DeFi Pulse Farmer #42
Catch up on a new week in DeFi as we recap China & Bitcoin, Elon Musk's crypto drama, the Farm of the Week, the Conservative Farmer, and more!
Welcome to DeFi Pulse Farmer - your guide to staying up on the latest and best trends in yield farming and beyond.
In this newsletter, we break down top stories, developments, and trends from the past week in tandem with two key farming opportunities to keep an eye on.
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This week DeFi experienced its first major drawdown in a while, as the total value locked (TVL) in the ecosystem’s dapps dropped a whopping +$23B, from $82.7B to $58.9B, since this point last weekend. Wow!
That’s the reality of crypto and DeFi: things can go up fast, and they can go down just as fast, too. If you zoom in, though, this particular drawdown wasn’t so surprising, at least considering a handful of developments that depressed the wider cryptoeconomy in recent days.
First off, the U.S. tax payment deadline came this week, and you can bet more than a few yield farmers scrambled until the last minute to file, selling tokens to help cover their 2020 tax tabs in the process. You don’t have to be an elite on-chain analyst to know some non-trivial sell pressure came from this deadline! We also experienced a major FUD trifecta this week from big players:
Chinese Vice Premier Liu He and other top Chinese government officials called for a “crack down on Bitcoin mining and trading behavior.” Every bull run there seems to be huge crypto scares from the Chinese govt. that don’t actually lead to much, so I wouldn’t hold my breath on this tough talk going too far. But it’s precisely the kind of chatter that does spook many crypto traders into acutely selling, that much is clear.
The US Treasury Department proposed boosting the IRS’s budget and specifically boosting the tax agency’s capabilities around cryptocurrency reporting. The news instantly caused a fright, but that’s only because it doesn’t seem like many actually read what the proposal said. In short, in 2023 businesses that deal with crypto will have to report on crypto transactions that are worth over $10k — just as these businesses already have to do for cash transactions over $10k. That’s not much to fear, but the FUD came on strong with this one anyways.
Lastly, Tesla CEO Elon Musk spooked the crypto markets when he suggested that Tesla was going to dump all of its remaining BTC holdings. The suggestion came on the heels of Musk receiving no shortage of flak from Bitcoiners over Tesla’s recently announced decision to stop accepting BTC for payments.
So these events may have catalyzed acute selloffs by temporarily taking the air out of the cryptoeconomy, but nothing about the fundamentals of Ethereum and DeFi have changed in recent days. If anything, DeFi’s become that much more impressive in showing it can now gracefully handle massive liquidation surges in market downturns!
Closing out, let’s take a look at how top DeFi tokens fared amid this red week. In that span we saw some life from PERP (+26.4%) and QUICK (+7.6%), which are, in fact, the only non-stablecoin DeFi tokens that are currently in the green on a 7-day timeframe. In kind, the DeFi Pulse Index (DPI) dropped 39.18% to reach $340.65.
Thank you to our sponsors DEXTF, an asset management protocol that makes managing and investing assets easier, and O3 Swap, a cross-chain Aggregation Protocol that integrates fragmented liquidity across blockchains.
Accumulate and bundle yield generating assets with your favorite longs on DEXTF today, and access the best trading prices on a one-step platform with O3 Swap.
Farm up to 4-digit APYs via leveraged IMX farming!
THIS STRATEGY INVOLVES A PROTOCOL THAT DEFI PULSE HAS A PROMOTIONAL ARRANGEMENT WITH. THAT ARRANGEMENT HAD NO BEARING ON THIS FARM OF THE WEEK SELECTION, ONLY THE PROJECT’S ONGOING FARMS DID.
To date, lending platforms have been the most popular projects in DeFi. But so far these protocols have mostly been simplistic. You deposit in a basic ERC-20 token as collateral, then you can borrow against it. Tada!
Yet DeFi’s growing fast, and that’s leading to new kinds of demands.
For example, in recent times we’ve experienced an explosion of liquidity provider (LP) tokens. More than a few DeFi users now have Uniswap LP tokens, SushiSwap LP tokens, Curve LP tokens, and beyond in their wallets at any given time.
So now we have all these savvy DeFi users sitting around with LP tokens, and they want to put them to greater, more productive use like their other ERC-20 tokens. Here, cue in Impermax Finance.
That’s because Impermax Finance is a lending protocol for DeFi LP tokens. While the project’s still up-and-coming it only supports Uniswap V2 LP tokens right now, but support for more trading protocols is on the team’s slate.
What makes Impermax particularly interesting is how the project lets its users leverage their LP tokens. In other words, token holders can deposit LP tokens into Impermax, use the borrowings to create more LP tokens, and then borrow against this new supply, over and over. This is made easy because borrowers can only borrow the assets they’re LPing for, so if DAI/ETH LP tokens are your collateral then you can borrow DAI, ETH, or both.
How to Farm IMX
Currently, Impermax is offering attractive incentives in IMX — the protocol’s native token — via the project’s 4-year Leveraged Farming liquidity mining program, which started last month.
Simply put, if you want to farm IMX you have to borrow tokens through one of Impermax’s incentivized lending pools, namely IMX/ETH, DAI/ETH, USDC/ETH, USDT/ETH, USDC/USDT, WBTC/ETH, UNI/ETH, and DPI/ETH. You can even use leverage to 20x your fee yield and 20x your IMX farming rewards simultaneously!
If these aggressive yield farms are up your alley, then you can follow these steps to join in:
Select an IMX incentived lending pool and ready liquidity for it, e.g. ETH and DAI.
Deposit your aforementioned liquidity allocation into Uniswap V2 using the V2 Pool dashboard.
You’ll receive an equivalent amount of Uniswap V2 LP tokens. Now navigate to the Impermax Markets dashboard and click on your pool of choice.
Click on “Deposit,” input the amount of LP tokens you want to supply as collateral, and then confirm the transaction.
After this and using the same interface, select which of your supplied tokens, e.g. ETH, DAI, or both, that you want to borrow. Proceed by pressing “Borrow,” inputting the number of tokens you want to borrow, and then confirming the transaction.
Voila, you’re now racking up IMX rewards. Kick things up a notch if you dare by clicking on the “Leverage” button and setting your leverage. This will raise the risk involved but also the potential IMX rewards.
Unwind your position and withdraw your liquidity whenever you’d like through Impermax’s pool interfaces.
Impermax Finance has been audited and the project has a known team, which are positives. But anything that involves leverage is risky, so only participate in these yield farms if you thoroughly understand the protocol and its risks. As always, never deposit more money into any farm than you can afford to lose!
Farmers can enhance this week’s farms with our sponsor Alpha Finance. Its recently launched Alpha Homora V2 allows farmers to do leveraged yield farming on pools that are on Curve, Balancer, SushiSwap, and Uniswap. Farmers can also lend assets such as ETH, DAI, USDT & USDC.
In Alpha Homora V2 farmers can open leveraged yield farming positions for selected pools and, similar as in Alpha Homora V1, farmers don’t need to have equal value of both tokens to yield farm. Head over to Alpha Homora V2 and start farming or lending today!
Liquidity Mining on Uniswap V3
TLDR: Crypto investment firm Paradigm outlines why Uniswap V3’s new NFT-centric liquidity provider (LP) system is compatible with liquidity mining.
Coinbase Wallet Introduces New Browser Extension
TLDR: The Coinbase Wallet team releases a Coinbase Wallet browser extension so that, like with MetaMask, users can easily interact with DeFi apps.
Ready, set, go!
TLDR: Convex Finance, a protocol centered around simplifying CRV staking and boosting CRV rewards, is live.
Teller Alpha Launch
TLDR: Teller, a protocol for secured and unsecured DeFi loans, unveils its Alpha release.
SushiSwap Earned More Fees Than Bitcoin
TLDR: Trading protocol SushiSwap became the second DeFi app behind Uniswap to acutely notch more 1-day fees than the entire Bitcoin network.
Ethereum Announces First Quarter 2021 Results
TLDR: Writer James Wang presents a Q1 2021 earnings report for Ethereum as if the network were a large software company; the results are impressive.
Solving the Liquidity Problem
TLDR: Ethereum scaling project Connext announces plans for cross-chain Virtual AMMs and liquidity auctions.
Farm +46% via Yearn V2 SNX Vault
Staking SNX in Synthetix is DeFi’s oldest yield farm, but hitherto it’s been painful at times. Why? Having to actively manually manage your debt on a rolling basis and facing high gas fees has been more suited for impassioned DeFi pioneers.
Now, though, SNX staking is a breeze and friendly to users of all stripes courtesy of Yearn’s new SNX V2 Vault!
Here’s how the system works. Users deposit SNX into the vault, or zap in using another supported DeFi token. Ensuing sUSD earnings will be parked into Yearn’s new sUSD V2 Vault to generate further yield for depositors. The process is more efficient for all participants, since claims are handled automatically every week and are done in batches to considerably mitigate gas expenditures.
Whenever you’re ready to withdraw your underlying SNX and earnings, you can do so easily through the vault’s interface. It’s even possible to “zap out” your SNX into ETH, DAI, USDC, USDT, and WBTC if you so choose.
Yearn has a reputation for excellence in DeFi, so you can rest assured knowing that the SNX V2 Vault is likely safer than most yield farms. At the same time, no team is full-proof and slip-ups happen. Just make sure you do your own research and farm responsibly at all times.
This Saturday's Plow of the Week goes to LP Royale! A super cool tool that allows you to learn how liquidity providing works without investing real money. Did we say you can also win prizes along the way? The tool requires you to sign up with your email but, if you’re okay with that, go check it out!
DeFi may be down, but it’s definitely not out. The ecosystem still has a long way to go in many regards, but after this week nobody can say the top DeFi dapps aren’t built well. DeFi faced serious market stress tests in recent days, and on the infrastructure front the space passed with flying colors! This is what the beginning of the future of finance looks like.
All info in this newsletter is purely educational and should only be used to inform your own research. We're not offering investment advice, endorsement of any project or approach, or promise of any outcome. This is prepared using public information and couldn't possibly account for anyone's specific goals or financial situation. Be careful and keep up the honest work!