Project Serenity seeks to earn passive yield without exposing our funds to cryptocurrency volatility. As of late months of 2020, the project is able to take minimal risks and achieving 20% APY. This article summarises the strategies. We have a program that does the real-time calculations of the APY of each strategy. It can be used for investment and portfolio allocation references.
We neutralise risks by hedging, e.g centralised cryptoexchanges (CEX) likes Binance, or decentralised platforms like Compound. More details will be given out in future articles. Hedging minimises market volatity but does not eliminate the systematic risks of the crypto industry, nor does it protects investors the security risks. It’s still wise not to put all eggs in one basket. But some baskets are better than the others, for the same risks.
Uniswap: Providing liquidity into top pairs, and hedging the non-stable coin portion. The returns including trading fees and UNI mining rewards. The cost is the impermanent cost, estimiated based on the volatility of the pair (adding the one standard deviation of each token) for the last 7 days. The cost or return, as the case maybe, the funding cost or return of hedging the non-stablecoin token in Binance. If you do not wish to take martket volatility risk at all, consider USDC-USDT pair.
Balancer: The same as Uniswap. As of now, balancer has higher mining rewards given out in BAL weekly, but lower trading fees income compaired to Uniswap for major pairs.
Compound: Lending in one stablecoin and borrowing in another to mine COMP, and also arbitrage on lending and borrowing costs. The % borrowed is the final borrowing position, which should not be over 75%, and 50% to be safe.
Curve: Providing liquidity in Curve. This is passive and no action or strategy is required. The return is CRV mining rewards, trading fees and landing fees (for a lending pool). You can also further enhance your yield by locking some CRV tokens, up to 2.5x.
Pure Hedging in CEX: Purchasing a token and hedging (short) the same amount in Binance. This is usually done together with providing liquidity, but it can be done independently as well. If the strategy is executed independently, the Coin Futures of Binanes funding costs (returns) should be more accurate.
There are many other strategies that can yield higher returnes than the above. However, the risks of a platform is also to be considered. For instance, Sushiswap offers higher return for certain pairs; you can further deposit your liquidity pool tokens from Uniswap or Balancer into mStable and Harvest, to get another 5% to 10% yield. You can also try Cream, which offers higher yield than Compound and more choices of deposit principals. But these platforms are newer and have not stood the test of time.
There are also on-chain investment services like Yearn. It works for smaller investors who are concerned about gas fees paid for transactions. Otherwise, most of Yearn’s strategies are transparent and can be duplicated by everyone, without incurring a 20% fee paid to Yearn. We will elaborate further in furture articles.
If you wish to contact us for commercial collaboration, please contact us twitter @serenityfund .
(Serenity Team, 26 Nov 2020)