Preparing to launch a new cryptocurrency programme targeted at conservative folks in my generation has raised some questions that probably can't be answered right now even with all the information we have.
What you can be shown above is a simple experiment I'm doing with my spare cash. Beyond the usual yield farming strategies, I've also used some kopi money ($3,000+) to farm into really dubious projects - just for the lolz.
As you can see, some projects under the Nexus Protocol can yield over 100%+ a year.
BTW, I don't recommend this to readers because I started losing money immediately after pulling this stunt - it's still a big question mark as to whether the yields farm can cover the losses over the next few months. I also could not, for the life of me, understand the white paper of this project.
The rest of my yielding farming strategies using stablecoins, however, are doing fine and I was able to build a fairly steady portfolio that yields about 14% a year. And while I actually do not think this is sustainable over the long term, if stable strategies above 14% can be shown to work in the cryptocurrency world, it raises some issues for policymakers and philosophers to think about.
Imagine a world where you can yield 14%-20% without experiencing market risk. No matter what you do, be it internal marketing campaigns or launching of new products in a company, your opportunity cost would be making 14%-20% in the cryptocurrency world. Suppose you are an IT manager that wants to pitch some service management software to be deployed to make your department more efficient. Your CFO may argue that in order to justify your project you need a hurdle rate IRR of 20%, because, otherwise, it's better to convert the funds into crypto to yield farm instead.
This will also have ramifications in your personal life - why do you want to take a risk to start a business when a stablecoin can be farmed at 20%? Also, anyone working and saving up $120,000 can generate $2000 a month at 20% yield year. Why would anyone with $120,000 liquid cash wake up to answer to the boss at work?
Of course, in real life, no one will really believe that 20% yield are sustainable, there may be some kind of de-pegging in the horizon, farming yields may drop, or inflation will surge.
But I think this will not stop some Zoomers from giving this high-yielding for of FIRE a try. This shuld be a thing that should bother employers because we are in the midst of a Great Resignation.
For folks my generation, there's nothing stopping us from getting some $200-$300 Amazon goods from yield farming strategies every month, if we get depegged, we should just move on in life. We may enjoy better odds than playing 4D or Toto.
Anyway, all my crypto is bought using dividends from my equity portfolio.
Forgive me for being cynical, I've searched for hours and cannot find an answer to the question: where do the yields come from?
ReplyDeleteOnly 2 sources I know of: staking (as a validator, returns are usually 5-10% and may come with the responsibility of running a node), and lending (Someone's paying an even higher yield to borrow your assets)
The best answer I could find for lending is here: https://www.notboring.co/p/is-blockfi-the-future-of-finance Around a year ago, hedgies could put on a risk free arbitrage trade by buying bitcoin while holding bitcoin futures. They'd happily pay 8+% to borrow BTC and leverage up their risk free trade.
But that was then, and bitcoin ETFs have since emerged to remove this arbitrage opportunity. And that was 8.6% interest. Who the hell is paying 14-20%? Smells like ponzi.
I'm also trying to figure out where the yields come from. In the meantime, to incentivise the effort to investigate, I took a small position.
ReplyDeleteUS is experiencing the Great Retirement and the Great Resignation. For ex-US, it's more of a Great Job-Hopping. Hasn't happened in S'pore yet, although majority of locals (mostly Gen Y & Z?) have indicated intention in surveys. We'll see whether lip service translates to action in 2022.
ReplyDeleteWhen it comes to cryptos, I prefer using financial situation tropes as opposed to generational tropes.
There are 3 main groups in the crypto space:
- those with shitty jobs/careers and looking to get rich quick;
- those with a handle on their careers but looking for FO money;
- those already with a semblance of FI but seeking to expand (asset class, wealth, intellectual pursuit, for fun, for business, etc).
It's why I see Gen X & even some Boomers who go all-in with whatever little savings they have. It's a lottery mentality. Some do earn their FO money in the last year.
99.99% of cryptos will eventually implode. The 0.01% will survive due to critical mass adoption & money flows, similar to gold.
For anchor, the 20% comes from combination of borrowing interest and yield from collateral. Yield of collateral are their staking yields. Assuming 33% ltv and 10% yield, then anchor would be able to generate 30% yield from the collateral. Currently seems like the outflow is slightly larger than the inflow.
ReplyDeleteSee https://wantfi.com/terra-luna-anchor-protocol-savings-account.html
For nexus, those 100+% apr are from emissions/inflation. So value of psi would be diluting over time. There is some buying pressure from the neth and nluna vaults, and market if they are bullish.
Thanks blight. I have a lot to learn in this department.
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