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!
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.
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 Vaultson 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.
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.
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.
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.
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
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.