[Weekly] Market Return on StableCoin-based Strategies（17 Jul 2023): The Curious Case of BNB

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 17 July. 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 17 July:

Risk Free Rate: 3.01% (last week, 2.99%)

• Risk free rate is up marginally, surpassing 3%. This indicates the market is bullish again and spurs borrowing.
• Multichain announced that it will cease operation, due to the hack and management being uncontactable.

Mainstream Rate (Curve1.5x/Convex): 3.7% (last week, 5.4%)

• Mainstream rate is lower as TUSD and LUSD pools both dropped fairly a bit this week.
• Liquidity in sUSD dropped about 20m; but the pool remains balanced and sUSD pegged.

Benchmark Rate (Other Stablecoin Platforms): 9.3% (last week, 9.1%）

• Vesper’s FRAX Aggressive Vault continued to top this week. Vesper’s Frax vault is an aggregator of other Frax pools like Fraxlend CRV (yield 7%), Convex DOLA-FRAXBP (yield 20%) and EUSD-FRAXBP (yield 8%).
• crvUSD related pools (Curve, Convex pools and Conic) have improved yields this week, as the demand for crvUSD gets stronger. The borrowing rate for crvUSD fluctuates largely between the band of 1% t0 10%.

Exotic Strategies (non-Ethereum or quasi stablecoin strategies): 5% to 20% (last week, 5% to 15%）

• Velodrome had a short squeeze and its price rocketed, causing most of its pools to have a higher APY. Velodrome’s USD+ USDC pool topped globally this week, and there are other more risky pools in Velodrome that offer much higher yield now.
• Mai is still depegged about 2% to 3%, due to the looming Multichain hack (and the incapacity of management). alUSD and a few other tokens are similarly affected to different extent. We had a short thread on this to discuss briefly the depegging rational.
• Fantom has some decent pools using axlUSDC now and we are monitoring this. The yields are higher but risky as well.
• Platypus had a small hack last week but recovered very fast from it, and all users affected compensated.

Delta Neutral Liquidity Providing (Uniswap V2 and GMX):

• GLP’s estimated yield returned to a normal level of 14.4% APR this week (earnings before adjustment for impermant loss, hedging cost and traders’ PnL, 5 days estimate of the current week), in line with its historical trading fee yield range. Gains gDAI (Arbitrum) is at 10.3%.
• Uniswap fees remained low — it’s more due to the tradings are moving gradually to other markets like V3 or L2s.

Funding Rate (Binance Coin-Margined):

• Funding rates were all positive, except for BNB, which is severely negative of more than 50% — this is about an absolute 1% for a week’s funding cost of shorting. There’s a launchpad going on, and traditionally launchpad always increases demand for BNB and also corresponding shorting activities to hedge. However, the magnitude this time was much higher, also double from previous launch pad periods. The market has it that operationally Binance might have some issues. Let’s remain vigilent and curious about the case of BNB.

Serenity Premium:

• New article on Lybra Finance and $eUSD. Lybra Finance is a LSDfi protocol that allows users to collateralise stETH to mint stablecoin eUSD. The protocol retains the stETH yield from these collaterals and splits it amongst the protocol and eUSD borrowers.

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, 17 July 2023, Twitter: https://twitter.com/SerenityFund )