Pretty sure I’ve seen CT say things like “Why yield farm when you can put them in T-Bills for 4-5% and its safe?”
Well, if you only find yields under 4-5% then you probably aren’t yield farming right.
A🧵 about the art of yield farming with some alpha below:
Well, if you only find yields under 4-5% then you probably aren’t yield farming right.
A🧵 about the art of yield farming with some alpha below:
1/ What is yield farming? You first need to understand this.
How do protocols generate revenue?
DEXs → % of the swap fees
Money Markets → % of the interest charged to borrowers
Derivatives → % of the fees used to open/close positions or from funding rates
How do protocols generate revenue?
DEXs → % of the swap fees
Money Markets → % of the interest charged to borrowers
Derivatives → % of the fees used to open/close positions or from funding rates
2/ What is needed for the above? Liquidity.
3/ The above is mainly for DEXs, but money markets have a similar flow.
Notice something missing?
Protocols that earn more fees are able to incentivize higher APRs for liquidity providers (LPers), hence incentivizing more liquidity into the system.
Notice something missing?
Protocols that earn more fees are able to incentivize higher APRs for liquidity providers (LPers), hence incentivizing more liquidity into the system.
4/ As a protocol, there are many ways to incentivize liquidity.
1️⃣ Sharing revenue with LPers ( GLPers on @GMX_IO )
2️⃣ Emitting a native reward token for LPers ( @ThenaFi_ )
3️⃣ Promising future airdrops for LPers ( @0vixProtocol )
1️⃣ Sharing revenue with LPers ( GLPers on @GMX_IO )
2️⃣ Emitting a native reward token for LPers ( @ThenaFi_ )
3️⃣ Promising future airdrops for LPers ( @0vixProtocol )
5/ This is 1 of the main reasons a lot of tokens are inflationary, although there are protocols that employ different methods to curb inflation (or should I say, get holders not to sell).
6/ Some of them below:
1️⃣ Penalty on harvesting rewards ( @RDNTCapital )
2️⃣ Issuing revenue to token stakers ( @RDNTCapital )
3️⃣ veTokens / bribes for more rewards for pools ( @Equalizer0x / @CurveFinance )
4️⃣ Allocating majority of rewards to native token LPs (most farms)
1️⃣ Penalty on harvesting rewards ( @RDNTCapital )
2️⃣ Issuing revenue to token stakers ( @RDNTCapital )
3️⃣ veTokens / bribes for more rewards for pools ( @Equalizer0x / @CurveFinance )
4️⃣ Allocating majority of rewards to native token LPs (most farms)
7/ As a yield farmer, your goal is to either accumulate tokens you’re bullish on for free or to profit purely by selling the reward token into ETH / USD or whatever you want.
Majority farm tokens end up like this. $QUICK
Majority farm tokens end up like this. $QUICK
8/ I won’t be going in on the technicals of yield farming in this thread otherwise it’ll be a 50 page article.
But here is a framework to consider before entering any positions:
But here is a framework to consider before entering any positions:
9/ Safety Parameters 🦺
• Are there audits?
• Is the team doxxed / known?
• Is this a fork of an existing protocol or a completely new one?
• What’s the TVL?
• How does the team make money?
• Are there audits?
• Is the team doxxed / known?
• Is this a fork of an existing protocol or a completely new one?
• What’s the TVL?
• How does the team make money?
10/ Which pools do I enter? 🤔
• Assets on hand, stables or bluechips?
• Will IL outpace your rewards if you’re farming non stable pools?
• Which pools have the highest emission / lowest TVL ratio?
• How early are you to the farm?
• Deposit fees and time to breakeven?
• Assets on hand, stables or bluechips?
• Will IL outpace your rewards if you’re farming non stable pools?
• Which pools have the highest emission / lowest TVL ratio?
• How early are you to the farm?
• Deposit fees and time to breakeven?
11/ Dump🗑️ or accumulate👨🌾?
• Bullish token?
• How early are you again?
• Is exit liquidity you or someone else?
• Will there be any buyers if you buy now to farm native pools?
• Any upcoming catalyst / narratives that will justify you accumulating instead of selling now?
• Bullish token?
• How early are you again?
• Is exit liquidity you or someone else?
• Will there be any buyers if you buy now to farm native pools?
• Any upcoming catalyst / narratives that will justify you accumulating instead of selling now?
12/ Sizing 💲
• What percent of your portfolio are you deploying?
• What is the likelihood that you will still be fine if the protocol gets exploited?
• Is there enough liquidity for you to dump on to justify your position?
• What percent of your portfolio are you deploying?
• What is the likelihood that you will still be fine if the protocol gets exploited?
• Is there enough liquidity for you to dump on to justify your position?
13/ Duration ⌚
• How long will this farm / strategy last vs your expectations?
• How long till CT apes find out and dilute your strategy?
• Are there other better strategies with better risk-to-reward ratios coming up soon?
• How long will this farm / strategy last vs your expectations?
• How long till CT apes find out and dilute your strategy?
• Are there other better strategies with better risk-to-reward ratios coming up soon?
14/ Mentality🧠and On-Chain Metrics📊
• Is the TVL constantly growing?
• Who else is farming this besides you, and are they accumulating or dumping?
• Is this farm hard to enter or under the radar(different chain etc), if so then how long till it gets noticed by others?
• Is the TVL constantly growing?
• Who else is farming this besides you, and are they accumulating or dumping?
• Is this farm hard to enter or under the radar(different chain etc), if so then how long till it gets noticed by others?
15/ Mentality🧠and On-Chain Metrics📊
• Is the yield sustainable? Where does the yield come from?
• Is the protocol hyped on Twitter and is everyone shilling it?
• When will you exit, after a certain % of profits?
• Is the yield sustainable? Where does the yield come from?
• Is the protocol hyped on Twitter and is everyone shilling it?
• When will you exit, after a certain % of profits?
16/ Will yield farming make you a millionaire in a year?
Probably not.
But it will provide you good passive income as long as you manage your risks (and IL) accordingly and avoid getting rugged.
Probably not.
But it will provide you good passive income as long as you manage your risks (and IL) accordingly and avoid getting rugged.
17/ @bartcheeks once mentioned, if you don’t have 5-6figs minimum, then yield farming is probably not worth your time.
You'd be better off shitcoining / trading or dedicating your time to your job to grow your bags.
You'd be better off shitcoining / trading or dedicating your time to your job to grow your bags.
18/ Some frens who are gud farmers:
@delucinator > Notorious farm and dumpooor but gud strats
@Forgiving15 > Rarely gets rugged
@bizyugo > Whale with 30 farms or more
Also wrote a thread on what the top 10 Debank wallets are farming/doing last month.
@delucinator > Notorious farm and dumpooor but gud strats
@Forgiving15 > Rarely gets rugged
@bizyugo > Whale with 30 farms or more
Also wrote a thread on what the top 10 Debank wallets are farming/doing last month.
19/ Its all about risk management, capital allocation and preservation.
Sure if you sell the rewards, you might miss the 5-10x pump.
But hey, profits are profits and you're already outperforming majority of people who are buying tops and selling bottoms.
Sure if you sell the rewards, you might miss the 5-10x pump.
But hey, profits are profits and you're already outperforming majority of people who are buying tops and selling bottoms.
20/ You don't see many CT peeps talking about farms because the more apes in a farm, the less rewards for others.
I'm nice so I'll share some I'm in although I have a higher risk tolerance so pure FYI.
Am a degen so I won't run away from degen farms 🤣
I'm nice so I'll share some I'm in although I have a higher risk tolerance so pure FYI.
Am a degen so I won't run away from degen farms 🤣
21/
🟢 Thena (16% on frxETH-ETH)
🟢 Ipor (50% on stables with 0.5% deposit fee)
🟢 Level Finance Mezzanine Tranche 90% on their GLP
🟢 GMX GLP 20%
🔴 Zyber (15-20% on stables)
🔴 Solid Lizard (40% on BTC-ETH)
🟢 Thena (16% on frxETH-ETH)
🟢 Ipor (50% on stables with 0.5% deposit fee)
🟢 Level Finance Mezzanine Tranche 90% on their GLP
🟢 GMX GLP 20%
🔴 Zyber (15-20% on stables)
🔴 Solid Lizard (40% on BTC-ETH)
If you guys are interested, I will write a part 2 on this, diving deeper into some of the technicalities and different strategies that yield farmers can use.
Do let me know in the comments what you guys would like to read!
Do let me know in the comments what you guys would like to read!
If you like the content, do sub to @C4dotgg for market and project recap+alpha, and also like & retweet the below.
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