[Weekly] Market Return on StableCoin-based Strategies（29 May 2023): GLP Yield Recovery

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 29 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 29 May:

Risk Free Rate: 2.55% (last week, 2.58%)

• Risk free rate declined marginally as liquidity in Aave and Compound recovered a little.

Mainstream Rate (Curve1.5x/Convex): 3.5% (last week, 3.9%)

• The mainstream yield declined as the yield of LUSD and sUSD yields declined.

Benchmark Rate (Other Stablecoin Platforms): 7.5% (last week, 8.6%）

• Conic’s DAI pool topped this category, surpassing crvUSD-TUSD’s 10.5% marginally.
• Generally, the market is quiet and yields are below 10%. LSD has more attention of the market and ETH-denominated products are generally performing better than USDC-denominated ones.

Exotic Strategies (non-Ethereum or quasi stablecoin strategies): 4% to 16% (last week, 5% to 15%）

• The yields on EVM chain continued to decline, all in single digits now and we did not see new protocols surfacing on Avalanche or Fantom for a long time.
• Gamma’s Mai-USDC pool topped this week globally and this is one of the oldest farms on Polygon.

Delta Neutral Liquidity Providing (Uniswap V2 and GMX):

• Uniswap V2 subgraph is back to normal (last week it was down on Monday) and the yields for half-ETH, half-stablecoin pairs are single-digit.
• GLP’s estimated yield bounced back to 9.7% APR this week (earnings before adjustment for impermant loss, hedging cost and traders’ PnL, 5 days estimate of the current week). Good news for yield traders on Pendle Finance.
• On the other hand, the yield of Gains Network’s gDAI continued to decline to a historical low of 4.7%.

Funding Rate (Binance Coin-Margined):

• Funding rates were all positive, and DeFi tokens have over 10% funding rate earning, meaning that if you purchase the token, use it as collateral and short the same amount in Binance, the net yield is a delta neutral 10%. BTC is also above 10% and BNB is close to 10% as well. A systematically higher funding rate probably suggests that there’s no innovation going on and funds are back to trading.

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, 29 May 2023, Twitter: https://twitter.com/SerenityFund )