DeFi Alpha: Get Paid To Trade Perps On Kwenta

Featured Yields: Up to 85% APR on Stablecoins, 74% APR on ETH

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. It is meant to be highly actionable and shareable.

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.

Latest Developments

Before we get started, here are the top headline-grabbing events from this week that every savvy DeFi investor ought to keep on their radar.

Yield Alpha

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

ETH: Up to 74.4% APR looping ETH 4X on Radiant Capital on Arbitrum
- This yield is accrued in ETH borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged ETH/ETH position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 81.6%.
- One must deposit ETH into Radiant here and loop 4X here + zap into an LP staked for 1-12 months (1 month = 4% net APR vs 12 months = 81.6% net APR).
- Caution: This is a leveraged ETH position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
WBTC: Up to 55% APR looping WBTC 4X on Radiant Capital on Arbitrum
- This yield is accrued in WBTC borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged WBTC/WBTC position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 51%.
- One must deposit WBTC into Radiant here and loop 4X here + zap into an LP staked for 1-12 months.
- Caution: This is a leveraged WBTC position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
MATIC: 14% APY with a 3X MaticX/MATIC recursive staking position in Cian
- The yield is backed by validator rewards using MaticX as collateral, and looping borrowed MATIC against the MaticX.
- To participate on Polygon, one can follow the prompts to deposit into the MATICX/MATIC Leveraged Staking strategy here on Cian.
ATOM: 20.6% 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.
BNB: 13% APY with the BNB/BNBx LP on Wombat
- This yield is issued in BNB staking yield and trading fees.
- On BSC, one can deposit BNB for BNBx here on Stader.
- Then, one can deposit BNBx here on Wombat and opt to DEPOSIT & STAKE.
AVAX: 40.5% APY with sAVAX/AVAX recursive staking position in Cian
- The yield is backed by validator rewards using sAVAX as collateral, and looping borrowed AVAX with Aave.
- To participate on Avalanche, one can follow the prompts to deposit into the sAVAX/AVAX Recursive Staking – Aave strategy here on Cian.
SOL: 6.8% APY staking SOL with stSOL by Lido
- This is backed by SOL staking yield.
- To participate, one must deposit SOL here or buy it on a Solana DEX.
FTM: 6.22% APR staking FTM via a Beefy Finance vault
- The yield is issued in FTM rewards.
- To participate, one must deposit FTM here on Beefy.
Stablecoins: Up to 85% APR looping USDT 4X on Radiant Capital on Arbitrum
- This yield is accrued in DAI borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged USDT/USDT position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 85% APR.
- One must deposit USDT into Radiant here and loop 4X here + zap into an LP staked for 1-12 months.
- Caution: This is a leveraged USDT position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.

Please be aware we do not always report the highest yield rates because some high yields may be less sustainable due to high inflation token rewards or fewer LPs participating.

Tutorial

Earn Optimism Trading Rewards By Using Synthetix Perps

Disclosure: DeFi Dad holds the KWENTA token and was a seed investor in Polynomial. This is neither a recommendation nor an endorsement to buy KWENTA or any token. This tutorial is for informational purposes only and should not be the basis for any investment decisions.

One of the pioneers of DeFi, Synthetix, just launched their Perps Optimism Trading Incentives program, starting last week on April 19th. This program aims to encourage trading activity for Synthetix Perps on the Ethereum L2 Optimism by allocating OP rewards to traders across these flagship frontends for trading, all based on fees paid by traders.

Kwenta

Polynomial

Decentrex

dHEDGE

We’re currently in Week 2 of this 20-week OP rewards program.

100k OP rewards were distributed to traders during Week 1.

100k OP rewards will be distributed to traders this Week 2 (beginning April 26th).

Next week, the week of May 3rd, another 100k OP rewards will be distributed.

Then, starting May 10th for 17 weeks, 300k OP will be rewarded weekly!

What’s even wilder is that Kwenta, the original team incubated to build a frontend for Synthetix Perps and currently the leading perps platform by trade volume on Synthetix, is offering an additional 30k OP in rewards for Kwenta traders through the completion of this program, as well as KWENTA token rewards according to their recent Mirror post.

Trading Rewards on Kwenta

Today, I’ll demonstrate how I might start earning OP + KWENTA by trading on Kwenta! Keep in mind, one could earn a share of the same rewards, minus 30k OP + KWENTA rewards per week on the other 3 platforms mentioned above.

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

Smart contract risk in Synthetix and Kwenta

Systemic risk in DeFi composability

Stablecoins such as sUSD are capable of de-pegging

Front-end spoof attack on the Kwenta dApp

Liquidation if I open a short position or trade with leverage on Kwenta

Step 1: First, let’s assume I want to remain delta neutral and capture the OP + KWENTA rewards through a basis trading strategy, while getting paid by a potentially positive funding rate. Funding can be likened to an interest payment in that it represents a percentage of your position size, after taking into account the impact of leverage, that is paid or received at regular intervals.

In regards to the basis trading strategy, this is where I would hold equivalent long and short positions that equate to 0, while earning the OP + KWENTA rewards, and hopefully with a positive funding rate. An example would be for me to open a long and short position in ETH simultaneously. For this example, I’ll plan to open a 1x ETH short position on Kwenta while holding a spot long position in ETH. Thankfully, I can do it all from Kwenta!

Let’s also assume I already have sUSD (the stablecoin of Synthetix) on Optimism L2. If not, I can use a bridge aggregator like Bungee to bridge sUSD from Ethereum Mainnet.

With my sUSD, I first go to the Kwenta Spot Exchange and swap 100 sUSD for ETH.

Step 2: Now I’m ready to open a 1x short ETH position with 100 sUSD to balance out my long exposure while collecting the OP + KWENTA rewards. To open the 1x short ETH position, I need to go to the Kwenta Futures -> Smart Margin tab -> ETH-PERP market. I do the following:

Deposit 100 sUSD of margin

Opt to open a Short position at Market price,with 100 sUSD

Leave leverage at 1.00

Click Open Position in red and follow the prompts on my wallet

If I’ve never used Kwenta, it’ll prompt me to create a Smart Margin Account, which requires at least 2 transactions to deposit my sUSD for trading into a smart contract, but the end result is opening the Short position.

I could use up to 50X leverage, and if one knows how to balance out that position while managing the risk of liquidation, one could go about doing that. What’s key here is my long equals my short position in value to start.

Step 3: Lastly, I can manage or close my position under the Kwenta Futures Smart Margin (see below) and if I go to Dashboard -> Rewards, I can claim my future OP rewards from Kwenta + Synthetix as well as KWENTA rewards.

Airdrop Alpha

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

$ARB is Live!

Layer 2 network Arbitrum has launched its ARB token.

Claim your ARB tokens here.

We’ve been tracking Arbitrum ever since last summer’s Odyssey, in addition to tutorials on GMX, Radiant, TreasureDAO and more, so our readers should certainly be eligible!

Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.

Arbitrum – one of the leading L2s for Ethereum. Claimable now!

Arrakis Finance – a trustless algorithmic market-maker, for auto-managing Uniswap V3 LPs on Ethereum, Polygon, Arbitrum, and Optimism

Base – A new Ethereum L2, incubated by Coinbase and built on the open-source OP Stack, that could potentially have a governance token in the future

DeFi Saver – a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer

DeFrag – instant loans for Treasure gaming NFTs on Arbitrum

Farcaster – a “sufficiently” decentralized social network where users will have the freedom to move their social identity between applications

Jupiter – The leading DEX aggregator by trading volume on Solana

LayerZero – An omnichain interoperability protocol, powering popular dApps like Stargate and Radiant Capital. Check out our airdrop guide here.

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.

Orb – one the leading mobile apps for Lens social media

Phaver – one of the leading mobile app for Lens social media

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 derivatives protocol built on Synthetix on Optimism, with a newly launched perps trading platform called Polynomial Trade.

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.

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 – The same can be said 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. The airdrop has been distributed. Check your zkSync wallet.

zkSync – zkSync Era, the first zkEVM is live! Airdrop guide in this week’s Degen Tutorial.

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.