 | Yes, for real. Remember the wsb user, /u/ControlTheNarrative, who found that infinite margin hack in robinhood In traditional finance instruments such as stocks and options, those kind of opportunities are few and far between however that is not the case in crypto. On my last post I’ve highlighted the merit of using BSC Pancakeswap’s Liquidity Provider Tokens (LPs) paired with stable coins to make money even if the token prices you hold drops. "Make money even if your token drops 75% and still profit handsomely if it goes up" And from there, we have this chart generated from the linked google sheet to show you the profit profile of a LP which provides massive downside protection while earning yields. Now in the comments section, one of the top comment highlighted this fact
Yes, that’s sort of true as most farming reward tokens are very inflationary, one way to hedge it is to use perpetual futures at Binance or FTX. So when you create a Pancakeswap (PCS) LP token, since the farming rewards are in CAKE, you simultaneously short the perpetual CAKE futures to lock in your farming rewards profit and reduce your delta (The sensitivity of your LP asset value against price changes in the underlying). But wait you say, won’t opening a short futures position charge you the funding rate ? Yeah, it’s actually hovering near positive now, meaning you’ll get paid interest for shorting CAKE while synthetically going long on it as you farm your PCS LPs, effectively boosting your yields. How is the above even possible you ask ? Because CAKE is approaching deflationary tokenomics since it’s daily transaction volume generates so much fees, it’s almost enough to counter the rewards minting. But if everybody farms won’t the rewards APY % decrease ? If the entire 4 MM subscribers base of CC farm the same LPs, then yes the APY will probably go to zero however I don’t think that’ll be an instant process. If you are in the pool early and the amount of liquidity increases due to new farmers coming in, it’s likely that underlying token prices of your LP will also increase since those new farmers will themselves have to buy the tokens before providing liquidity. This phenomena will in effect offset the APY decrease. Why didn’t I tell you all this in the last post ? Well I don’t want to overload you guys with information, I’m trying to communicate simple and easily understandable facts from which you can act on to make money. Nobody wants to read a 10,000 word long post explaining the convexity of LP yields vs the imperfect linear hedge of futures that ends with a technical description of a flash loan exploit resistant smart contract vaults. I keep things simple and practical in order to help you make money now. And finally, after you’ve created the LPs, hedged via futures(optional) , one last step is to put those LPs into an autocompounding vault to further reduce the risk of holding rewards token by automatically converting them to LPs thereby boosting your investment APYs. For that purpose, I’d like to recommend HappyHippo.farm, made by yours truly, the place where the hippos are happy and everything is awesome, like the Lego movie theme song. TL;DR: It’s really that easy [link] [comments] |
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