tho - I haven't even tried this yet.
If you spot the right kinds of arbitrage, you can use flash loans to make huge returns with minimal risk.
You can borrow millions of $ to profit from arbitrage opportunities.
https://twitter.com/shivsakhuja/status/1478879414553231362?s=20
This is significantly trickier tho - I haven't even tried this yet.
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48 tweets later, there's still a ton more I could cover, but this covers a lot of #DeFi strategies, ideas, tools and instruments.
I'd love to know what strategies you want me to cover. Comment below π
48 tweets later, there's still a ton more I could cover, but this covers a lot of #DeFi strategies, ideas, tools and instruments.
I'd love to know what strategies you want me to cover. Comment below π
49/
I write threads covering #crypto and #DeFi strategies, protocol explainers, tips and tricks.
Here's a mega-thread with my past posts, organized for convenience π
#WAGMI
I write threads covering #crypto and #DeFi strategies, protocol explainers, tips and tricks.
Here's a mega-thread with my past posts, organized for convenience π
https://twitter.com/shivsakhuja/status/1470898910218440708?s=20
#WAGMI
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I've never written such a long thread before. It took a very loooong time to write.
Would really appreciate a β€οΈ and RT on the original post if you found this helpful π
I've never written such a long thread before. It took a very loooong time to write.
Would really appreciate a β€οΈ and RT on the original post if you found this helpful π
https://twitter.com/shivsakhuja/status/1491679865040359426
β’ β’ β’
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force a refresh
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