Thursday, April 7, 2022

HARMONY: Leveraged yield farming on Tranquil.fi

#PSA 

The BORROW side for $USDC is finally net-positive yields on @tranquil_fi ... also for $ETH, if that return (49%) is to be believed.


I don't believe it (glitch?), but I'll borrow and cover there as long as @tranquil_fi honors that return. 

YMMV.



But what are you going to do what that α?

Here's how to set up a δNeutral $ETH position on @tranquil_fi to leverage yield farming.

Recap: δNeutral is when you borrow or short a position, something considered to be very risky, but then immediately cover that short, completely, with a long-position of the same asset.

Why? You get yields on both sides and protect your principal from market ups and downs.

Great! So, where would you do this? Where the yields for a borrow are net-positive: they are PAYING you to borrow crypto.

They are

PAYING YOU

to borrow crypto.



Establishing a δNeutral position on Tranq.fi

Okay, so HOW do you set up a δNeutral position on @tranquil_fi?

First, FUND your @tranquil_fi position with collateral. 


You see I have lots of collateral everywhere. Why? To be flexible. When an opportunity arises, I can take it, BOOM!, just like that.

Like now.

Next, go to the borrow-side and look for assets that have a net-positive yield.


Borrow. Me: I borrow to 95% (VERRA RISKY!). Why? I'll explain.


So, the risk is what? If $ETH suddenly spikes, I get liquidated. Ick: no bueno. 🤢🤮

But, for me, that risk exists only for seconds, because I IMMEDIATELY take that borrowed asset and fund the collateral-side, COVERING the borrow, COMPLETELY



δNeutral, folks. 😍

Do you see what happened when I covered the loan? My position freed up: I'm in the safe-zone again

Guess what I do next?
  1. BORROW <-
  2. COVER         |
  3. LOOP ---------|
until my position stabilizes.





This is LEVERAGED yield farming. I use the loan to LEVERAGE my position.

Let's take a step back.

I now have $4500 in $ETH borrowed and collateralized: both sides earning yields.


How much of that is mine?

None. Zero. Zip. Nada.

I am earning 22% yield ...

... using $4500 of OTHER. PEOPLE'S. MONEY.

Geniousness. 🤓

Maintenance

What happens when the price of $ETH drops? My borrow becomes weaker, but my collateral covers more strongly. Me likey.

What happens when $ETH price skyrockets?

Uh, oh! The loan amount is not covered by the collateral anymore.

Do I panic?

Maybe a little, but...


But that's why I have collateral to COVER the loan. If the markets go cray and things get out of hand, I pull out the collateral and pay off the loan with it.

I'm covered, see? That's why the collateral COVERS the loan.

No sweat. (Okay, a wee bit o' sweat.) 😅

But until that time, I keep this position until it's no longer viable. When the loan $ETH interest increases to be above the $TRANQ yield, then I close out the position.

Do I get to keep any of the $ETH? Nope. It's other people's. I keep NONE of the asset in a @tranquil_fi δNeutral position.

Then why do it?

Those sweet, sweet $TRANQ yields on $4500 ...

... of OTHER PEOPLE'S MONEY. 😘

Caveat Investor

I would be remiss if I don't point out that δNeutral is not for everyone. It's a very high risk approach, and I recommend only very experienced investors even try it.

DO NOT take a loan you CAN'T repay or afford to lose in liquidation, because YOU WILL be liquidated!

How do I know you'll be liquidated? Because I've been liquidated FOUR TIMES learning this stuff.

START very-Very-VERRA SMOL!

Also, if you can't keep calm in turbulent market conditions, DO NOT do δNeutral. You'll panic and lose everything.

KEEP CALM, or DON'T DO IT!

Finally, δNeutral means IT'S NOT YOURS! 

If you get attached to 'your' $ETH, then don't do this. It's not 'your' $ETH, it's BORROWED $ETH, and you HAVE to give it back when the position sours. If you can't do that, DON'T DO THIS!

Conclusion

So, read the caveats, understand the risks, and try it out (only with money you can afford to lose, mind). It's 40%+ interest, leveraged using 'other people's money.'

δNeutral is a powerful instrument to have in a portfolio.

Give it a go and see if it's for you.


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