⍺ DeFi Alpha: Tips for Rethinking Your DeFi Portfolio in Bearish Times
DeFi Alpha is a weekly newsletter published every Friday, contributed by Defiant Advisor and DeFi investor at 4RC, DeFi Dad, and our Degen in Chief yyctrader. It aims to educate traders, investors, and newcomers about investment opportunities in decentralized finance, as well as provide primers and guides about its emerging platforms.
Two years ago, DeFi investors could easily name every yield farming opportunity without much effort. It was a simpler time, when only a handful of teams had launched with any liquidity to trade, lend, borrow, provide liquidity, or even demonstrate new primitives such as no-loss savings by PoolTogether.
But times have changed! DeFi liquidity has grown to hundreds of billions of dollars across Ethereum with new burgeoning DeFi economies taking shape on EVM-compatible chains such as Polygon and Avalanche and non-EVM chains such as Terra and Solana. Any given day, a new DeFi or NFT project is launching. So after writing and creating countless DeFi guides and tutorials since 2019, we at The Defiant agreed it’s time we publish a more detailed weekly guide on all you need to know to keep up with new and old yield earning opportunities.
This is DeFi Alpha by The Defiant.
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🙌 Together with:
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📈 Yield Alpha
Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.
ETH - Earn 6.87% net APR with Instadapp Lite’s ETH vault for leveraging stETH ~3X
This yield is accrued by borrowing ETH against stETH collateral in Aave, then converting ETH to stETH to gain an increased amount of ETH POS staking rewards.
To participate, go to the Instadapp Lite dApp (ETH) to deposit ETH or stETH.
BTC - lend WBTC and borrow recursively WBTC to hold a 2.10X WBTC position via, netting 17.31% APR on FODL Finance
This yield is issued 6.32% APR in Compound rewards + 16.43% APR in FODL rewards.
To participate, I would deposit into this FODL farm.
Be aware holding a leveraged position like this could be liquidated if I do not maintain a healthy LTV if ever the borrowing rate far exceeded the supply rate.
AVAX - Lend AVAX on Aave using Yield Yak for leveraged lending at 9.9% APY
This yield is issued in AVAX, paid by borrowers on Aave.
To participate, check out this page on YieldYak.
SOL - Lend stSOL with Francium farmers on Solana to earn 11.53% APY
This yield is backed by 6.19% APY interest paid by borrowers on Francium + 5.2% APR from staking rewards thanks to Lido’s stSOL.
To participate, check out the Lending tab on Francium under stSOL.
LUNA - LP with LUNA-LunaX by Stader in TerraSwap to earn a net ~28.9% APY
This yield is backed by auto-compounding LUNA staking rewards thanks to LunaX by Stader earning 7.1% APY, trading fees on TerraSwap, and 25.4% APY in SD token rewards.
To participate on Terra, deposit 50% of LUNA into LunaX and then go here to TerraSwap to pair 50/50 LUNA<>LunaX as an LP and passively collect trading fees, staking rewards, and claimable SD tokens, without impermanent loss.
MATIC - stake MATIC with Stader’s MaticX at 8.53% APY
The yield is backed by validator rewards using a MATIC liquid staking derivative.
To participate on Polygon, check out the Stader MaticX dApp.
ATOM - mint pATOM and stake the pATOMs on Ethereum to earn more pATOMs on pSTAKE at a rate of 12.02% APR
The yield earned is issued and claimable in pATOM and this yield is expected to hold steady for weeks/months unless pSTAKE changes their liquid staking model.
To participate, one must first mint a 1:1 representation of ATOM as pATOM on Ethereum by using the pSTAKE dApp under Deposit
Then, deposit/stake pATOMs to get stkATOMs and earn 12.02% APR
FTM - stake with the first FTM liquid staking derivative by Stader, earning 13.5% APY
The yield is issued in FTM rewards, as sFTMX is earning FTM via validator rewards to support Fantom’s PoS network.
To participate, deposit FTM to receive sFTMX here on Stader.
Caution: This is in beta with a recommended limit of 1000 FTM / staker.
HBAR - stake with the first HBAR liquid staking derivative by Stader, earning 53.5% APY
The yield is issued in HBAR rewards, as HBARX is earning validator rewards.
To participate, deposit HBAR to receive HBARX here on Stader.
Caution: This is in beta and withdrawals will not be possible until July 2022 or later.
Stablecoins - Earn up to 77% APR with oUSDC-oUSDT LP staked in Meshswap on Polygon
This yield is issued in trading fees + MESH rewards.
To participate, one must deposit into the oUSDC-oUSDT LP here and then stake the LP token. See more details in today’s Degen Tutorial below!
🪂 Airdrop Alpha
In each DeFi Alpha guide, we update a list of the most obvious DeFi protocols that have yet to announce and/or launch a token.
Arch Finance - a protocol for comprehensive indices that provide access to differentiated sources of market risk.
Arbitrum - one of the leading L2 solutions for Ethereum with live dApps such as Uniswap, SushiSwap, Hop, and more. A token may be imminent, according to this tweet.
Concentrator - an app for boosting Curve LP yields by harvesting and auto-compounding rewards earned via Convex
DeFi Saver - a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer
Edge Protocol - the first money market on Terra, looks like Aave or Compound
Euler Finance - a non-custodial protocol on Ethereum that allows users to lend and borrow almost any crypto asset, just launched but has yet to launch a token.
Francium - leveraged yield farming similar to Alpha Homora but on Solana, one can choose to simply lend single assets or hold leveraged LPs to potentially earn an airdrop here
Hop Protocol - Congrats if you earned the HOP airdrop announced this week! Learn more here.
Katana DEX - Farm/stake the AXS/WETH LP or SLP/WETH LP on this forked AMM on Ronin to earn WRON (wrapped RON), so this is a guaranteed reward but for a token not yet trading
Jupiter - The leading DEX aggregator by trading volume on Solana
LI.FI - A cross-chain bridge and DEX aggregator protocol
Magic Eden - The leading NFT marketplace by trading volume on Solana
Nested - a crypto social trading platform built on Ethereum and other chains
Optimism - Congrats if you followed our guide betting on a hunch that Optimism would release a token! On Apr 26th, they announced their OP token coming in May with the 1st of 4 retroactive airdrops. Learn more here.
Opyn - one of the OG decentralized options protocols on Ethereum, with major investors that signal a token has to be in their future. Buy/sell puts or call options to earn a possible future airdrop.
Polymarket - one of the strongest players in the DeFi prediction market vertical, bet on an outcome related to crypto, politics, sports and more or add liquidity
Polynomial - A newer DeFi derivatives vault creator, built on Optimism
Set Protocol - one of the earliest DeFi protocols yet to launch a token for DeFi asset management, popular for TokenSets and known for powering IndexCoop indexes
Socket (formerly Movr) - their bridge aggregator Bungee moves assets between chains, finding the cheapest, fastest route
Terraswap - One of the most popular AMMs on Terra
Volmex - Volmex is a tokenized volatility protocol, similar to the VIX but ETHV
Wormhole - a cross-chain messaging protocol known for bridging between Solana, Terra, Polygon, BSC, Avalanche, Fantom, and Oasis
Yield Protocol - a newer protocol for fixed-term, fixed-rate lending in DeFi, backed by Paradigm, one might earn a future airdrop by lending DAI or USDC
Zapper - participate in Zapper trading, lending, providing liquidity, or yield farming; given the Zapper Quests and NFT Rewards program, it can be surmised that if Zapper ever releases a token, this is one way they might do a retro airdrop
Zerion - same can be said speculated about Zerion; if they ever release a token, they’re likely to reward those who interacted with their smart contracts swapping, lending, providing liquidity, or borrowing
🧑💻 Defiant Starter Tutorial
Tips for Rethinking Your DeFi Portfolio in Bearish Times
Quick reminder: None of this is financial advice. I may hold some of the tokens referenced but it is simply to give real examples of how I might use strategies to earn passive yield on.
This week, I thought it was appropriate to change things up a bit. We regularly scour every farm available in DeFi to bring you some of the highest and often easiest yields to farm. By now, you’ve probably figured out that we’ll never run out of opportunities to share. So this begs the question, is the real challenge finding where to earn yield or is it identifying what long term holds you’re comfortable holding onto while earning yield?
Over the last few weeks, the markets have been brutal for us degens who are long anything. Whether crypto markets find a bottom soon, it’s about time to take a good hard look at what you’re holding, whether it’s worth holding any longer, and how to maximize yield in bearish times.
So here are a few quick tips to consider on how to make the most of these ugly markets!
Step 1: First, I would recommend making sure you understand where all your tokens and investments are collectively by using on-chain portfolio dashboard trackers like Zerion and Zapper.
Step 2: From here, I think among the tokens I’m holding, i. what’s working, ii. what’s changed, iii. what’s not working, and iv. what’s dead. In doing so, here’s how I might organize my portfolio into super basic categories:
70-80% - Long term SoV tokens: For years, this has been ETH. For many others, it’s BTC, and still for that many more, it’s often a strong L1 token with well understood network effects to keep growing. This is the largest allocation in my portfolio because during bearish trends, many narratives tend to die down, niche projects lose confidence in the markets, and some projects die off from a lack of incentive due to such small market caps or the crypto Twitter masses deeming a project to be dead.
15-25% - Stablecoins: If you’re fortunate enough to have taken profits and sold at higher prices (which I won’t assume is NOT the case for everyone), holding onto stablecoins in DeFi is not only valuable for investing in tokens at lower prices but also earning passive yield on stablecoins, which we tend to focus on in DeFi Alpha each week!
5-15% - Platforms and Category Kings: Beyond L1s, I allocate a much smaller percentage to what I believe can be dominant players in certain categories of DeFi or Web3 or whatever niche you’re investing into in crypto. These tend to be tokens that did well in the bull run and showed lots of resilience, with noticeably more developer activity, and well understood memetic themes about their token’s value accrual. One example in this category might be CRV because you see Curve as a dominant AMM, used by a majority of DeFi teams to build deep liquidity, with easily understood value accrual for the CRV token. Another example might be betting on AAVE because it offers voting rights (or exposure of some kind) to one of the most popular and liquid DeFi money markets in the world.
1-5% - Moonshots and Mispriced Tokens: Lastly, a smaller part of my portfolio is composed of a few very niche investments where I may believe I understand something truly mispriced in the market, but simultaneously I could be wrong and lose it all, which is why I’ve given the example of such a smaller allocation of my portfolio. In bull runs, these sorts of bets might mean you just make less money than if you were invested in another “blue chip” token, but in bear markets, if you’re right, you truly look like a genius and if you’re wrong, the project goes to 0.
Step 3: Lastly, after doing the much harder work of deciding what I should or shouldn’t continue to hold in my portfolio, I get to work maximizing passive yield. That means make every last token in my portfolio as productive as possible, without oversizing a position in any single dApp that could cause me to lose a greater percentage of my portfolio to an exploit.
Staking: For any PoS long term holds like ETH, I personally choose stake anywhere from 25%-33%, mainly because I do have some fears of liquid staking protocols like Lido or Rocketpool being exploited in the future. I have other friends who stake 100% of their ETH, or LUNA or FTM, etc.
Like-Asset LPs: There’s a rabbithole to go down in terms of strategies I might use if I hold ETH and other volatile assets, where I might be comfortable accumulating either token thanks to impermanent loss, but assuming most prefer to earn maximum yield while not losing your principal, I tend to focus on pools with near equivalent assets such as stablecoin LPs, ETH-staked ETH pools, and any other LP where tokens are nearly equivalent in value or very correlated such as WBTC-ETH. For these LPs, I tend to prefer Curve, Uniswap v3, and Balancer.
Single-sided LPs: This is a newer DeFi money lego, pioneered mainly by Bancor. Bancor v3 will soon launch where one can deposit any token into a single-sided LP and they’ll pair BNT to enable a liquidity pool. It means I can lend a single token but not risk incurring impermanent loss. It’s a radical new offering (which is still experimental) and it’s coming soon!
Vaults: Nothing beats easy. And nothing’s easier than depositing single tokens (or LPs) into vaults which automate farming strategies, such as Yearn or newer risk-managed vaults like Spool.
Stablecoin Farms: Well, you know where to go to learn about stablecoin farms, earning maximum yield on over a dozen chains with our weekly guide on DeFi Alpha!
🦍 Defiant Degen Tutorial
Earn Up To 77% APR On Stablecoins With Meshswap on Polygon
Meshswap is a decentralized exchange (DEX) and lending protocol on Polygon that’s running a liquidity mining program for its $MESH token.
You can earn rewards by providing liquidity to the various pools pictured above, or by supplying single assets to the lending protocol.
The highest yielding stablecoin farm is oUSDC-oUSDT that’s yielding 77% APR.
The oAssets listed on the platform are native to the Orbit Bridge, a custodial cross-chain bridge. oMATIC, oETH, oUSDC, oUSDT, and oDAI are minted by bridging MATIC, ETH, USDC, USDT, and DAI via the Orbit Bridge to the Polygon network.
If you’d prefer not to take exposure to oAssets, you can consider the single-asset deposits yielding 35%-50% APR, pictured above, or familiar LP pairs like WETH-USDT, DAI-USDT and DAI-USDC.
We’re going to deposit some stablecoins into the DAI-USDC pool in today’s tutorial.
Let’s get started.
Step 1: Connect your Metamask wallet to the Polygon network. If you’re using Polygon for the first time, check out this tutorial on how to do this.
Step 2: Bridge USDC and/or DAI. We’re going to use the official Polygon bridge, though there are plenty of other options like Multichain, Hop Protocol, Synapse, Celer etc.
If you’re looking to provide liquidity to the oAsset pools, use the Orbit Bridge instead.
Gas fees on Polygon are paid in its native MATIC token. First-time users can get some from this faucet. It is recommended that you obtain some more MATIC to avoid running out of gas at an inopportune moment. You can do so on any of the major DEXs like Sushi.
Step 3: Add liquidity on Meshswap. You can deposit equal amounts of USDC and DAI or deposit a single asset and let the protocol swap it for you. Be mindful of slippage if you choose this option.
You’ll be asked to approve spending your assets. Confirm the transactions to receive your Liquidity Provider (LP) tokens.
That’s it! You’re now earning $MESH rewards that you can claim at any time.
$MESH can also be locked for up to 12 months in exchange for vMESH, which carries governance rights and influences the allocation of MESH rewards to the various liquidity pools.
Warning: Degen farms carry a higher risk of potential exploits. The published audit notes various issues that the project claims to have addressed and the protocol currently has nearly $600M in TVL.
The official Polygon Twitter account promoted it.
However, there’s always a risk when depositing assets in new and unproven protocols. Ape at your own risk!
📰 Elsewhere on The Defiant
Tuesday Tutorial on The Defiant YouTube: This week, Robin explored bridgeless cross-chain swaps with Hashflow and the chance to earn a potential airdrop.
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The information contained in this newsletter is not intended as, and shall not be understood or construed as, financial advice. The authors are not financial advisors and the information contained here is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided is accurate but neither The Defiant nor any of its contributors shall be held liable or responsible for any errors or omissions or for any damage readers may suffer as a result of failing to seek financial advice from a professional.