[Weekly] Market Return on StableCoin-based Strategies（20 June 2022)
We provide a weekly update of the platforms we track, based on the strategies discussed in Serenity Fund’s Overview of Stablecoin Investments and the periodical updates.
(Note: Yields derived from mining reward tokens are based on the prices of tokens on 20 June. Yields that are cumulative, e.g. Uniswap and Compound’s basic earnings and Binance funding rates, and are actual yields over last week, compounded weekly to derive the APY.)
Quick analysis on 20 June:
- Risk Free Rate: 0.62%. Risk free rate, representing the safe yield from Compound, Aave and Curve, was comparable to last week’s 0.61%. Market continued to decline and at the worst of times, ETH was below 1k and BTC below 20k. In the wake of Three Arrow Capital’s liquidation and Celcius’s halt of business, panic is prevalent in the market, as these are centralised institutions with no clarity on-chian. Market participants started to question other centralised institutions, like BlockFi, FTX and Binance, and more are pulling cash out to be safe. In fear of a total melt-down, we see a universal withdrawal of liquidity in all places, including DeFi protocols.
- Curve/Yearn/Convex: The Curve/Yearn Large-Cap Benchmark Rate is now 8.9%, higher than last week’s 2.7%. Trading activities caused some pools, e.g. sUSD to gain significant yield from trading fees, boosting its yield temporarily to a high level Excluding sUSD pool, the average yield in this category is still 3.3%, higher than that of last week. This is largely the result of liquidity outflow; more than 500m has left Curve’s 3pool, and other pools saw liquidity moving out more or less.
- Other Stablecoin Platforms: the yields vary from 1% ~ 70%, and averaged 16%, higher than last week’s 6%. This is due to the trading volume in the mStable protocol, which netted a APY of 70%. Excluding mStable, the average for this category will be 10%. This is still much higher than that of last week, due mainly to the temporary depegging of MIM. Over last week, MIM traded around 90 cents for some time, in fear of the protocol not being able to cover it debt incurring during the UST meltdown. The peg was restored but the bad debt issue remained unresolved (see our Twitter for details). This led to redemption of MIM as well as capital outflow, pushing the APY higher for the capital stayed. Yield from Liquity’s stability pool was also much higher, as massive redemption took place, consuming a large portion of LUSD in the pool. Yields from TrueFi and Maple continued to be high, but both protocols have lock-up arrangements (Maple a 10-day cool down period, and TrueFi a penalty on withdrawal when tilisation is high). This adds to the market fear, as these protocols lend to centralised institutions. This week, we have replaced Fei Protocol’s pool with D3 pool on Convex (a pool with FEI, alUSD and FRAX).
- Other (non-USD stablecoin or non-Ethereum) platforms, aka Exotic Strategies: Exotic strategy yields’ are from 1% to 17% now. The yields from alternatives continued to be weak. Yields from gold rebounded slightly, and EUR-denominated products remained lukewarm. In the news, Circle Pay is launching a EUR coin, similar to USDC, and this might give the market some new incentives. On the EVM chains, Abracadabra on Arbitrum has a higher yield now due to the liquidity outflow for redeeming MIM. MAI, on the other hand, remained collateralised with mimimal level of bad debt, according to unverified statics provided by a third part in the discord (see our Twitter). Farming yields came down a lot on Fantom chain in general. Avax chain remained decent, thanks to Traderjoe and Yeti Finance.
- Uniswap/Alpha: Uniswap earnings continued to be high last week as, for half stablecoin, half ETH pairs, as significant liquidation and trading activities took place during the market upheaval last week.
- Binance Coin-Margined Funding Rate: funding rates were all negative. During a market meltdown, there’s no safe place. In this tough time, liquidity is precious and we hope all can stay safe first and be patient.
The above summary is a snapshot of what the market looks like over the last week and as of Monday. This is by no means the portfolio of any of Serenity Fund. Neither is the above table meant to be a ranking table nor to be exhaustive. There are various other defi protocols and products that can offer different risk and return exposures. Follow our Twitter below to have more timely and detailed information on the defi market.
In view of the changing landscape of the DeFi industry and increasingly complex product offerings in the space, we are now publishing premium strategy papers to cover these “degen” type of protocols. For more information, please refer to our article “Launch of Premium Strategy Paper” in Medium on 9 May.
(Serenity Team, 20 June 2022, Twitter: https://twitter.com/SerenityFund )