Liquidity pools as an alternative to cash or HODL

[tsznecki]

This post is targeted to people currently in the Defi space: What are your thoughts to add liquidity in periods where you forecast a range in some asset?

Because adding liquidity is essentially a negative gamma profile, it may have potential to outperform short straddles on your choice of crypto assets.

I have yet to run a test or see data comparing the two but would like to start a discussion. I would suspect the return would be higher than outright lending of spot but of course with impermanent loss.

 

[johnarb]

This post is targeted to people currently in the Defi space: What are your thoughts to add liquidity in periods where you forecast a range in some asset?

Because adding liquidity is essentially a negative gamma profile, it may have potential to outperform short straddles on your choice of crypto assets.

I have yet to run a test or see data comparing the two but would like to start a discussion. I would suspect the return would be higher than outright lending of spot but of course with impermanent loss.

Sorry, I don't have any value to add to the discussion since I never took any leveraged position in DeFi and was only long (never took a loan against a collateral deposit and to redeposit for yield).

I own Core LP1 and LP2 (weth/core and wbtc/cbtc, respectively) and have earned to date just ok interest in USD terms, but not in Eth valuation. Eth was used for purchase of the LP's and thus, Impermanent Loss on interest but that would be incorrect since it's a positive yield, the real IL is on the resale value of the LP's in Eth , the reason for this is Eth has gone up in USD value, considerably.

I quit DeFi (not 100%, since I still own Core tokens and LP'S, but has become minuscule as a %age of the portfolio) and also quit cryptos trading and went into full hodl mode see here --> [my last post on the DeFi thread]

This was a great decision (for me) as my portfolio keeps making ath USD valuation on a weekly basis partly due to my top holding cel outperforming my btc holding. I'm aware that DeFi coins have skyrocketed 300-400% from the bottom - aave, yfi, cream and I've resisted even reading up on why they went up so I'm not tempted to get back in the game. I keep myself busy refreshing my crypto portfolio tracker a couple of thousand times a day, lol.

DeFi -- yield farming, AMM, IL, the huge swings, profits & losses, was an awesome experience and I have no regrets, but this coming bull market is going to be insane (imho) and I want to ride this with 100% focus.

I wish you the best in your DeFi endeavors.

 

[Daal]

The whole DeFi thing sounds ridiculous. Borrowing on it sounds insane as these coins can run 200% at the blink of an eye and lending is also nuts as you can lose all your capital in hacking/theft incidents

 

[They]

I keep myself busy refreshing my crypto portfolio tracker a couple of thousand times a day, lol.

 

[Daal]

I think this DeFi thing can make sense when the protocol is paying out its governance tokens for users that are using a lot. Its like getting a gigantic rakeback in poker, to the point that it actually overwhealms your profit and then you can earn really big returns. But as far as I'm aware there is no siginficant protocol doing that, only small copycats here and there that are unlikely to have a very valuable governance token. But it probably doesnt hurt to try. I might monitor these sites to see if there are any that are worth a shot

But DeFiying without these rewards, so far, I dont like it. I'm not a fan of the idea of risking my coins (smart contract risk, hacking risk, volatility risk, etc) to make a much smaller return. I rather hold and get the long-term gain but I'm still new at DeFi this so maybe I'm missing out

 

[Sprout]

I think this DeFi thing can make sense when the protocol is paying out its governance tokens for users that are using a lot. Its like getting a gigantic rakeback in poker, to the point that it actually overwhealms your profit and then you can earn really big returns. But as far as I'm aware there is no siginficant protocol doing that, only small copycats here and there that are unlikely to have a very valuable governance token. But it probably doesnt hurt to try. I might monitor these sites to see if there are any that are worth a shot

But DeFiying without these rewards, so far, I dont like it. I'm not a fan of the idea of risking my coins (smart contract risk, hacking risk, volatility risk, etc) to make a much smaller return. I rather hold and get the long-term gain but I'm still new at DeFi this so maybe I'm missing out

It depends. I was an early enthusiast of Sushiswap as an LP and getting >1000% APY for a brief period of time. I exited when the token took a dive from the migration fiasco with chef sushi and didn’t re-enter when the price recovered. If I had, that position would be 5x rn. Instead I had rolled iit into BTC and only got 4x.

*only 4x <- typical semi-salty degenerate shit coin trader perspective.


The alt market is hot rn, lot’s of opportunities to receive magnitudes in returns. It really makes the case for developing some advanced skill in momentum trading to harvest profits daily.

It’s also getting close to euphoric. The US folk are probably not gonna see another big stimulus check and all that stimulus money is panting at the sidelines looking to get in on what may become a blowoff top.

 

[Daal]

It depends. I was an early enthusiast of Sushiswap as an LP and getting >1000% APY for a brief period of time. I exited when the token took a dive from the migration fiasco with chef sushi and didn’t re-enter when the price recovered. If I had, that position would be 5x rn. Instead I had rolled iit into BTC and only got 4x.

*only 4x <- typical semi-salty degenerate shit coin trader perspective.


The alt market is hot rn, lot’s of opportunities to receive magnitudes in returns. It really makes the case for developing some advanced skill in momentum trading to harvest profits daily.

It’s also getting close to euphoric. The US folk are probably not gonna see another big stimulus check and all that stimulus money is panting at the sidelines looking to get in on what may become a blowoff top.

I see, so you agree that the astronomical yields only happen if the token appreciates after you received them? Because as I understand it, the people that were early and kind got caught by surprise by the airdrops and rewards, got a huge yield even without needing appreciation (they could just dump into the market and call it a trade) but then droves of people came in and these returns were gone. Now the person needs the token to rally a lot to make the big APYs, correct?

 

[Sprout]

I see, so you agree that the astronomical yields only happen if the token appreciates after you received them? Because as I understand it, the people that were early and kind got caught by surprise by the airdrops and rewards, got a huge yield even without needing appreciation (they could just dump into the market and call it a trade) but then droves of people came in and these returns were gone. Now the person needs the token to rally a lot to make the big APYs, correct?

Yes and accepting risk being an early Liquidity Provider. Early Liquidity Providers get in early and are selling off those tokens as they become available to earn cash now. Unless they are governance tokens or used for staking or a composable primary with first mover advantage, then those have longer term potential and worthy of hodl.

Much to many surprised, DeFi winter was fairly short lived.