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I’ve been getting 36% APR holding only stablecoins and using only Aave and Quickswap. Here’s how.

My idea was to use the stablecoins to borrow ETH or similar, and to stake that on LP. As said in the title, I’ve been using Aave and Quickswap. Uniswap could work too, at least for larger sums. In the last month, with the crab market going on, it has worked pretty well.

Here is a writeup of what I’m doing and the risks involved: [https://atiselsts.medium.com/experiments-with-defi-a-strategy-for-reducing-volatility-risks-e7925dc44d8a?source=friends_link&sk=null](https://atiselsts.medium.com/experiments-with-defi-a-strategy-for-reducing-volatility-risks-e7925dc44d8a?source=friends_link&sk=null)

I’m reposting this the weekly discussion as it did not get much attention there, and because I haven’t seen this strategy discussed yet, at least not in this exact form.

What do you think?

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23 Comments

  1. tl;dr;

    “I started playing with DeFi in June, 2021. The returns have been variable, but they are on the ballpark of 0.1% per day.”

    Read if you want to learn more…there…fixed it

  2. You can minimize your risk with a slight tweak to your strategy – when you put your borrowed WETH into a pool just choose a pair that moves similarly to ether rather than pairing with a stablecoin, that way if the market jumps up in value you’re much less exposed to impermanent loss.

  3. You took three biggest risk of DEFI (smart contract risk, IL risk, liquidation risk), and put them all together in one “safe” strategy. Kids, don’t try this at home 🙂

    ​

    >these APR returns come with a far less risk, and do not require timing the market!”

    This is not true. Risk of owning a crypt is just a volatility, you don’t time the market – just hold.

    Risk of your strategy is IL, as you’ve stated yourself. This IS timing the market. If ETH will go up – you lose (ie you owe more value, and have less ETH than in the begging). If ETH will go down – you also lose, as you’ve just sold some of you USD to buy more of falling asset.

    This will work only in a side going market, like we have right now. So it is “timing the market”.

    Also, liquidation is not funny. This together with IL makes your strategy very risky in my book.

  4. 36% is good but your risk is too high. What I’m currently doing is this: I have BUSD, added liquidity on dopple finance, got the LP tokens, using these tokens, I’m farming on beefy finance for 18% APY. Little to no risk with market fluctuations

  5. You are still exposed to the volatility of the borrowed non stable assets and IL. Risk is higher than if you own those borrowed assets since you are now exposed to the risk of getting liquidated too…

  6. would it not make more sense to borrow usdc or usdt and the buy eth with that usdc. The problem you have at the moment if the eth price goes up, your loan to value will also go up. If eth goes up to fast you won’t have enough collateral for your borrowed eth.

  7. I have tried reading comments if there is a consensus on safety of this play. To me it seems a bit risky if it’s not a crab market.

    I am doing a fairly conservative play with my eth I am messing around with on polygon. Lending out my eth on aave and borrowing usdc to put in a usdc dai pool on quickswap. I have thought about Mai-usdc but not sure I understand enough about Mai and how it keeping it peg to USD. Not sure I want another iron usdc situation.

    I have tiny lp in usdc eth and matic eth just try and understand the basics of lp and IL a bit more. I don’t think apy vision is that accurate in calculating my losses and gains

  8. What’s the benefit of using stablecoins to borrow ETH? Why not just buy ETH directly and then put it in the USDC/ETH pool. Because you have to over-collateralize the aave loan, 2/3rds of your money is just sitting there.

  9. Yea, defi is fun. Just stake it in the Mai-USDC from Mai, for a 34% APR with 0.5% deposit fee. Or, USDC-Dai from JetSwap for a 66% APR (it just launched, so probably won’t last, but no deposit fee so you can just move on to the next one).

    Beefy and KogeFarm lists both as auto-compounding vaults. KogeFarm has a significantly lower performance fee, but are also less established.

  10. “Borrowing a cryptocurrency (instead of buying it) fully protects from the risk of the coin losing its value.”

    Can someone explain this to me? When you repay the loan, is it a fixed amount of ETH for example or the value of USD when you borrowed?

  11. thanks…dont defi too much …. stick to staking but I am thinking about delving soon into deeper waters….may vey well try something like this…appreciate the effort you made and the share! Best to ya.

  12. Thanks for the read! I still wonder, when you say that you react in time to top up the collateral, do you manually or in an automated manner? I started reading about defi a week ago i hope this is not too noob of a question.

I want to take a moment to talk about the exchange and the timing of its release.

Does ledger help protect against funds being drained from bad actors on contracts with infinite token allowance?