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Any suggestions for improving my yield farming flow? ~50% APY using Aave, Curve, and Beefy.

I’ve been wanting to get started with Defi – I am currently waiting on my withdrawal from Celsius. I’ve tried a couple small transactions and decided I want to try yield farming mostly on Polygon to save on fees since I’ll have a small account.

My hypothetical yield plan with current interest rates would be:

* Deposit MATIC to Aave (5.69%)
* Borrow against MATIC to get WETH (0.2%)
* Stake WETH on CRV tricrypto (3% WETH, ~11% matic, ~11% crv =25.5%)
* Stake tricrypto LP on beefy.finance (56%)

Total APY: 5.69%(collateral) + 81.5%(borrowed asset)

Then, taking just the interest rewards ->

* Stake CRV on beefy.finance (44%)
* Stake MATIC on Aave (4.5%) or Beefy as ETH-MATIC (69%)

Am I overlooking anything? I’m trying to avoid any pump and dump farm pairs/high risk LP’s. Am I on the right track?

What do you think?

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17 Comments

  1. If you are just starting with defi, wouldn’t recommend you try such a complicated setup. Most people already struggle with calculating the **risk** of LP and impermanent loss. The keyword here is **risk. The rule of thumb is – If there is a good deal with no risk(or returns > risk), someone would have found it.** So if there’s a way for 50% APY, it will definitely have more risk than 20% APY. Perhaps start with baby steps, not the full plunge like what you are suggesting now.

  2. Here are my thoughts:

    1. Not sure where you got the 0.2% for borrowing ETH, but right now borrowing in Aave is net negative. Right now I’m seeing 1.36% APY for borrowing ETH with 1.29% in MATIC rewards, which mean you are paying 0.07% for borrowing. That should be negative in calculating net APY.

    2. Beefy is an aggregator, meaning it just automatically compounds the reward you’re getting. So in your case you DO NOT get the rewards from both Tricrypto pool and Beefy. You either provide your LP tokens on Tricrypto OR Beefy, not both.

    3. This just my opinion (NFA) but borrowing a volatile asset like ETH is risky. If ETH ends up mooning the amount your going to pay also increases. And seeing that you’re providing liquidity, you’re sure to get a net negative here due to impermanent loss.

  3. remember dont borrow the token you are long aka bullish on. borrow a stable for the value for the token you want then swap to token. if you borrow the token and not a stable you are shorting.

  4. You’re on the right path as in you’re doing your DD to maximize your yield and basing your strategy on popular pairs. I’m unfamiliar with beefy but that 56% APY seems to speak to some underlying risks (aside from smart contract and rug pull risks). Maybe you have already considered your triple exposure to IL and volatility risks.

    Consider the correlation between MATIC<>WETH because if ETH shots up in price vs MATIC your position will be undercollateralized and liquidated. Assume you’re ok borrowing-wise. Your next risk is impermanent loss of WBTC volatility vs ETH and vice-versa.

    Lastly consider your time horizon and risk tolerance. There is no “one-click unwind” for this complex strategy. Good luck!

  5. Use stablecoins to start out with IMO. Way less risk when considering getting liquidated for any borrowed assets and impermanent loss. You could make some dumb mistakes using volatile assets like that starting out learning the ropes.

  6. Your idea is neat, not the best though, however the risks of your strategy are numerous, to derisk your strategy, I’d suggest change aave to cream, as your collateral factor of matic improves from 50 to 65, also on the borrowing side, borrow in the same portion of your pool, this way you’ll only lose IL, and not IL+ appreciation of the borrowed asset – portion of your borrowed asset in the pool
    So borrow like 33% wbtc,33%eth and some fiat stable coins.
    Another note is that, beefy gives you compounded, which usually never happens, only count on apr and never future apy.
    Overcollateralize at all the times ! So a 30% price movement wouldn’t liquidate you !
    Setting up bots, with notifications etc is always a plus.
    Also there is a better strat in town if you wanna keep matic.
    Just use polyquity, and farm PYQ, you can use adamant to automate it, and risks are easier to manage, plus no IMPL, the only note is that, pusd is usually at a premium, if you decided to enter the pool usdc/pusd, make sure to enter it, when it is at a good premium, and payback your loan when it is closer to peg, remember whenever there is a dip, the premium goes higher, as there will be a positive price pressure, from ppl getting liquidated.

  7. A few things to consider:

    Borrowing is riskier than it looks. Personally I don’t ever leverage in this way. At most I would make an exception for something like Alchemix, but only because there are no liquidations.

    Impermanent Loss is everywhere but you can use it to your advantage if you understand it. For example if I hold an asset that I really believe in; it can be a positive to stake it in a pool against a stablecoin in a sideways or stable market, because pool rewards plus gov token incentives;

    it can be a positive to hold this position in a declining market because it will automatically buy the dip converting dollars to the high conviction asset. But if the asset starts rising again or falls too far I will exit the pool. When/if the token recovers I have successfully bought the dip.

    In a bull market a high conviction asset in a pool against a stablecoin will automatically take profits for you. But you’ll still have to exit the pool towards the top, otherwise Impermanent Gains.

    If you have a staked pool of two assets that are both worth holding and they rise together, this is the ultimate win win scenario. Very little IL and staking rewards. But if the reward token is in the pool then you have to consider the rewards as inflation, not income. Very few tokens can sustain enough interest to hold their value through the inflation, especially if the macro market isn’t rising. Example Eth/Alcx was a very good pool, until the market downturn. Buying fails to exceed inflation the price declines.

    Bancor might be the only place where it’s truly safe For a passive LP because they protect against IL.

    High APY is not a good measure of risk. Some high yield farms are running on battle tested contracts in projects that are genuinely exciting. A better way to judge the risk is to look at the team. Do they have a history in DeFi? Anon or doxxed doesn’t matter but a long Twitter, Reddit, Discord history could mean a lot. Maybe one of the devs cut their teeth writing code for an already successful project or visibly participated in a discussion or community that advanced DeFi/Eth in some way? That would be encouraging. Is the project a fork and if so why is better than whatever it forked?

  8. Correlated pairs are a nice way to “minimise” IL. Say solana/serum. Both are part of the same ecosystem and move in a fairly correlated way so chances are they will rise and fall together, somewhat.

  9. no why would you borrow ETH to deposit into tri-crypto? If the price of ETH goes up then your tri crypto deposit won’t be able to pay back the loan, and you’re risking liquidation, and furthermore you’re only yield farming at most 50% of what you could if you didn’t deposit in aave.

  10. ~50% APR is great actually when you’re investing in something long term. Go live life and sleep easy knowing you’re providing value to an ecosystem that pays you back.

    If you’re really keen to bump it up, there’s a ton of degen yield farming ideas, but it’s super risky and very much luck + experience.

    All the best OP. Personally I’m pulling about 100% APR overall which is already a dream come true for me.

  11. Very well on the right track. I love how well you’re managing risks, no yield chasing and all. How do you identify high-risk LPs tho, do you use a risk parity system?

What if open source hardware makes Wallet Beta and Exchange super easy.

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