PP vs Yield Farming Stablecoin Cryptos?

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blackomen
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PP vs Yield Farming Stablecoin Cryptos?

Post by blackomen » Mon Nov 15, 2021 3:42 pm

Would it be crazy to put a significant % of your nest egg in yield farming Stablecoin crytpos (like USDC, USDT, TUSD, Dai, etc) instead of the PP? There are quite a few of these "farms" yielding around 20% or more a year on cryptos that theoretically stay put at $1/coin.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by vincent_c » Tue Nov 16, 2021 2:18 pm

Why would it be crazy?
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by blackomen » Wed Dec 01, 2021 7:23 am

vincent_c wrote:
Tue Nov 16, 2021 2:18 pm
Why would it be crazy?
You seem quite confident.. care to explain your reasoning?
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by vincent_c » Wed Dec 01, 2021 10:04 am

Sorry, it was a failed attempt at being sarcastic.


But on a serious note, you're taking on protocol risk, various smart contract risks, stablecoin risk, regulatory risk just to name a few so the yield you get is appropriate I think. There are some good deals out there where if you do your due diligence it can reduce some of these risks and on top of that certain risks are insurable.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by bitcoininthevp » Thu Dec 02, 2021 8:28 am

Check out these ideas. It is a similar concept but much lower risk (returns are also less in some cases) as you dont have the risk of brand new protocols blowing up (which routinely happen), and counterparty risk is much better as well and can be limited to the CME.
bitcoininthevp wrote:
Wed Nov 17, 2021 9:53 am
1. Buy BTC, collar it.

Buy spot BTC and then sell a call against it and take the $ from that sold call and buy either a put spread or puts. Example for September 2022 expiration: Buy 1x $60k BTC, sell an 80k call against it, and buy 60k put for downside protection. You can get this for essentially no cost. The positioning here allows upside exposure to BTC up to $80k, and you have no risk of a downside move (since current BTC price is $60k).

2. BTC Cash and carry.

Buy spot BTC and sell futures against it. Example: Buy 1x $60k BTC now, and sell 1x BTC worth of September 2022 futures against it. September futures are currently $65k, so you make a nice $5k profit with no BTC price risk. This isnt as attractive as its been at "only" ~10%, but still nice "risk free" trade. This trade has gotten into the 20%+ range during bullish periods.

3. Sell BTC covered calls.

This one has some downside risk, but if you already have some BTC and already told yourself youd sell your BTC if it hits $100k, why not sell a $100k call against your BTC and make some additional $ vs just selling it? A September 2022 $100k call sold would give you $12,000 USD.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by vincent_c » Thu Dec 02, 2021 3:32 pm

bitcoininthevp wrote:
Wed Nov 17, 2021 9:53 am
1. Buy BTC, collar it.
Which options exchange are you looking at for such a good deal?
bitcoininthevp wrote:
Wed Nov 17, 2021 9:53 am
2. BTC Cash and carry.
If you take into account of the spread, then I just calculated the Dec 2022 contract and it's closer to 5% so once you factor in on and off ramp costs and various slippage it just reflects most BTC deposit rates.

But anyway, I don't know if futures prices are that efficient right now to determine the cost of carry for BTC when it comes to the opportunity cost from BTC lending or crypto yield farming. There are certainly ways to make more yield on BTC if you have the ability to assess risk differently to how the futures market is assessing it.

I also interpreted the question more targeted at stablecoin liquidity pool farming.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by bitcoininthevp » Tue Dec 07, 2021 1:26 pm

vincent_c wrote:
Thu Dec 02, 2021 3:32 pm
bitcoininthevp wrote:
Wed Nov 17, 2021 9:53 am
1. Buy BTC, collar it.
Which options exchange are you looking at for such a good deal?
Deribit has the most volume and was probably what I was looking at. Delta Exchange can have cheaper BTC options if you are on the buy side.
vincent_c wrote:
Thu Dec 02, 2021 3:32 pm
bitcoininthevp wrote:
Wed Nov 17, 2021 9:53 am
2. BTC Cash and carry.
If you take into account of the spread, then I just calculated the Dec 2022 contract and it's closer to 5% so once you factor in on and off ramp costs and various slippage it just reflects most BTC deposit rates.
The rate varies of course. It has been 20-30% annualized during particularly bullish periods.
vincent_c wrote:
Thu Dec 02, 2021 3:32 pm
But anyway, I don't know if futures prices are that efficient right now to determine the cost of carry for BTC when it comes to the opportunity cost from BTC lending or crypto yield farming. There are certainly ways to make more yield on BTC if you have the ability to assess risk differently to how the futures market is assessing it.
Lending and yield farming are both much higher risk IMHO. In the examples I provided above your counterparty can be the freaking CME. Of course anything could happen, but CME is much more trustworthy than some smart contract platform or Blockfi.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by vincent_c » Tue Dec 07, 2021 3:49 pm

bitcoininthevp wrote:
Tue Dec 07, 2021 1:26 pm
Deribit has the most volume and was probably what I was looking at. Delta Exchange can have cheaper BTC options if you are on the buy side.
Maybe you haven't checked it a while or it was just an anomaly, but I just checked and the OTM calls that you sell do not come close to being able to pay for the ATM puts.
bitcoininthevp wrote:
Tue Dec 07, 2021 1:26 pm
It has been 20-30% annualized during particularly bullish periods.
It's definitely something to take a look at next time, but I suspect that it would be more profitable to sell the bitcoin and repurchase at a lower price when it corrects than to essentially lend it out for a long period of time. Also remember that short BTC futures requires 100% margin and there's an opportunity cost to that. I know you're comparing against risk free rates but lending out at the risk free rate isn't capital efficient IMHO and although you say stablecoin farms are much more risky things I still think that you can determine a true risk free rate for capital in defi for example if you're lending on Anchor and then insuring against smart contract bugs/hacking/UST depegging you still end up with 13-14% APY.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by bitcoininthevp » Wed Dec 08, 2021 9:44 am

vincent_c wrote:
Tue Dec 07, 2021 3:49 pm
Maybe you haven't checked it a while or it was just an anomaly, but I just checked and the OTM calls that you sell do not come close to being able to pay for the ATM puts.
Markets fluctuate of course. Not all trades are available or as profitable at all times. BTC had a big pullback so calls are less in demand and puts are more in demand currently, for example.
bitcoininthevp wrote:
Tue Dec 07, 2021 1:26 pm
It has been 20-30% annualized during particularly bullish periods.
vincent_c wrote:
Tue Dec 07, 2021 3:49 pm
It's definitely something to take a look at next time, but I suspect that it would be more profitable to sell the bitcoin and repurchase at a lower price when it corrects than to essentially lend it out for a long period of time.
You can of course actively trade and time the market tops and bottoms. :)
vincent_c wrote:
Tue Dec 07, 2021 3:49 pm
Also remember that short BTC futures requires 100% margin and there's an opportunity cost to that. I know you're comparing against risk free rates but lending out at the risk free rate isn't capital efficient IMHO
None of what Ive outlined involved lending I dont think.

Yes short futures at the CME require higher margins. I suspect there might be solutions that drop that for certain "delta neutral" traders. But that is not my domain of expertise.
vincent_c wrote:
Tue Dec 07, 2021 3:49 pm
... and although you say stablecoin farms are much more risky things I still think that you can determine a true risk free rate for capital in defi for example if you're lending on Anchor and then insuring against smart contract bugs/hacking/UST depegging you still end up with 13-14% APY.
Yes, its funny that no matter what APR you quote for defi there is seemingly always another opportunity with higher returns and higher risk.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by ppnewbie » Tue Dec 21, 2021 11:35 pm

blackomen wrote:
Mon Nov 15, 2021 3:42 pm
Would it be crazy to put a significant % of your nest egg in yield farming Stablecoin crytpos (like USDC, USDT, TUSD, Dai, etc) instead of the PP? There are quite a few of these "farms" yielding around 20% or more a year on cryptos that theoretically stay put at $1/coin.
One question is exactly how is such a high yield being generated? I believe Peter Schiff was debating a crypto CEO and asked that question, which the CEO could not answer (second hand info which I heard on the Quoth The Raven podcast).

Basically something risky is probably happening with your dollars turned into stable coins.

Also great recent Bloomberg article on Tether which basically said it’s run by an interesting cast of characters and no one really knows what it’s backed by and what the founders are doing with the money they do have in reserves. If I recall the article correctly they have issued 48 billion Tether in the last year (or something along those lines).
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by vincent_c » Wed Dec 22, 2021 12:02 am

It varies but most of the time it is either due to an incentive that dilutes the holders of a certain token in addition to fees from providing liquidity or it is because lenders can lend directly to borrowers.
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Re: PP vs Yield Farming Stablecoin Cryptos?

Post by var » Sat Dec 25, 2021 11:58 am

blackomen wrote:
Mon Nov 15, 2021 3:42 pm
Would it be crazy to put a significant % of your nest egg in yield farming Stablecoin crytpos (like USDC, USDT, TUSD, Dai, etc) instead of the PP? There are quite a few of these "farms" yielding around 20% or more a year on cryptos that theoretically stay put at $1/coin.

Yes depends because security varies, depends on where you farm it can get hacked. There no SPIC or FDIC to cover the your funds.

IMO better off just holding 5%-10% BTC, ETH, etc. in private wallet. Use PP rebalances method when the crypto moons.
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