Finding neutrality

This is either a galaxy brain move or is going to get me rekt:

I’m trying to find a way to generate some income for myself. Since it looks like the market could go either way right now, I’ve been looking for a way to generate yield in a market neutral way. Traditionally, one would do this by buying one asset and shorting it at the same time while capturing the spread. Vesper’s vVSP pool has a quite insane APY, so I wanted to see if I could capture enough off of this to cover living expenses, and decided last night to try a position for a week. So I staked my Yearn Iron Bank position as collateral on CREAM and borrowed VSP, which I then staked on Vesper. The borrow APY is quite ridiculous as well, but if my math is right, I should net a couple hundred dollars this week.

It’s not quite enough to live off of, but it should open doors for other similar strategies if it pays off. Since my collateral is in stablecoins, my main risk is that the price of my borrowed asset appreciates and puts my collateralization ratio at risk. Due to the current VSP issuance rate, I don’t believe it’s at risk for some sort of pump. Regardless I think reduce my risk by restaking the VSP back into CREAM, but I’m really not sure about the secondary effects of that. It might put me in a position where I’m stuck and might need additional collateral to rotate out.

My plan is to let this ride for a week, remove some of the staked vVSP, swap some of the VSP to USDC and use the rest to pay back the interest on the debt. Gas costs will be a factor, as will changes to the VSP APY and CREAM lending rates. If it works, I’ll be able to generate cash flow and not be concerned if the price of VSP continues to drop.

When VSP’s emissions rate dies down enough that it’s no longer providing me with enough incentive, I can try other pools. CREAM has a huge number of assets available to borrow, I just need to figure out the best opportunities for them and figure out where to go. UNI is only 3.55% to borrow right now, and I could stake that on Impermax for 57% currently. That’s probably more risk than I’m willing to take on, given that protocol’s only a few weeks old.

I’ll have to look at some other platforms as well to try and figure out other ways I can generate some yield while staying market neutral. Since I’m mostly in stables, ETH and wBTC, I’m sort of in a bind, since returns on ETH/wBTC are pretty lousy across the board, and borrow rates on stables are already pretty high. All told, I’m not sure that this is a viable long-term strategy, but I’ll continue to investigate. I just don’t think I’ve got enough capital to make it work unless I am willing to put a lot of my eggs in one basket. It may be to risky a strategy to pursue.

DeFi level up

Trade notes: Pickle, Perp and CREAM

I was pretty busy yesterday, as I got the latest tranche of funds transferred from my brokerage TradFi IRA over to my AltoIRA and onto Kraken. Tracking my portfolio to my original plan was very difficult, due to the various wallets, chains and apps that I’m using to track it. My original plan was to do a 40/40/20 BED portfolio, (BTC, ETH, DPI,) but it’s changed a bit. The current portfolio looks a bit like this:

BTC16.75%Native BTC
wBTC18.25%also includes BTC2x-FLI-wBTC SLP
ETH31.00%also includes ETH2x-FLI
DPI/BDI7.50%Staked BDI, BASK
ALCX6.50%Staked alUSD, ALCX and ALCX-ETH SLP
Solana8.50%SOL, SOL-RAY and STEP-USDC LP
USD stables5.00%
Other6.50%BAL, RUNE, others, Star Atlas NFTs

I can’t actually seem to get the total value of the other category to calculate correctly, leading to a margin of error around five thousand dollars. It made trading a little bit difficult, since I wasn’t quite sure how to balance what I was doing. So I’m sitting on about seven percent more cash than I want to right now, and was not sure exactly how to proceed, so I made a few trades into ETH and wBTC, sent some USDC to Solana, and decided to look at some other things.

I’m not quite sure what brought me to it, but the V1 Yearn 3crv vault is migrating to the V2 version and is not earning boost, so it needed to be moved. I decided to pull it entirely and move it to the native USDC vault, which is getting a higher yield right now. I came out a bit ahead, thankfully, but only a trivial amount. I’ll have a full report on the reFIREment fund in June.

I did start poking around the other Yearn vaults while I was there, and contemplated the yvBOOST vaults. It basically holds yveCRV tokens, which go into a one-way vault, and earn 3crv tokens in return. The BOOST vault compounds these of course, but there’s another one that interested me was the one that deposited it as yvBOOST-ETH SLP on Pickle.Finance. The first time I looked at it a few weeks ago I couldn’t wrap my head around it, but this time it clicked. I’ll explain, with a slightly different example. I’m holding ALCX-ETH SLP, which I have staked on Alchemix for more ALCX rewards. I unstaked my SLP from there and deposited it on Pickle, where the jar, or vault, follows a basic auto-compounding strategy. This turns my 250% APY into a 500% position. On top of that, I can stake this resulting pSLP, as it’s called, for an additional 10% APY in PICKLE tokens.

I also spent a lot of time on yesterday. I’ve been trying to wrap my head around perpetual contracts for some time, but have been somewhat limited as a US-citizen. I’ve done some basic leverage trading on Kraken, but found the experience to be a bit lacking. has some leveraged products available, but using margin with my IRA triggers a taxable event, and I haven’t done KYC with my regular account yet. Perpetual Finance, while still geo-locked for those of us in the US, is available 100% on-chain. Better yet, it’s trade engine is on xDAI, which means it’s very cheap to use.

Even better, funding rates are negative, meaning that shorts pay long. So I can basically get paid to take a long position. Everything’s done through USDC, and I already had some wETH and wBTC on xDAI, so I liquidated some of my position and opened longs using the proceeds as collateral. So I’m sitting on a couple of 5x positions, that won’t get liquidated unless we have a further market correction that takes us lower than this week’s lows. In the meantime, I’ll get a little bit of funding from the spread.

I’m really impressed with the Perpetual team. Their docs are put together nicely, and their code repos have some nice treats, including a CLI client (!) and an FTX/Perp arbitrage bot, which is nice. They have their own token, which receives some of the trading fees, but I haven’t decided whether to take a position on that. The main use case seems to be for taking short positions, as this video shows. Taking a market-neutral position to facilitate high interest yield farming really opens some doors.

Perp is limited to a few trading pairs, mostly BTC, ETH and a few DeFi blue chips. One really important note in the video is how you can use CREAM’s bigger selection of tokens to short the other side. I clicked with me, and opened up the door to another piece of the yield farming puzzle. I’ve got plenty of tokens and LP I can use as collateral in CREAM and borrow some of the low interest rate tokens, such as DPI, and, which I can lend to Impermax; or VSP, which is 25% to borrow, but yields 125% in the Vesper vault. There’s obviously some liquidation risk, but it is something I’m going to be taking a further look at in the coming days.

Morning notes

So I read this “Roadmap for the Future” post last night and it’s all I can think about since I woke up this morning. There are about four or five replies chained to this thread, so it will take about twenty minutes to read. Other than a few points about the long-term ramifications of UBI, I think the piece is spot on. I’m waiting for a hard copy to share with friends. This is basically the resignation letter that I’ve been wanting to write.

I’m going to break this down later. As the FEI launch is later today and I’ve got a lot of catch up to do to figure out whether and how much I want to allocate to the launch. An associate of mine said he’s deploying $25k, but I didn’t ask what sort of risk management he’s got on that. Smart contract repos and audits are available, as well as several medium articles, so I’ve got a lot of catching up to do. I was able to get in touch with the man behind, and he gave me permission to use his process quality report. It’s mainly a deep dive into code coverage and test quality. He said he’d be willing to post my contributions on his website, so that’ll be nice. I started working though Integral yesterday, but the repos aren’t available yet.

I’ve deployed half of my B-risk tranche into the Yearn Iron Bank vault after seeing this tweet from one of the Curve devs:

For those who aren’t familiar, the range shows the CRV rewards on vault deposits. You have to stake CRV (veCRV) to get the higher boost, but the Yearn vaults earn this and compound their rewards. I’d be stupid not to put funds here, but I’m sticking to the framework that I’ve established and not going all-in. This is almost a C-tranche deposit, as the Iron Bank is very new, but Yearn/Curve are established player. These rates are only good for two weeks, which equates to about a 70% return during this period. If my numbers are right, this should return roughly the same amount I’m anticipating out of the A-tranche over the entire year.

Ape indeed.


I’ve written about IDEX here on several occasions. Yesterday, I sold my entire stash.

It’s probably most telling that despite owning their tokens, I never once used the market. On-chain exchanges are gas heavy and slow, and IDEX never got anywhere near their goal of being a fully decentralized product. They had on-chain orderbook nodes, which I ran (at a loss) for about a year. They finally got rid of that a few months ago in favor of a lightweight staking node. The truth is though, despite having about ten times the minimum stake requirement, I never got more than a few dollars in ETH rewards. The tokens did accumulate, but despite everything going on in the markets I felt like my money was better put to use elsewhere. Time will tell.

So I’m currently sitting at a little over one third of my “retirement fund”. I’ve still got over two months left to get the other two thirds. It’s going to involve some hard decisions. The majority of my funds are locked up in Badger DAO, so I’ve got to figure out how I want to pull funds from there. It’s going to be a difficult decision, although I did wake up this morning ready to pull the trigger after this latest dump. I’m still up significantly, but don’t want to risk losing capital.

So it’s quite fortuitous that I ran across this Badger Improvement Proposal on putting the USDC treasury to use. Basically, it would have eighteen months of runway set aside (with a growth multiplier, at that,) and the rest of the funds would be put to use. The author, Mason, proposed a three tiered tranche system, based on risk ratings, which would rate the various USDC vaults and projects, such as Curve, Yearn, Maker, as well as riskier ones like Float and Dollar protocol.

I thought it was a brilliant solution to the problem that I’m not facing. How to preserve funds in a stablecoin while still maintaining yield and returns. I immediately copied the spreadsheet and put my numbers in it.

As you can see, allocation 1 and 3 provide nearly identical returns with less risk. I’m actually quite comfortable with allocation 4, but decided to go with 1 to be conservative. Another Bager commented that no more than 40% of any tranche should go to one project, but after some consideration of gas costs, I think it would be too much trouble to need to manage nine positions compared to six, so we’ll say that no more than half of a position should be deployed in any one vault.

The risk rating of each project is going to take some though. I’ll need to do some research to see if anyone has put a framework together already that I can build off of. For example, there are about a dozen or more Curve vaults with various stablecoin assets and returns up to forty percent. Some have one, three or four underlying tokens such as DAI, USDC, USDT, as well as other newcomers like USDP, GUSD and so forth. Each one will need some sort of risk rating. Then we have Yearn vaults which build on top of those Curve pools. Could a Yearn vault still be “safer” than one of the newer Curve vaults? How to we rate the Yearn V2 vaults versus V1?

Then there’s the matter of these newer projects like Vesper, Float Protocol, Fei, and Dollar Protocol. Those are going to require serious consideration. Normally I’m willing to stake funds in practically any single-asset vault for liquidity mining, but when you’re talking about an elastic rebasing token or sienorage token things are a bit different.

As of right now, I’ve got funds staked in the Curve USDP vault, considered tranche B (med. risk) by Mason, and I’ve got enough ready to stake for one of my tranche A low risk vaults. I’m leaning toward the yCRV vault with 34% APY. I’ve also been checking out these other projects closely to assess risk.

More research will be done.