Many people are in the world of cryptocurrencies for the relatively easy earnings they offer. Those who are here for this reason together with those who instead believe in the fundamentals (but still want to have a profit) have the income offered by De-Fi available. In particular, the possibilities of Farming in the various platforms offer unimaginable earning possibilities for classic finance. Let's see today a simple strategy for those who approach Farming to make an income.
Premise
Before continuing and seeing what Farm & Dump is, it is necessary to make a necessary premise: in investments you must have a clear idea of the strategy to follow and the first step is to define a portfolio. A well-balanced investment portfolio, in fact, provides for very precise allocations for the various assets it contains. The percentages dedicated to the different types of annuity must be decided in advance and respected even in the event of fluctuations. To use the De-Fi platforms, therefore, you need to think about a slice of your portfolio to dedicate to one or more platforms and calculate in advance which tokens or coins to hold and which not.
How to Farm&Dump
Each De-Fi platform pays Farming interest in its own token. For example, Osmosis.Zone makes the $OSMO token an asset that has its own value and its own volatility. Often, precisely because of the volatility, investors plan to hold these tokens in their portfolio and therefore decide not to rely on the revenues of a platform for this reason. Due to this, therefore, certain platforms with high returns are discarded and others are chosen that do not perform as well. So, how can you avoid being exposed to volatile tokens that we don't want to hold? The Farm & Dump strategy, in this case, becomes an investment style: it involves allocating a portfolio share to Farming, to be converted into the appropriate tokens directly on the chosen platform. As interest is paid, the tokens must be claimed and resold in favor of a coin that you wish to hold. It sounds like a simple strategy but is sometimes the most profitable. However, some simple rules must always be respected:
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The claim and the subsequent sale must be made constantly and periodically, following a pre-set scheme.
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The share allocated to this process must be proportional to the fees paid, that is, it must be high enough so that the annuity guarantees the profit.
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The platform and the capital must be checked periodically because the interests vary and when they go down the process is no longer profitable.
An example
Now let's see, in a practical way, how to perform these operations. First of all, the rules must be established: suppose we allocate a sum of $500 to Farming and we choose the Osmosis.Zone platform due to the very high APYs of this period. I also chose this platform because it does not require any Bridge to move capital on it and therefore it is practically at no cost. The $OSMO token is not doing badly, so we would also have an advantage in selling it and we can afford to make weekly sales. If it had been a downtrend coin it would have been necessary to shorten the sell interval to 2 or 3 days at most, in order not to incur excessive losses. Finally, we choose the pool where to do the Farming: CRO/OSMO looks great since it offers an APY of 228%. Both $CRO and $OSMO are two excellent assets and for this reason the strategy can be kicked off. We calculate that weekly we should receive approximately $21 (without taking into account impermanent-loss) and, given the practically zero fees of the Cosmos blockchain, we can say that this is a good passive income. As long as the interest remains at 200% and the assets do not hint at significant falls, the sum allocated to this pool can be maintained. On the other hand, when the situation changes, this evaluation must be redone and, if necessary, our capital is moved to a different platform.
To conclude...
This style of investing may seem a bit opportunistic but in the end the person who adopts it is a speculator and this is his job. It is considered this way for the simple reason that you go to resell the tokens you earn by negatively affecting the price. However, the possibilities of income in this sense are manifold on the new blockchains such as Terra, Solana and BSC, but also on Cosmos with Osmosis (here is an interesting article: My DeFi expeience #2: Osmosis Zone on Cosmos).
I conclude by saying anyone wishing to approach De-Fi must necessarily inquire before investing.
Everything you have read is an example and should not be replicated without first understanding what you are doing.
Read Also: My CeFi experience #2: Celsius Network
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