There are many different approaches to investing in the crypto space. From watching the charts every second to day trading, squinting at monthly price actions to trend trading, to simply buying and HODLing long term, there are various strategies that can be used to amplify one’s savings. Each strategy comes with its own risk profile, skill set requirements, and set of compatibility factors in terms of the investor’s character. Traders that can’t deal with losses are better off HODLing, and conversely, long-term positions don’t work if you are impatient or don’t have the confidence to weather the storms that come with the volatility of digital assets.
But that doesn’t mean that there aren’t any ways to maximize your gains when you HODL.
Boosting your HODL strategy in DeFi
In the DeFi space, users can post assets as collateral when taking out a loan to further deploy their digital assets. However, doing something like this does come with added risks such as liquidations when markets suffer downturns and your collateral fails to cover the loan.
Another strategy is providing liquidity for an asset pair and staking the LP tokens to farm yield. The projected APY during the early phase of farming new liquidity pools can be astronomically high – easily above 10,000% – but it also drops rapidly as more farmers join the pool. Still, you’d think that a yield hovering around 250% for weeks at a time would still be profitable but that isn’t always the case.
The liquidity farm is often one of the primary ways the token increases in circulation, and as it does, selling pressure tends to be quite high. So even though you harvest 3000 tokens every day, the value of that yield drops every day as well. Then there’s another risk element called impermanent loss, which essentially means it would’ve been more profitable to simply buy the 2 assets in the pair and HODL each token separately. In any case, farming insanely high yields is often a short-term game, and farmers often need to move to new fields quite rapidly to maintain profitability.
If you want a safer way to boost your HODL strategy, there are many savings products available in the market as well that pay a fixed* interest rate for deposits. One of the more infamous applications is Anchor Protocol, which offers an APY of around 20% for UST, the algorithmic stablecoin native to the Terra blockchain (now also available on additional chains as well). Of course, this comes with its own risk at both the network level and the asset level – UST is still a fairly new stablecoin built using an experimental methodology.
20% is certainly a high fixed rate for a stable asset. But what if there was a way you could get a high yield for an asset that you thought would also go up in value?
Most crypto exchanges offer some savings products, but few provide the rates AAX does. For the 2 leading digital assets, BTC and ETH, there is a wide selection of fixed savings products at varying rates, each with their own maximum allowable amount for the principle that can generate very attractive yield on a regular basis.
Let’s put together some numbers looking only at BTC, ETH, and USDT and see what we can do. For all calculations below, we are assuming BTC is $43,000, and ETH is $ 3,300.
The savings products with the highest yields for BTC are:
- 20%, 7 Days, max deposit 0.033 BTC = monthly yield of $23
- 16%, 14 Days, max deposit 0.1 BTC = monthly yield of $56
The savings products with the highest yields for ETH are:
- 20%, 7 Days, max deposit 0.6 ETH = monthly yield of $33
- 16%, 14 Days, max deposit 1.3 ETH = monthly yield of $56
So with 0.1033 BTC and 1.9 ETH, you are generating $168 on a monthly** basis at current prices. If you also put down 1000 USDT to max out the 20% USDT product that pays out on a weekly basis, you can add another stable $16 to that monthly gain.
To further boost these gains, you can set each product to renew automatically, and add the additional BTC and ETH gains to the Flexible savings product which generates a 4% yield, or any of the other longer term savings products – essentially working your way down the profit ladder as you stack gains on top of your HODLing portfolio. The USDT and USDC products are of interest because you can easily convert the weekly gains into SATS as they come in for some additional and free dollar cost averaging.
Doing this can help you keep your cool during market downturns, as you are still loading up your bags using your existing holdings. When the market trades sideways for weeks at a time, it’s easier to be patient as you rack up the SATS. And for all the calculations above, the monthly yields will go up in value as the price of BTC and ETH rises. Say we go back to a higher trading band where BTC is $60,000 and ETH is $4,000, the total monthly yield using the same 4 savings products will bag you a quick $220. That’s a pretty solid amount to re-invest every month.