$ReFi — additional farming deployment
> by our lead farmer, Huf Haus
Hello again to current and future $ReFi investors.
As many of you will know, we have already deployed 25 ETH in 3 farming strategies, split between low risk, medium risk, and high risk plays.
Yesterday we deployed an extra 10 ETH into 2 new strategies. This brings our total farming wallet to over 35 ETH (+ earnings) within 72 hours of launch. We want to grow this exponentially.
In this update, I want to explain what we just did and why.
- Adding to the low-medium risk bucket
In our efforts to spread risk across platforms and protocols, yesterday we bridged 7 ETH to the Terra Network.
The breakdown is as follow:
3 ETH to LUNA (the native token on several Terra protocols)
4 ETH to UST (the algorithmic peg to the US dollar)
The first thing we did was head over to the Anchor Protocol and bonded our LUNA and minted bLUNA, which means it was in a format where we can borrow UST against it. Why would you do that? Well, because Terra Network currently pays you to borrow UST from them! 🤯
So much like a conventional loan, we pay a Borrow APR, but earn a distribution APR that is greater than this. We thus took a loan with a 40% LTV, and had extra UST to earn yield on.
Now that same UST (which we get paid to borrow!) can be combined with the other 4 ETH worth of UST we bought, and staked to earn a nice 19.47% APY.
This is already an amazing return for simply depositing Stablecoins (UST), with very minimal risk. However, we have done some stuff on top of that which I’ll explain in a sec.
There is another benefit here, by minting bLUNA, we automatically start earning governance tokens of the Anchor Protocol (ANC).
These same ANC will be claimed periodically and staked in the ANC-UST liquidity pool to earn us 87.7% APY on that.
So, altogether we had 4 ETH into UST (approx $15,500) plus the loaned amount of UST ( approx $4800) and we could just sit comfy and earn 20% on that.
BUT, our $ReFi investors expect more than that from us right!
So, here’s what I did next. See when we deposit UST, we get aUST, which is essentially a receipt saying “Yo, you got this money, it’s just on deposit right now, but y’all can go use that aUST somewhere else”.
Cue: Mirror Protocol. Mirror Protocol is a rapidly growing trading venue where users can trade synthetic versions of U.S. Equity stocks (both long and short). Rather than having UST sat “just earning 20% APY”, we used the aUST as collateral to enter a short farm on Coinbase stock earning an additional 22% APY. However, from my derivatives trading days, I know better than to have risk to a stock price, and so we bought an offsetting number of shares to be delta neutral. We then used any spare UST we had to long farm the same stock and earn some additional yield.
For doing this, we get a very nice APY uplift on our deposited UST, with minimal risk (collateral ratios were set at the most conservative numbers eg. 250% on the short farm).
The added benefit is that for providing liquidity on the Mirror protocol, we will also earn MIR tokens, which will also be staked!
All in, on the 7 ETH I expect us to net about 160% APY across all these strategies, with the added benefit that if $LUNA continues it’s fantastic growth (as cautious investors flee to stablecoins), then we’ll also get a nice uptick when we come to swap our bLUNA back into LUNA, and finally back into ETH for farming redistributions.
2. Adding to the high-risk bucket
As discussed in our last article, we want to be cautious in deploying capital to DAOs unless there is a compelling opportunity and it fulfils our 10+ criteria outlined previously.
Every DAO from $OHM has seen massive drawdowns as investors de-risk and move to stablecoins. We benefit from this given we are providing liquidity to several stablecoin farms. However, we also want to be tactical when the risk:reward ratio is in our favour.
$TIME is the second largest DeFi 2.0 protocol, with over $1bn in TVL. The price of their native token has collapsed from almost $10,000 through to $3,200 at time of writing. Many of the biggest names in DeFi and Crypto Twitter have bought the dip. Wonderland founder and pioneer, Daniele Siesta also commented on this last night.
This tweet and the subsequent rebound went out around the same time we bridged and started allocating. We got a great entry on our 3 ETH, around $3,100, and will be earning the APY in a comfortable manner knowing that the runway is large, the yield is sustainable for now, and that the DAO has a very reputable treasury management policy, which has significantly de-risked.
Just to clarify, that APY is currently sustainable for a whopping 397.6 days, and the backing per $TIME is $1700 so our downside is limited.
This is a buy and hold for us. We will take rebases when price recovers but for now we’re very comfortable with the new position.
As always, we’ll keep you posted on our next moves and actively monitor the farming positions.
Originally published here