Quick thread on why you shouldn't be moving your stablecoins around for the 'best' #YieldFarming opportunities too often, and you may well be losing money. Grass is not always greener. 🧵👇 
All big stablecoin yield farms trend to 10-25%.
Why? @anchor_protocol $UST $ANC pegs 20%. If anything dips below 20%, people move to anchor, and so a natural arbitrage occurs. People accept lower APRs for perceived less risk (dollar backed token farms e.g. USDC vs algo like UST)
Why? @anchor_protocol $UST $ANC pegs 20%. If anything dips below 20%, people move to anchor, and so a natural arbitrage occurs. People accept lower APRs for perceived less risk (dollar backed token farms e.g. USDC vs algo like UST)
Or accept higher risk (algo stablecoins on newer protocols, on newer chains). Risk premium.
You see a new farm open (e.g. $STG @StargateFinance). APR is high (say 40%), but considered risky and new and people are slow to move. As perceived safety improves, people move over.
You see a new farm open (e.g. $STG @StargateFinance). APR is high (say 40%), but considered risky and new and people are slow to move. As perceived safety improves, people move over.
token being farmed gets dumped harder than exuberant buy pressure, APR settles into the range described above. You either stick around or move onto the next farm offering marginally more yield.
What you don't account for is
slippage between stablecoin swaps,
slight peg variations at the time of swapping or entering new stablecoin pools (99.7 FRAX to 99.99 USDC for example),
gas costs
bridge fees
swap fees
claim+dump costs
slippage between stablecoin swaps,
slight peg variations at the time of swapping or entering new stablecoin pools (99.7 FRAX to 99.99 USDC for example),
gas costs
bridge fees
swap fees
claim+dump costs
This all will easily lead to people losing 0.1-1% in the value of their stables in dollar terms every move.
Sounds like very little, but break it down.
If a farm is offering 20% APR, that's roughly 0.05% daily.
Sounds like very little, but break it down.
If a farm is offering 20% APR, that's roughly 0.05% daily.
If you're moving every week for better APR which drops within days, you may earn e.g 0.3% more over a week vs your previous farm. But actually, because of costs involved, you're now down.
Exceptions to this are farms which provide APR boosts through users locking non-stable tokens, such as @CurveFinance and now @Platypusdefi $PTP vePTP (which has the best stablecoin ponzinomics out there).
Solution? Just think twice, gone are the the DeFi summer days of 1000s% APR for over 24hrs to make such things irrelevant. If you don't perceive something to stay high APR for long, probably stick with your current farms. Or consider accumulating and staking some $PTP LONG-TERM.
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