Prefacing this article, I must remind everyone that I am not a financial advisor, and that like with everything, do your own homework and figure out what's the best thing for you to do yourself when it comes to investing.
Abracadabra and MIMS
For those of you that aren't familiar with abracadabra.money, perhaps they're most popular right now is for their leveraging strategy involves leveraging UST coins as with their native Magic Internet Money otherwise known as MIMs. I'm not going to go into the details, but in a nutshell, you're leveraging one stable coin for another driving up your total collateral and allowing you to utilize much higher APY's.
Depending on what kind of liquidation risk one wants to take, the APY's advertised can reach up to around the mid-100%'s, which is freaking crazy for stable coins. One of the drawbacks to all this--is that it's super hard to get a hold of MIMs. Once they replenish the MIMS supply, it's like it evaporates in thin air. No joke, if you take a look at the MIMs supply available, you can see it go down from the millions to the double or single digits within minutes. People scout the MIMs replenishment twitter feed for announcements of when they come out, and if you're just lucky enough to be in the right place at the right time, (with readily available UST of course), you can take advantage of this leveraging strategy.
MIMS disappearing into thin air...
Right place, right time
So about a week ago, I was in the middle of doing something on the computer, and I saw an e-mail come in notifying me that @MIM_Replenishes had just sent out a tweet that they had just replenished again. I was completely unprepared. In fact, I wasn't even planning on doing this at all. I had only watched like a 10 minute youtube on it, and in no way was wanting to commit money in it so quickly. After seeing literally the amount of MIMs drop by 25% in a minute, I quickly decided to bite the bullet and collateralized my UST, somehow entering 4 different confirmations of signoffs (which felt like 10) approving insane amounts of gas fees, because of course, this is going through Ethereum. The whole process just took seconds and I spent the next hour doing research about what exactly I just did.
My biggest question was that I wasn't sure how I could track interest earned, and for all I can tell, I couldn't figure out if the whole Degenbox was "working." I found out through discord later that the yields are reflected in the total collateral, and this process is updated once a week. And for me, that day was today.
OK, so what happened?
To make a long story short, I didn't make out as much as I was expecting. For my total amount of collateral, I (like many others) was expecting about 16% APY, but instead...it was more like 11%. (One thing I should also note is that I did take a pretty safe-ish gamble with the liquidation rate. The liquidation rate I chose was around .70, meaning that I wouldn't get liquidated out of this unless basically there was a lot of depegging going on). Without revealing how much money I put up, after doing some math I made to gain about 50% more interest than what I would have made if I just left my money at anchor.
And yet, although this was much lower than I had hoped, this didn't come as a surprise either. I've read other blogs and heard from others on discord that there experiences have been similar, and not quite as much as they would had hoped. And given the risk you take for leveraging collateral and then plus literally the hundreds of dollars worth in gas fees, it will probably be a few months for me to recoup the gas fees, and then whenever I deleverage my position, I'm assuming it will negate another couple of months worth of interest to pay the gas fees out. All-in-all, I probably could have taken on less risk and kept all my UST sitting where it was, at 19.5%APY with anchor.
Would I do this again?
I'd say its a coinflip decision for whether or not I would commit again to doing this. In order to turn a profit, my money now needs to be locked up for awhile, where with anchor, I could pull out at any time. And not only could I pull out at any time, I could also see my money in real time. In addition, who's to say that these APY rates won't continue to change even further? If the rates change drastically and quickly, it's a lot cheaper to pull them out of anchor then it is abracadabra.
Would I wait until 4 in the morning hoping that that I get another tweet saying that there's been more MIMS replenished? Hell no. Would I do it again if I had a nice chunk of UST ready to go and I got the tweet right now? Man, that's hard to say. Maybe?
Have you gotten involved with the UST/MIM Degen? Any better results?