$ReFi — Farming Strategy Update
From our lead farmer, Ξ hufhaus.
Hello to all existing (and future) $ReFi investors.
Your farming investment committee of 4 people has been busy today discussing various strategies. In this update I’d like to share our proposal for how to allocate the initial treasury funds.
In the spirit of decentralisation and community, we’d like your input before deploying the capital.
We believe in diversifying risk across blockchains, and across DeFi protocols. The investment thesis is to split funds into different risk buckets.
- Low Risk budget (volatility <5%)
- Medium Risk budget (volatility between 5–40%)
- Higher risk budget (volatility >40%)
This article aims to break down what we plan to do in each.
1. Low Risk budget
We think it is wise to put up to 40% of the treasury proceeds into Stablecoin farming (USDt/USDc/DAI), which is essentially paying a much lower APY, but has the dual benefit of being very liquid, low risk, and allows us to have capital available for opportunistic farming opportunities.
The favoured solution by the team is bridge ETH to the Fantom Network and purchase USDc. This will then be used to add liquidity to the fUSDT/DAI/USDC pool, which currently yields 30.61%.
This is higher than what is available on the Terra network and other stablecoin opportunities.
Whilst 30% APY is not the most exciting, this is simply a prudent strategy within risk budget 1. Unlike other FaaS providers, we want to be nimble and have extra capital at hand in the event of heightened volatility in ETH, BTC and other assets.
2. Medium Risk budget
Here we can go to the bread and butter of DeFi farming, which is to add liquidity to certain popular pools. Amongst DeFi farmers, there is a growing consensus that Fantom is about to go through a period of exponential growth in terms of Total Value Locked. The charts below shows the trend in TVL on Fantom, which has grown steadily in the past few months, but is still way behind the $11.5bn TVL on Avalanche.
We suggest adding a further 15% to the FTM/TOMB and FTM/TSHARE liquidity pools, and holding these for a minimum of 30 days.
The APY is 5905.801% and 1306.032% respectively and has remained fairly constant for the past few weeks. TOMB is algorithmically pegged to FTM so it’s a levered play on the Fantom ecosystem. TSHARE is the governance token of Fantom.
You are still exposed to the risk of impermanent loss (mark-to-market volatility) based on where FTM and TOMB trade, but as you can see the TVL’s are quite high and we only represent a small amount of the LP at this stage.
3. High Risk budget
We understand that our investors want to compound their gains and as such we would look to deploy the remaining 30% of the treasury capital into higher yielding DAOs, this time on another network, the Avalanche network.
Whilst many are familiar with $TIME and $SPELL, we think there are currently better opportunities. The $TIME chart is below:
When evaluating a DAO, we want to answer the following questions:
- What are they doing/coding above and beyond the original $OHM fork smart contract?
- What is the TVL?
- What is the roadmap?
- How engaged is their community? What kind of discussions are taking place in their discord and telegram?
- Do they have plans for utility for the native token?
- What is their rebase policy? Is there an warm up epoch policy?
- What is their treasury management policy? Are they active in de-risking? What are the mint discounts at? Where have they been previously?
- How much of the liquidity do they own? What is the circulating supply? How much is staked?
- What is the current APY runway? What is the backing per coin?
10. What is their marketing strategy and how sustainable is it?
With all these in mind, we concluded that we would put the remaining capital in MidasDAO. Some stats are presented below:
You can see that MidasDAO has achieved quite consistent growth over the past month in particular. Compared to many of their peers, they are growing in a steady and consistent manner. This is a testament to the approach the team have made. Just twitter search $CROWN (the native token) and you’ll see the levels of engagement.
We also like that their dashboard has an estimate feature. For example, if you were to put $10,000 in today, then assuming constant prices and APY we can expect over $119,728 back in 30 days, representing at 19.7x in just 30 days.
Hold this for the runway of 56 days and things get very exciting ($739,021).
The key here is to be nimble and stay on top of your higher risk investments. This means actively participating in governance votes that take place on Discord, following the relevant channels and asking meaningful questions at their Spaces events.
So to recap:
- Low Risk budget -> 40% of capital -> expecting 30% APY+
- Medium Risk budget -> 30% of capital -> expecting up to 6000% APY
- Higher Risk budget -> 30% of capital -> potential for extremely nice compounded gains.
The team are looking at a bunch of other strategies including derivatives based plays, and some other protocols on the Binance smart chain and upcoming ones on Solana too.
We look forward to your feedback and starting farming!