After Jerome Powell’s hawkish press conference, the market’s not getting any better, but the crypto industry has another profitable ace up its sleeve. Stablecoin farming is a less risky crypto play. The downside is it could prove to be even more harmful to crypto’s momentum.
Stablecoins are pegged to $1. They’re algorithmically pegged or simply pegged to commodities, which implies impermanent loss is minimal. And they’re a crypto diamond in the rough when put to good use.
There’s no real secret to stablecoin farming except knowing where to look. Here, we’ll help you find that gem of a strategy!
What’s up, crypto?
The market is undecided in the wake of, first, Powell’s announcement and then the press conference by Jerome Powell. The “hikes soon” tone of his comments makes it challenging for crypto to know which way to go.
It’s not a pretty sight. And unfortunately, an indecisive crypto market equates to less excitement by retail investors for hard assets. And we all know the driving force behind every bull run is retail mania.
If that goes out the window, so will the drive to invest in hard crypto assets because they’re too risky. Of course, crypto veterans know that better than everyone, and so should you.
That’s how the market works. Thankfully, that’s also a way for you to work (and profit) within the current market. Crypto has blessed us with countless, if not infinite, opportunities to leverage digital assets, and gain an edge without being too overexposed in times of price uncertainty and indecision.
Stablecoin farming is a risk-off strategy slowly being embraced by crypto, because it bears fewer risks. Stablecoin yield farming could be the only way to still profit during a market downturn. Even if you consider Bitcoin’s year-to-date (YTD) return, stablecoins seem to be winning.
But if better yields drive people to offload their risk-on crypto assets into more stable, where will the next market catalyst come from? There needs to be a strong impulse in the market to turn the tide. Interest rate announcements will likely not happen until March. And if yields continue to be performing better than regular assets, Bitcoin could continue to bleed.
Why would users deploy capital to volatility or low-performing assets when stablecoins are as financially rewarding, if not even more?
It’s true that there’s no real hype about crypto when markets dump. And holding stablecoins generates less anxiety. It might sound like a banking commercial, but stablecoin farming lets you sleep like a baby, because volatility and price fluctuations are no longer your concern.
Let’s dive into a few stablecoin strategies that can yield between 20% and 160% on various protocols.
Stablecoin strategy 101
There haven’t been many incentives to explore stablecoin strategies because the market was trending up at speed. Now that things have changed, so should your strategies, and there are plenty to choose from.
Don-key Finance is a copy trading yield farming strategy platform that gets you into the circle. It’s a mouthful at first, but traders can earn up to 600% on stablecoin strategies.
With Don-key, you’re either creating your own cross-protocol strategy, or copying someone that presumably knows what they’re doing. Either way, stablecoins are stable.
Anchor Protocol, on the other hand, redefined the stablecoin annual percentage yield (APR) at 19.95%. You can also use Yearn Finance for a moderate 6.65% APR, but the risk is greater because Yearn Finance uses USDT. For the full list of options read the entire thread here.
Then there are the more complex ways of approaching stablecoin farming, expanding across multiple protocols – and using borrowing as well as staking to increase the APR. It’s a bit more complicated, but if you’re feeling adventurous, it’s worth it because it can yield a juicy 160% APR.
Platypus Finance is a good example of a single ecosystem stablecoin play, because users are not obligated to create a Liquidity Pair in order to generate a “good” yield. The one interesting aspect of Platypus is that those who own $PTP, the native token of the protocol, get a Boosted APR.
Where to now? Crypto Banter contributor Miles Deutscher has developed and shared two stablecoin yield farming strategies, which can yield between 82% and 200% on AVAX or LUNA. That’s a better ROI than many tokens in the current market.
If blockchain yields turn out to be so rewarding, especially in periods of a market downturn, there is a chance that crypto and Bitcoin could die by its own success. Paradoxically, a blockchain product like DeFi could kill off the very excitement that brought people into DeFi.
Innovation in DeFi is happening at a rapid rate. If you are going to go this route, it’s probably better to jump on stablecoin protocols early – today’s yields will continue to decrease as more people see them as an opportunity.
Now is a good time to reflect on your portfolio and dollar cost average into quality projects. If you own stablecoins, you might want to add your assets on liquidity protocols which can yield APRs as high as 80%. Stablecoins could be an amazing opportunity to increase your exposure to additional capital, because it’s not yet known when the hype catalysts for a bull market will arise, and you want to position yourself the best you can! And remember: DYOR, and don’t invest money you can’t afford to lose.