DeFi Alpha

⍺ DeFi Alpha: Using Opyn’s ETH Zen Bull Strategy To Capitalize On Low Volatility

Trade with up to 25X Leverage using Kwenta Decentralized Perpetuals on L2

  • Yields: Up to 22% APY on Stablecoins, 4-27% APY on ETH and BTC

DeFi Alpha is a weekly newsletter published for our premium subscribers every Friday, contributed by Defiant Advisor and DeFi investor at 4RC, DeFi Dad, and our Degen in Chief yyctrader. It aims to educate traders, investors, and newcomers about investment opportunities in decentralized finance, as well as provide primers and guides about its emerging platforms.

We’re sending out this first Alpha newsletter of 2023 to all our subscribers!

Motivation

Two years ago, DeFi investors could easily name every yield farm without much effort. It was a simpler time, where only a handful of protocols presented limited options to trade, lend, borrow, stake, and provide liquidity.

But times have changed! From 2019 through the end of 2021, DeFi TVL grew a staggering 250X, and although DeFi liquidity contracted in 2022, we see this sector gearing up to expand again in 2023 and beyond.

In order to keep up with the latest and greatest DeFi yields, we bring you this weekly guide.

This is DeFi Alpha by The Defiant.

Any information covered in DeFi Alpha should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions. Any mention of a token or protocol should not be considered a recommendation or endorsement.

Yield Alpha

Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.

  • ETH: 26.2% APY with pETH/ETH Curve LP staked in Convex via Concentrator
    • This yield is accrued in aCRV + trading fees compounded in the LP.
    • To participate, one must Deposit into the pETH/ETH Curve LP here (not stake).
    • Then, one must stake/deposit the Curve LP under the ETH-pETH vault under aCRV Vaults on Concentrator.
    • Caution: pETH is an ETH derivative minted when a user borrows against their NFT and burned when they decide to repay their loan. pETH has a risk of depegging.
  • BTC: 4.51% projected vAPR with the Curve HBTC+WBTC LP staked in Convex
    • This yield is accrued in CRV, CVX, and trading fees.
    • To participate, one must first deposit HBTC and/or WBTC into this Curve factory pool and then stake the LP here in Convex.
  • MATIC: 12.7% APY with 50/50 MaticX-WMATIC LP on MeshSwap
    • The yield is backed by validator rewards using the MaticX liquid staking derivative + MeshSwap trading fees + MESH rewards + SD rewards.
    • To participate on Polygon, I use the Stader MaticX dApp to mint MaticX.
    • Then, I deposit into the MaticX-WMATIC pool on MeshSwap and stake the LP.
  • ATOM: 20.5% APR staking ATOM with Keplr Wallet on Cosmos Hub
    • The yield earned is issued in ATOM.
    • To participate, one must set up a Keplr Wallet, go to the Cosmos Hub validators on Keplr Dashboard, rank by APR, choose a validator, and click Delegate.
    • Then, I specify how many ATOMs and follow the prompts to Delegate.
  • AVAX: 7.3% APY staking AVAX with ankrAVAX by Ankr
    • This yield is issued AVAX.
    • To participate, one must deposit AVAX for ankrAVAX here on Ankr.
  • SOL: 7.56% APY staking SOL with stSOL by Lido
    • This is backed only by Solana staking yield.
    • To participate, one must deposit SOL here or buy it on a Solana DEX.
  • FTM: 4.7% APY staking sFTMx liquid staking derivative by Stader
    • The yield is issued in FTM rewards, as sFTMX is earning FTM via validator rewards to support Fantom’s PoS network.
    • To participate, one must deposit FTM for sFTMX here on Stader.
  • Stablecoins: 17.86% APR with the USDC/DOLA LP staked in Velodrome on Optimism
    • This yield is accrued in VELO.
    • To participate, one must deposit and stake in this USDC + DOLA LP.

Please be aware we intentionally do not report the highest yield rates because often, those yields are less sustainable and, in some instances, artificially elevated due to high inflation tokens or fewer LPs participating.

Starter Tutorial

Trade with up to 25X Leverage on Kwenta Decentralized Perpetuals on L2

Kwenta is the flagship frontend for Synthetix Perpetual Futures on the Ethereum L2 Optimism. Kwenta is an advanced decentralized perpetual futures AMM. After the recent collapse of FTX, there’s no better time to learn about how these decentralized perps work!

With Kwenta, there are a number of unique features for DeFi-native traders.

  • Synthetic assets: Trade synthetic assets (Synthetix synths), allowing for a wide range of exposure to asset classes, including Ethereum-based crypto tokens, non-EVM tokens, forex such as the EUR, and commodities such as gold and silver
  • Near Instant Transactions: Trade with low gas fees and near-instant transactions thanks to the Optimism L2
  • Leverage: Trade with up to 25X leverage
  • Chainlink Oracles: Trade against reputable Chainlink oracle-protected price data
  • Advanced Orders: Trade with familiar CEX features such as limit and stop market orders
  • Self-Custody: Always a good reminder users trade directly from their Ethereum wallets and don’t need to trust any centralized intermediaries like a CEX
  • Open Source: Kwenta smart contracts are audited, and the code is open source
  • Lower Fees: Kwenta Perpetual Futures V2 will (soon) reduce fees by around 80%
  • sUSD Supported: All markets are priced in the Synthetix stablecoin sUSD and require sUSD deposited into margin accounts

While decentralized perpetuals are not new to the market, Kwenta presents another promising DeFi-powered exchange with leverage to meet the needs of traders who have been burned by CEXs like FTX. Kwenta aims to be the preferred trading venue for synthetic assets on Optimism.

One of the standout features of Kwenta is their “cross margin accounts,” allowing traders to trade any market by using a single margin account. With isolated margin, users are forced to risk all of the collateral in a single market and can only protect collateral from liquidation by withdrawing the collateral they wish to protect. 

With cross-margin accounts, traders are able to select the amount of collateral they are comfortable risking when opening a position, while unused collateral will stay safe in the cross-margin account if liquidations should occur. With cross-margin accounts, traders can trade different markets with a single “account,” meaning fewer transactions and a simpler user experience.

Because Synthetix Perps V2 markets are currently in closed alpha here, today I’ll show how I can create a new cross-margin account with Kwenta Futures and potentially long or short in a market with up to 25X leverage.

Before we get started, please be aware of these risks.

  • Smart contract risk in Synthetix and Kwenta contracts
  • Front-end spoof attack on the Kwenta website
  • Oracle failure or manipulation
  • Exploits in economic design of Synthetix or Kwenta protocols
  • Governance attacks or admin key compromise
  • Systemic risk in DeFi composability
  • Liquidation if trading with leverage
  • Pegged assets like sUSD can potentially de-peg

Step 1: First, I go to the Kwenta Futures -> Cross Margin tab here and connect my Ethereum wallet to the Optimism network. If I need sUSD, I can use the Kwenta Spot Exchange here.

Step 2: Next, assuming I already have sUSD in my Optimism wallet, I can Create Account in the top right corner and follow 3 steps to create an account, approve spending sUSD, and then deposit 50 sUSD or more to open my first position. This will require 3 transactions in total.

Step 3: Now, with my cross-margin account funded, I can choose a market I want to go long or short in, using the top left dropdown menu. Let’s assume I want to long 100 sUSD of ETH with 2X leverage. After I edit Leverage to 2.00x, I can Set order size to 100 so I’m only using 50 sUSD of my margin account and click the green button Long, followed by a final Confirm Order.Disclaimer: This is not financial advice. This example is purely for informational purposes only. It is not a recommendation or endorsement to go long ETH with leverage. This tutorial assumes one is familiar with how leveraged trading works. If not, learn more about the Basics of Futures Trading in the Kwenta docs.

Degen Tutorial

Using Opyn’s ETH Zen Bull Strategy To Capitalize On Low Volatility

Using Opyn’s ETH Zen Bull Strategy To Capitalize On Low Volatility

Crypto markets started 2023 in the green after a ruinous 2022.

If you believe that ETH will continue to make steady progress to the upside, Opyn’s recently-launched Zen Bull strategy lets you accumulate more ETH as long as the price stays within the price bands of the strategy between rebalances.

Here’s how it works.

When users deposit ETH, the funds are split:

  • 50% is deposited in Opyn’s ETH Crab strategy, which aims to generate delta-neutral returns by being short ETH volatility.
  • 50% is used to create a 2x leveraged long position on ETH.

Essentially, Zen Bull maintains 100% ETH exposure while capturing additional returns from the Crab strategy as long as markets remain relatively calm. Opyn’s documentation calls it ‘ETH with benefits.’

 A few things to note:

  • Zen Bull is optimal for periods of low volatility with an upward bias. The strategy can become unprofitable if volatility spikes, driving ETH out of the price bands.
  • One would ideally look to open a position when the price bands are wide (volatility is high) and look to close it when the bands are narrow (low volatility), thereby capturing a favourable move in Squeeth.

According to the website, Zen Bull has delivered an annualized 12% since launching three weeks ago. Of course, this was during a period when markets traded in a relatively tight range, resulting in optimum conditions for the strategy.

To participate, simply head over to https://squeeth.opyn.co/strategies/bull and deposit ETH.

🪂Airdrop Alpha

In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.

Blur Airdrop 3

Blur has announced that its third airdrop round will be geared towards users to place bids on the marketplace. You can find our step-by-step tutorial from last month here.

ACX Airdrop

Cross-chain bridge Across Protocol has launched its ACX token.

If you followed our guide and participated in the referral and bridging program, you can claim your tokens here.

Arbitrum Odyssey

Layer-2 rollup Arbitrum kicked off a months-long program on June 21.

Participants will be able to claim NFTs based on completing various tasks.

Week 1 was Bridge Week and we walked you through it in a previous issue of DeFi Alpha.

In a previous Degen Tutorial, we covered a series of on-chain quests.

We’ll be watching for the Odyssey to resume, now that Nitro is live.

Optimism Airdrop

Congratulations if you followed our guide betting on a hunch that Optimism would release a token!

In a previous DeFi Alpha, we covered a series of on-chain quests that could make you eligible for the next round of $OP airdrops.

$OP is Live! Claim guide here.

  • Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.
  • Aztec – an open source L2 bringing scalability and privacy to Ethereum, with zkSNARK proofs, having launched a private DeFi yield aggregator zk.money.
  • DeFi Saver –  a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer
  • Francium – leveraged yield farming similar to Alpha Homora but on Solana, one can choose to simply lend single assets or hold leveraged LPs to potentially earn an airdrop here
  • Jupiter – The leading DEX aggregator by trading volume on Solana
  • Lens Protocol – A decentralized composable social graph, underpinning an emerging landscape of Web3 social media dApps including Lenster, Lenstube, and Orb
  • LI.FI – A cross-chain bridge and DEX aggregator protocol
  • Liquality – A cross-chain, non-custodial browser extension wallet, similar to MetaMask but with more integrations for swapping cross-chain.
  • Magic Eden – The leading NFT marketplace by trading volume on Solana
  • Nested – a crypto social trading platform built on Ethereum and other chains
  • Opyn – one of the OG decentralized options protocols on Ethereum, with major investors that signal a token has to be in their future. Buy/sell puts or call options to earn a possible future airdrop.
  • Polymarket – one of the strongest players in the DeFi prediction market vertical, bet on an outcome related to crypto, politics, sports and more or add liquidity
  • Polynomial – A newer DeFi derivatives vault creator, built on Optimism
  • Sense Protocol – A decentralized fixed-income protocol on Ethereum, allowing users to manage risk through fixed rates and future yield trading on existing yield bearing-assets
  • Set Protocol – one of the earliest DeFi protocols yet to launch a token for DeFi asset management, popular for TokenSets and known for powering IndexCoop indexes
  • Socket (formerly Movr) – their bridge aggregator Bungee moves assets between chains, finding the cheapest, fastest route
  • StarkNet mainnet is live! Bridge and swap some tokens for a potential airdrop. Guide here.
  • SudoSwap has released details about its SUDO token and airdrop. If you followed our guide from August 12 and created some trading pools, you should be eligible!
  • Volmex – Volmex is a tokenized volatility protocol, similar to the VIX but ETHV
  • Wormhole – a cross-chain messaging protocol known for bridging between Solana, Terra, Polygon, BSC, Avalanche, Fantom, and Oasis
  • Yield Protocol – a newer protocol for fixed-term, fixed-rate lending in DeFi, backed by Paradigm, one might earn a future airdrop by lending DAI or USDC 
  • Zapper – participate in Zapper trading, lending, providing liquidity, or yield farming; given the Zapper Quests and NFT Rewards program, it can be surmised that if Zapper ever releases a token, this is one way they might do a retro airdrop
  • Zerion – same can be said speculated about Zerion; if they ever release a token, they’re likely to reward those who interacted with their smart contracts swapping, lending, providing liquidity, or borrowing
  • ZigZag – a DEX on zkSync that’s announced an upcoming airdrop.
  • zkSync is a Layer 2 scaling solution for Ethereum that uses zero-knowledge proofs to enable scalable low-cost payments. Bridge some assets and do some swaps for a potential airdrop. Guide here.

The information contained in this newsletter is not intended as, and shall not be understood or construed as, financial advice. The authors are not financial advisors and the information contained here is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided is accurate but neither The Defiant nor any of its contributors shall be held liable or responsible for any errors or omissions or for any damage readers may suffer as a result of failing to seek financial advice from a professional.

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