Stable Coin Yield Strategy for DeFi on Polygon (Beginners - Intermediate)

Stable Coin Yield Strategy for DeFi on Polygon (Beginners - Intermediate)

By Budget Boy | Budget Boy Finance | 18 Aug 2021


Terms like "Price impact", "slippage", "impermanent loss", "rug pulls" etc may be daunting and overwhelming for beginners. The extremely composable nature of the space may also be frightening as users can create and execute yield generating strategies across various protocols and earn massive profits. Most people start of by either of the 2 mentioned below:

1. Lending Funds on Aave / Compound and using borrowed funds on curve;

2. Providing liquidity in an AMM like uniswap, sushiswap, curve or balancer.

This strategy takes it just a small step ahead by making use of a slightly more "DEGEN" protocol called Impermax Finance (IMX). Impermax finance is one of the best performing leveraged yield generating protocols in the space. This may not be the best yielding strategy for stablecoin yield but I personally prefer it as it has no reliance on LM rewards and does not require selling the farm / protocol tokens to achieve a ~20%++ APR. The high single side supply APR is due to the extremely high utilisation rate (reason for high utilisation will be mentioned in a future article) that Impermax Finance has at around ~80%. The steps involved in the strategy are as follows:

Bob has $1000 of USDC with him and is relatively new to DeFi. He discovers Impermax Finance and realises that it has insanely high single side supply APRs for stablecoins. His local bank in offers an interest rate of 3% which is quite bad and he must also consider the impact of deflation also. On Impermax he is able to earn nearly ~20% per annum on $USD which is better than any bank can give. Below are the current APRs offered for stables on Impermax Finance (Polygon).

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Since Bob currently holds USDC, under current circumstances he realises that it would be best if he swaps his USDC for miMATIC as he can earn 27.64%. The very next day, Bob opens impermax and realises that the USDT has flipped miMATIC as the highest earning stable. 

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All Bob has to do is swap the miMATIC for USDT as it is giving the highest interest rate. He can do this using 1inch / Paraswap or even manually by swapping miMATIC for USDC on either Quickswap or QiDao (Anchor) and then swapping for USDT on Curve Finance for the cheapest swap. The interest rate in miMATIC fell drastically as the utilisation rate fell from 82.76% to 65.93% which is a 20% drop in utilisation. The primary reason could be a drop in demand to borrow at leverage or a drop in the amount of leverage used (reason will be explained in another article). 

All Bob has to do to get a ~20%++ APR on his stables is to monitor the interest rates frequently and shift his stablecoin holdings accordingly. The best part about this strategy is that he has an "APR" and not an "APY" as there is no auto compounding requirement in the form of selling farming rewards to achieve a 20%++ gain. 

Due to the low gas environment of Polygon, the total cost in gas to execute this strategy for 1 year would approximately amount to ~$5 only assuming that the Bob has to change his stablecoin holding each day

 

 

 

 

 

 

 

 

 

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Budget Boy
Budget Boy

DeFi and Crypto Enthusiast


Budget Boy Finance
Budget Boy Finance

Decentralised Finance, Crypto and Economics

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