I have put together a list of the Defi investments that I have found to be the best, based on a few months of evaluation and testing. I have taken into account things like risk, yield, market conditions etc. I have been honing and improving my strategies over time, since there are new services cropping up and older ones evolving and maturing. Evaluating risk is a whole subject in itself, so I won't get into the details here, other than to say that there is insurance that reduces contract risk (like Opyn and Nexus mutual, and others). Also transparency, audit reports, and battle testing (time that the project has been running live without a major problem) helps to reduce risk. In the current economic environment, the strategies which are based on the US dollar tend to be strong at least for the short term (stablecoins). In the longer term the more volatile coins like Bitcoin, eth, and altcoins will probably do well. But we don't know how long that will take. So, I have found these defi projects seem to be the best risk/reward trade-off for now.
1. YEarn - risk-off (USD)
This is a yield aggregator service that invests stablecoins in the pools that are earning the highest returns, and periodically re-balances. They support the major defi lending services Compound, Dydx, and Aave. I have gone into more detail on how to use it here, in a previous article.
2. Various Curve.fi Pools - risk-off (USD)
This is an exchange and liquidity pool, similar to Uniswap, which is optimised for stablecoins. I have gone into more detail about how to use it here. The most profitable pool with the highest yields is the busd.curve.fi, and the one with the lowest risk. is compound.curve.fi
3. Sets - hybrid risk-off/on Ex. (20DMA set)
This is the particular set that I use:
"The ETH 20 Day MA Crossover Yield Set attempts to capitalise on shorter term trends and accumulate ETH. ETHMACOAPY automatically triggers re-balances when the price of ETH crosses the 20 Day Simple Moving Average (20 SMA) indicating a trend reversal. If the price of Ethereum crosses and stays below the 20 SMA, the Set re-balances from ETH into Compound USDC and automatically accrues interest on your cash when the market is bearish. Link to more details." I have found this one to be a good way of hedging my bets on eth investing. There are also many other sets based on different indicators. I like the fact that they automatically adjust when the price goes very high or low, so that you don't have to monitor it constantly. It exposes me to the price of eth without taking as much risk.
I am mostly bullish on eth, but I also like to diversify my portfolio with some exposure to the price of bitcoin. I find it much more convenient to hold my BTC on the Ethereum chain for various reasons. There are several projects which allow you to do this, as per above title line, with links to each one. There are advantages and disadvantages to each one, and I am waiting for them to mature. For now, I buy Wbtc, and combine it with eth and invest it on the Uniswap liquidity pool, so that it can earn some income while I am waiting for it to go up in price. (See below re: investing in Uniswap pools). You can also use Wbtc in sets (see above), and automate the trading rules, like you do for eth.
Wbtc is supported by a large community and backed primarily by Bitgo custodians, but it is centralised. So the solution isn't ideal, but the decentralised solutions are maturing, so I might switch in the future. For now, I find it much easier, and more profitable to manage my bitcoin on the ethereum chain, since there is no Defi on the Bitcoin chain. In future, I expect that there will be more interoperability between Bitcoin and Ethereum, but that may be a few years away. For now, I like my bitcoin on Ethereum.
5. Synthetix + rewards - Risk-on
This a really interesting project which I talk about in more detail in a previous article. I go into a lot more detail there about how to stake SNX, and generate Susd, which you can also invest. There is a high collateralisation rate, but no liquidations to worry about. You will soon be able to stake eth instead of SNX, which will be good.
There is also an integration between synthetix and curve, which allows you to deposit the Susd on the curve liquidity pool, earn interest and transaction fees automatically, and also earn SNX which you can claim weekly. (In addition to the SNX staking rewards.
6. Synthetic gold sXAU, or sDefi index - risk on
You can trade your Susd, or eth, or other ERC 20 tokens to synthetic gold (sXAU) on 1inch.exchange or paraswap.io. Another good investment would be the synthetic defi index, if you believe in the future of Defi. (It includes a basket of defi tokens).
7. Uniswap pools - risk on
A previous article of mine talks about how to use Uniswap liquidity pools. I go into a fair amount of detail on how to provide liquidity, and how to determine your profitability. In most cases, I have done much better than straight HODL'ing. For this, I have deposited Dai, Link, Wbtc, and Bat. All of them have done well.
8. Nuo - Risk on
They tend to have the best rates on certain digital assets, like SNX or Dai for example, but are considered less transparent, and open. Nor is it composable with the other Defi Dashboards like Defisnap.io, Zerion.io, or mydefi.io. So you have to monitor this one separately for profitability etc.
Do your own research. Your circumstances may be different, but I have found it helpful to share experiences and strategies so that we can learn from each other. I am currently exploring some other options as well such as RealT for rental income on tokenized real estate, and Balancer labs just came out with a new liquidity pool/exchange which extends and builds on Uniswap's automated market making system. Selling Opyn insurance for yield, is another potential option. Here is another great article by Tokenbrice on the various Defi or "definancial" products.
There are lots of good alternatives that don't necessarily depend on the price of Bitcoin or Ethereum going up. You should be still able to earn good returns in a stable or sideways market.
As usual, feedback is welcomed.