[Weekly] Market Return on StableCoin-based Strategies（8 May 2023): Skyrocketing Gas

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 8 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 8 May:

Risk Free Rate: 2.57% (last week, 2.72%)

• USDC Liquidity in the Aave V2 pool recovered to be over 600m, whilst Compound liquidity did not change much.
• The slight drop in the rate is due mainly to the weaker borrowing demand in the middle of the meme frenzy. Pumping memecoins like Pepe and its thousands of copycats had caused the gas price of the Ethereum mainnet to be congested. Gas prices skyrocketed last week to be consistently over 100 gwei and each Uniswap transaction will cause about $50 to $80 — making minitrasctions on memecoins an expensive gamble. Whilst it’s good for the deflation of Ether, too high a gas cost suffocates real demand of the blockchain.

Mainstream Rate (Curve1.5x/Convex): 3.9% (last week, 4.5%)

• The yield went down due to a market correction over the weekend, with CRV prices came down fair bit.
• TUSD’s lending rates also came down as the Binance launchpad using TUSD as a bidding currency came to an end.

Benchmark Rate (Other Stablecoin Platforms): 7.6% (last week, 9.6%）

• Bella Finance’s USDT vault topped this category this week.
• The yields of major platforms came down significantly due to the market correction. Liquidity, as well as attention had been drawn to memecoins. Yields are at a level comparable to 2 months ago, where the market was fickle in terms of its direction. Today, the market seems to be at a road crossing again.

Exotic Strategies (non-Ethereum or quasi stablecoin strategies): 6% to 15% (last week, 7% to 20%）

• Yields on EVMs continued to come down, in line with the yield drop in Ethereum.
• Our weekly updates of Solidly forks will be published every Thursday now. This is the last Thursday’s screenshot.

Delta Neutral Liquidity Providing (Uniswap V2 and GMX):

• Uniswap V2 earnings gave a surprice for USDC and USDT-ETH pools last week, hitting very high levels.
• GMX’s estimated yield will come down this week, with our 5-day estimate suggesting only 14% APR this week (earnings before adjustment for impermant loss, hedging cost and traders’ PnL).

Funding Rate (Binance Coin-Margined):

• Funding rates were mostly positive but low last week, except for BNB, which remained significantly negative.

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