I've already had an experiment with financially engineered crypto things. That time I managed to get a 9.7% APY on 3 USDT with staking EOS (more info here).
About a week ago I started another experiment of that kind.
I bought 10 DOT for USDT at the spot and shorted a 10x-leveraged futures for the same 10 DOTs at the same USDT price.
Actually, I made it only because I learned that Binance had a locked staking offer for DOT, like 20% APY for 30 days with the min amount of 10 DOT. But as usual, I was kinda late to the party, and by the time I finally brought my DOTs for staking Binance had already closed the subscription...
Probably I should have sold my 10 spot DOTs right away, to watch DOT's price falling further down every hour and my short gaining more and more profits. I've already told somewhere that during the current BTC rally shorting shitcoins seemed to be a more profitable idea than even longing BTC (not to mention staking any shit for miserable returns).
However, I didn't sell my DOTs then.
I went to Binance's flexible savings to see that they offer a 5.99% APY for DOT. At the same time, I noticed that the funding rate for DOT/USDT was positive -- and I decided to stake my DOTs flexibly as long as the rate keeps staying positive.
In other words, my 10 DOT at spot were hedged by a short (i.e. overall I was always at breakeven against USDT). The spot was generating 5.99% APY and could be withdrawn and sold immediately, the short was generating 0.01% every 3 hours (as long as the rate was positive) and could also be liquidated immediately.
It stayed like that for five days, but on the sixth day I noticed that the funding rate turned negative. I decided to close the deal and to calculate the outcome. I made a small Excell on it (image):
Well, Excell presentations are not my best skill definitely...
I managed to close my long and short with a tiny profit, as well as to receive both savings interest and funding fee.
The total amount involved was 48 USDT (43.53 for spot and I also needed 4-something USDT for margin, so I rounded everything to 48 USDT). I pay commissions in BNB, so I recalculated them at average rates (H+L)/2 for the corresponding trading days. DOT interest was paid in DOT, and I took its USDT equivalent which I saw in my Binance account.
If we don't count the commissions, the APY is about (0.086/5x365)/48x100 = 13%. Not that brilliant.
If we include the commissions, the APY is (0.053/5x365)/48x100 = 8%, which is simply miserable!
There're several caveats we can learn from this outcome.
1st, commissions matter. I paid here more commissions than my savings and funding profits together!
2nd, time matters. The longer I'd been holding my thing, the more profits I'd received for the same amount invested and commissions paid. Five days stake is simply not long enough to justify all the troubles and commissions involved.
3rd, the savings APY matters. A 5.99% APY is simply miserable, it's for the devoted hodlers, who buy DOT to hold it forever (or at least until its price hundreduples) no matter what. For engineered things, I'd look for at least 20% interest in savings.
4th, market direction matters. This time the market direction was downward -- DOT price was falling constantly and sharply. For engineered things the flat or slightly upward market direction is better overall (sorry, I'm not going into more explanations right now) -- the only question is if you really need an engineered thing like this one when your spot DOTs go up by themselves...
Probably, there's more to learn, but I will leave it for my next experiment.
Disclamer: a usual disclaimer.
Posted Using LeoFinance Beta
Photo by Breakingpic from Pexels
