What is it all about?
So… you’ve got some lousy interest from your traditional bank account. Something like 0.1-0.5% a year. They are actually taking your money and earn higher interest behind your back. With your money.
You can invest in stock market, bonds, etc., they say ±10% a year is a fine one for ordinary year. When do you remember an ordinary year in stock market lately?
So… you just wanna keep your money to grow against the inflation, and even make a passive income – you’ve come to the right place.
Cryptocurrency market is known for volatility, risk, anonymity, and more. However one aspect that really makes the global financial system to shake is DeFi, and more specifically – stablecoins.
I assume you have some basic knowledge about DeFi, you have your wallet set up and secured, and you know how to bridge assets between networks. If not – please withhold from doing further steps until you’re ready, there are plenty of materials out there to get you ready into the starting point.
Types of stablecoin yields
- Fixed APY (±19.5% APY) – Anchor Protocol in Terra ecosystem gives ±19.5% fixed APY. Don’t ask me how, it’s probably simple however I limit myself to certain level of trust, they’re here for long time, audited and popular – https://anchorprotocol.com/
- Variable APY from DeFi blue-chips (up to ±30% APY) – Curve, AAVE, Yearn, Sushi… well there’s no definition who should be in this list, some well-known protocols have established good reputation over the past years, such as Beefy & Balancer, so check yourself – https://defillama.com/protocols
- Leverage (up to ±100% APY) – you deposit some initial stablecoins collateral and earn initial yield for it. Then you take the ‘receipt’ and use it as collateral in other protocol (or same one) in order to borrow more stablecoins, and then you can repeat this process several times. Some apps will automate this for you (lets wait for it to be available in non-ETH DeFi network) – https://abracadabramoney.medium.com/our-ust-strategy-the-first-application-of-the-magic-potentialities-of-degenbox-ea35f13d6b5e
- Short-long-buy-neutral (up to ±45% APY) – Mirror protocol on Terra ecosystem lets you invest in some famous US stocks or commodities. It also gives you the option to get nice interest while farming those securities and even short them with interest. So if you farm long on some stock, and farm short on the same stock with the same quantity, you’re neutralizing the risk of this stock going high or low, and get only the rewards of farming, plus Anchor based APY – cause they also let you do it with Anchor aUST as collateral. Confused? Everyone does, read more – I’ve tried it myself.
The Stablecoins Yields Multilemma
I believe the Anchor APY (~19.5%) became the baseline for stablecoin yields, due to its growing popularity, stability, relatively safe and high APY.
From here you can go up by sacrificing one or more of the following factors – risk, gas fees (ETH network), lock period, deposit/withdrawal fees, variable APR (research & rotate every few days), leverage, lack of liquidity.
I tend to compromise on lock period and variable APR, to achieve better yields, however it’s up to you.
Ethereum Network –
Due to high fees on the past year, according to the time of writing, I’m totally ignoring ETH mainnet network. It’s not in my portfolio, I didn’t mention protocols like Uniswap, Convex, Maker and more in DeFi blue-chips paragraph (#2 above) since they’re on ETH network only, it’s out of the question.
Don’t even think of start calculating the high yield APY in auto-compounding protocols vs transaction fees… it’s gonna tie you up to those projects, you won’t have the freedom to switch to other opportunity when APY will drop or when you’ll need the money from some reason.
Just let’s wait for them to fork themselves into the side networks, there are valuable opportunities there.
Nice summary on stable coins yields and DeFi strategies. There are an overwhelming amount of projects and its seems like a full time job to continually find best yields due to the fluctuation factor. Lots platforms that offer super high yields seem scammy and you have done a great job of weeding them out. Do you offer portfolio management using yield strategies for stable coins and alts? I took a risk with Wonderland, and seems to be a solid project. Uncertain of next steps.
Hi, thanks. According to your comment – you’re on the correct path already, and I agree with your statements, mainly the one related to time consumption of those activities, a tradeoff indeed exists between yield and portfolio management (and other factors as well, risk and more.)
I can advise personally if you wish (email@example.com), however I more recommend joining a community and getting more knowledge and experience, maybe in addition if not only.
As to Wonderland – it’s a long story, I (again) agree with you about it, however uncertainty is not healthy on investing, and it looks like they’re pushing it to extreme these days (sport bettings??), I opted out meantime, left traces in my portfolio on purpose to join back in when it’s on track again, hopefully.