3 Yield Farming Stablecoin Strategies
Yield farming stablecoin strategies provide high returns on low volatility digital assets. In this article I explore three ways to generate yield on USD stablecoin holdings.
For an introduction on what stablecoins are and the different stablecoins compared see this article: https://jamesbachini.com/stablecoins/
Stablecoin Strategies Video
Solidly is a decentralised exchange which launched at the start of 2022 on the Fantom blockchain. Solidex is a 3rd party aggregator for the Solidly exchange. It provides an easy way to access the liquidity pools and earn governance tokens on top.
APR’s at launch were over 50% on stablecoin pairs like USDC/FRAX & USDC/MIM. Currently they are ranging around 15%.
Note that rewards are made up of two governance tokens which would need to be sold to realise the yield and returns are not auto-compounding.
It is also worth noting that Solidly has drawn so much liquidity that other liquidity pools can offer exceptional returns at other AMM’s. The same USDC-FRAX pool on SpiritSwap currently offers 19.5% APR.
From a risk perspective Solidly is a new protocol and there is a greater risk of smart contract bugs and hacks.
Anchor protocol is the golden gem of the Luna/Terra ecosystem. Stake UST to earn nearly 20% on your holdings.
The benefit of Anchor is that it hasn’t changed much since launch. The product has offered these APY’s for some time and if you want a set and forget option this should be attractive.
The risk factor on Anchor is mainly based around regulation and litigation. The SEC recently won a case requiring the holding company to provide evidence and documentation in relation to US security laws. Sceptics have also suggested the whole UST/LUNA ecosystem is unsustainable and has a ponzi like structure.
In my opinion the protocol is safe as long as there isn’t a massive collapse across crypto markets. Some of the UST is now backed by Bitcoin and this could cause problems if Bitcoins value drops relative to the USD.
Multifarm is an application which collects market data on liquidity pools across different blockchains. Yield farming opportunities come and go, if you want to get the very best APR’s, especially from a risk/reward perspective you’ll need to be moving funds around a lot.
Sites like Multifarm provide a good starting point for researching different pools and looking for the best EV farms.
Rotating funds to the latest high yielding pools can be done on a opportunistic time frame or it can be scheduled quarterly for example.
Stablecoins offer a low volatility digital asset which can be staked to earn high yields of around 15-20% currently. With the lack of basis trading and lending demand currently across crypto markets these pools fill up quickly diluting the rewards.
In an ideal world funds would be diversified over the top few pools at any given time. Risk should always be calculated and assessed to discount the returns and rank opportunities accordingly.
I hope this serves as a good introduction to yield farming stablecoins.
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Disclaimer: Not a financial advisor, not financial advice. The content I create is to document my journey and for educational and entertainment purposes only. It is not under any circumstances investment advice. I am not an investment or trading professional and am learning myself while still making plenty of mistakes along the way. Any code published is experimental and not production ready to be used for financial transactions. Do your own research and do not play with funds you do not want to lose.