Dec 14, 2022 at 05:39The crypto market is finally getting a little stirred up about a month after several crashes, the biggest of which was the FTX fall. As Bitcoin and Ether start to rise in value, other altcoins start to rise as well. Usually, against this backdrop, many investors start looking for low-liquid assets that have a chance of increasing in value in the future. Or they turn their attention to another way to make money: yield farming.
Today, we want to talk more about the latter option. But first, let’s talk briefly about what it is.
What is crypto yield farming?
Yield farming is one way to earn interest on idle cryptocurrency; i.e., that you bought and hold. The basic concept is that by lending your digital assets to the platform’s liquidity pool, you will receive a certain amount of Annual Percentage Yield (APY) in exchange (in the form of tokens or part of fees).
How to earn money from yield farming?
When investors are positive about a particular cryptocurrency, in the long run, the easiest investment strategy is to HODL (buy and hold) them and wait for a multiple price increase (which may not happen). Although, of course, it is possible to use borrowed funds.
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From a financial point of view, a more reasonable strategy would be to use such tokens to generate income (but no one can guarantee that the received rewards will not start to depreciate or the exchange itself will not collapse, alas).
Therefore, investors either move their tokens and coins to platforms offering the highest APYs, usually on a weekly or daily basis. Or act as liquidity providers, with investors providing their tokens necessary for an automated market-maker (AMM) to offer cryptocurrency swaps to traders. This is similar to day trading in that you need to constantly monitor your positions and the current returns of various strategies.
It takes a lot of time, energy, and research. You need to make sure that you are betting, providing credit, and placing the right cryptocurrencies on the right platforms.
Pros and cons of yield farming
Pros
- Spreading investments across multiple strategies, losses from one strategy will not affect other investments.
- This strategy can yield a higher return than rates or lending.
Cons
- Working with yields takes time, and energy to research.
- With liquidity pools, there is a risk of smart contract vulnerabilities, which can lead to increased risks of financial loss and fraud.
- In some countries, tax returns for income farming are usually done manually, which can be a long and complicated process.
How can I make money on this?
From the above, it is clear that, in a nutshell, yield farming is an investment strategy that involves betting or lending crypto-assets for profit.
Stephen TCG, founder of Polygon-based yield aggregator Dojo, shared his seven favorite yields in BTC and ETH on Twitter. But remember that the author of the publication does not guarantee anything. So any action is at your own risk.
JPEG’d ETH
- pETH-ETH : $10.5M total liquidity
- pETH is a CDP (Collateralized Debt Position), mined under NFT.
- pETH-ETH LP (liquidity pool) at Convex Finance: 31% vAPR (annual percentage rate).
- pETH-ETH LP on Beefy Finance: 33% APY (annual percentage yield).
Balancer wstETH-rETH-sfrxETH
- Balancer advertises 344.59% – 857.66% APR.
- Beefy Finance offers 14% APR.
Lido Shuffle – Beethoven X
- wstETH-wETH on optimism: 11.18% APR
- Stimulated by Lido.
- Both assets are technically interest.
- WETH is actually bb-rf-aWETH (Beets Reaper Aave Boosted wETH).
DefiLlama yields strategy
- Securing wETH on BENQI (+0.05%).
- Borrow AVAX at 60% LTV (-2%).
- Farm AVAX at CIAN (+23%).
- Total APR: 21%.
- Available for placement: 34,000 AVAX.
- BenQI TVL: $107M.
- Cian TVL: $17M.
Venus Protocol (BTCB/BNB)
You can collateralize BTCB (+0.59%), then borrow BNB 60% LTV (+0.2%) and farm BNBx-BNB on ApeSwap (+6.5%). Total: 7.2% APY.
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Apeswap pool TVL: $1.3M.
Stader Labs BNBx LTV: $111M.
Venus TVL: $734M.
Moonwell DeFi Artemis Lending
- Supply APY: 28%.
- Supplied: 40 BTC.
- Supply APY: 0.85% Rewards APY: 27%.
- Rewards Token: GLMR & WELL.
- Moonwell Artemis TVL: $24M.
- You will need to sell the farm rewards.
Platypus BTC.B Pool
- Rewards APY: 23%.
- Rewards: PTP & WAVAX.
- Pool TVL: $1.4M.
- 30 days Average APY: 21.5%.
- Historical APY for this pool has been around 10-15%.
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