[Weekly] Market Return on StableCoin-based Strategies（15 May 2023): Time for crvUSD
We provide a weekly update of the platforms we track, based on the strategies discussed in Serenity Fund’s Overview of Stablecoin Investments 2022 and the periodical updates.
Note: this is NOT a portfolio. This is an average yield calculation of each risk category, to be used as a benchmark for assessing the risk-return of an investment or a portfolio. Yields derived from mining reward tokens are based on the prices of tokens on 15 May. Yields that are cumulative, e.g. Uniswap and Binance funding rates, and are actual yields over last week, compounded weekly to derive the APY.)
Quick analysis on 15 May:
Risk Free Rate: 2.63% (last week, 2.57%)
- USDC Liquidity in the Aave V2 pool dropped to below $600m, causing the lending rate to be slightly higher.
- Last, crvUSD has been deployed a few times and the Curve team reported strong earning abilities that the crvUSD stabilising mechanism could create for CRV. Let’s stay tuned for more on crvUSD from the team and this can be the next major thing in the stablecoin DeFi space.
Mainstream Rate (Curve1.5x/Convex): 4.0% (last week, 3.9%)
- There was little change in the liquidity or the yield from this category, as the market had a minor dip in the middle of the week but soon recovered over the weekend.
Benchmark Rate (Other Stablecoin Platforms): 8.2% (last week, 7.6%）
- Pendle’s USDT vault topped this category this week. This is due to a strong PENDLE price, as a PENDLE war is going on: Equilibra and Penpie are both launching a ve-staking derivative service built on Pendle Finance, similar to that of Convex to Curve. This pushed the price of PENDLE higher.
- We have replaced bb-USD pool on Balancer with StakeDAO’s FRAX-USDC pool this week. This had a positive impact on the average yield for this category.
Exotic Strategies (non-Ethereum or quasi stablecoin strategies): 7% to 15% (last week, 6% to 15%）
- The yield range from this category remained more or less the same compared with last week, but yields on EVMs continued to come down, and there are no new protocols being launched to spark market interest in DeFi.
- The narratives of memecoins are also fading and liquidity was stagnant for the time being.
Delta Neutral Liquidity Providing (Uniswap V2 and GMX):
- Uniswap V2 USDC-ETH pool last week continued to deliver good earnings.
- GMX’s estimated yield will come down this week, with our 5-day estimate suggesting only 12% APR this week (earnings before adjustment for impermant loss, hedging cost and traders’ PnL), which was lower than Uniswap V2 USDC- or USDT-ETH (which we think should be the lowest yield in this category). If this yield level continues, we foresee liquidity to withdraw from GMX.
Funding Rate (Binance Coin-Margined):
- Funding rates were mostly positive but still low last week, except for BNB, which was zero. In Binance, all the pairs have a 0.01% baseline rate (suggesting a close to 10% annual funding cost of long positions, if the long-short swings are within small ranges), and only BNB has a zero baseline rate.
Business Update:
- We have made a SubStack for premium content, mostly our strategy papers for more complex investments. This is a paid service at $49 per month (free for research clients). You can subscribe to the Free version to get a summary of each strategy paper. However, to support our work, we hope you could subscribe to it for the full article — $49 for four to five papers a month on stablecoin and DeFi strategies. For this, we offer a 70% discount for our Twitter and Medium audience: https://serenityresearch.substack.com/1a082767.
The above summary is a snapshot of what the market looks like over the last week and as of Monday. It is not meant to be a ranking table nor to be exhaustive. There are various other defi protocols and products that can offer different risk and return exposures. Follow our Twitter below to have more timely and detailed information on the DeFi market.
(Serenity Team, 15 May 2023, Twitter: https://twitter.com/SerenityFund )
