Onchain Wizard - UST Drama, Farms, Airdrops and Other Updates
The equity markets have been getting destroyed (US indices have had their worst start since 1939), and the crypto majors have not been spared. Which has led to a bloodbath in alts the last few weeks (most are down 50%+). While a majority of alts will probably continue to bleed out to zero, the few builders and projects that keep going and don’t quit while achieving more adoption will hopefully still be great investments when we get to the other side of the current macro problems. Now is a great time to keep learning, building lists of wallets and projects to monitor, and cut any risk to projects where you’ve got less conviction.
But isn’t crypto dead? If you can take a longer term view, it doesn’t look that way. Crypto adoption is following historical global internet penetration closely, so while the near term price action sucks, the long term adoption tailwinds are there. The people that could stomach historical volatility + massive drawdowns in BTC & ETH are now some of the whales we watch, and if we can stay in the game long enough, adoption tailwinds will help support the majors (and eventually alts with organic product market fit).
UST / BTC Drama:We saw massive amounts of capitulation yesterday (including over $2bn of liquidations), probably signaling some sort of near term bottom. What drove it? UST, a once ~$18bn stablecoin (pegged to $1), had de-pegging events over the weekend (with UST getting down to ~60c sometime yesterday). While all the facts aren’t totally out yet, the speculation is that the attacker (1) accumulated a large UST position and then (2) borrowed a multi billion dollar BTC position. The attacker (3) sold the BTC position to create panic (short sale). And then (4) attacked the curve pool when liquidity was low (drained liquidity there) and (5) then aggressively sold UST on Binance (to create a large de-peg). LFG then started dumping BTC in an attempt to restore the UST peg. As people ran for the exits (Anchor TVL got wiped out), the UST de-peg got worse dropping to 60-70c yesterday. The selling by LFG along with the marketwide panic (and liquidations) led to BTC falling ~18% from May 6th to yesterday’s low. In simple terms, the attacker printed a large gain on their BTC short by attacking UST. With the height of the drama hopefully over, we can hopefully put this behind us and return to some level of normality in the crypto markets. (note: probably not a good idea to be farming anything using UST).
Where I am still farming (DYOR):I mentioned in my Intro to Yield Farming post that I do not farm stablecoins - as the risk is too high vs. single digit yields (UST giving you a great case study on the risks there). Instead I focus on farms where I believe in the team and feel like I’m getting compensated for the risk I’m taking. All of these farms/strategies are on the higher end of the risk spectrum so please do your own research.
ETH & RDPX - Dopex SSOV’s (Lower Risk)
For my ETH and RDPX stacks that I do not plan on selling, but where I still want to keep increasing exposure, I’ve been using the Dopex.io options products (on Arbitrum) to write monthly covered calls to keep increasing my balance. Given that both of these tokens have high realized volatility, options writers can receive attractive base yields via premia from call option buyers (organic yield, not incentivized yield). Because these are covered calls, the only risk I’m taking (outside of the standard smart contract risks) is that the respective token prices move above my strike prices, but would only result in my losing some of my native token balance (the $ amount will still be up). This is a great way to earn yield on tokens that you like longer term, but that you think will stay under pressure short term. The annual yield on ETH SSOVs can be anywhere from 10-30% (depending on when you deposit and at what price), while the RDPX SSOVs historically have been making me 100% APRs (higher volatility). These products have propped up my portfolio these past few months, and I’ll keep using them to stay in the game.
Source: https://www.dopex.io/Dopex Liquidity Farms (Higher Risk):If you have the stomach for it, these farms are still paying very high APRs currently (some whales I watch farm here). This is higher risk than SSOVs (rewards are paid primarily in RDPX), but if you are bullish on onchain options adoption (like I am) and think the team is building innovative products (which they are), then it can be a good longer term farming position (don’t go all in). Given the volatility is lower on DPX, that is probably the better choice of the two at a 96% APR. Given both DPX and ETH have gotten washed out in the last few weeks, this can be a great strategy to get exposure to the project while earning some solid yields.
JPEG’d LP Farms (Higher Risk):I’ve been bullish on the intersection of NFTs and DeFi, and JPEG, with its NFT lending platform, fits into this narrative. The JPEG/ETH LP (on ETH L1) is paying 106% APR, which is pretty good (again need to be bullish on the token for this to really be worth it). The project has launched CryptoPunk lending vaults and is rolling out others soon. This is a smaller allocation for me to have exposure to the project while collecting some good yields.
GLP:I’ve been using GLP farms on Arbitrum as a lower risk “stable” farm. GLP collects 70% of trading fees on GMX, and the GLP token is composed of 33% ETH / 11% BTC / 2% LINK / 1% UNI / 53% stables. The yield (paid in ETH) is ~27% currently, and can move upwards when GMX trading volumes/fees improve. This gives you a yield on basically “stables” while also getting some upward price exposure on ETH and BTC. Because the yield is primarily from trading fees (and you are paid in ETH) the only risks here are (1) smart contract risk and (2) risk that speculative levered perp volume falls. But the structure is better here vs. other farms as the “yield” is organic.
Positioning for the Arbitrum Airdrop:If you aren’t aware, Arbitrum is one of the largest ETH Layer 2 networks (and my personal favorite to use). Transactions on Arbitrum are nearly instant and cost only $1-2 for swaps. Optimism (a competing ETH Layer 2) recently announced its own token and airdrop to users on April 20th - the Co-Founder of Arbitrum was quick to let people know on twitter that the Arbitrum airdrop is likely to be coming (and is the main course to the Optimism appetizer):
There are not a lot of public details out there about how to get the airdrop (obviously), and a snapshot for the airdrop might have been taken. But if not, here are the few ideas I have of how to position for it:
- Bridge over to Arbitrum using the official bridge: https://bridge.arbitrum.io/
- The Arbitrum OG Projects (outside of the farming rugs) are DPX, GMX and MAGIC, so interacting with these apps could potentially increase your odds of an airdrop -
- I would deposit into Dopex SSOVs once or twice (separate weeks or months)
- Swap or trade a perp on GMX a couple times
- Buy one of the Treasure/MAGIC NFTs
- It also is probably a good idea to buy a NFT on TofuNFT (where the main Arbitrum NFT projects trade)
- Lastly, interacting with Arbitrum’s “Odyssey” is another way to potentially get the airdrop (more details here)
No date has been set here, but the Arbitrum airdrop has been widely anticipated for awhile, so my guess is that after the 8-week Odyssey program, we will be fairly close to the airdrop. If you are like me, and don’t have the time to chase airdrops, just take a little bit of money, bridge over, and complete some of these actions to see if you can quality for one!
You can see that transaction activity has started picking up, suggesting the airdrop is on the horizon:
XMON/SUDO Update:Lots of price volatility so far - important to note (as people have asked) that I don’t think any of the recent price movements have anything to do with the project. Rather, equity markets and crypto majors have been getting punished, and higher risk protocol level investments like XMON tend to get washed out during these periods. Nothing has changed on the investment thesis for me, and the team has come out with more details since my initial post.
The team has now publicly confirmed that the public release of sudoAMM is growing closer, and has released more details on how the mechanics will work. The recent blog post provides some incremental color on how LPs will be able to set their pool price changes, and UI access is rolling out to more community members soon. As I mentioned in my XMON write up, I think once the product launches, the token will do well (and should outperform ETH), so stay tuned for more updates.
In summary:
As always, let me know if you have questions or comments on anything in here. I’ll include some wallets I like and what they are doing in the next paid post in a week or so, but I thought this was a good starting point for people to see farms on projects that aren’t going to zero, how to position for the upcoming Arbitrum airdrop, and what happened with the UST de-peg situation. Thank you all for your support, and I will continue grinding to find you the best alpha to help you cut through the noise and hopefully make some money (especially once macro conditions improve). If you found value from the post, feel free to share however you see fit and give me a shout out on twitter.
Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.