A guide on various ways to earn money on stablecoins and crypto through DeFi.
One way to make the best of a down market is to put your crypto to work to earn $ in a bull or bear market.
Here's a mega-🧵 explaining & comparing various ways to make your crypto work to earn you $ 👇
This thread (part 1) covers:
- Active & passive ways to make your crypto earn $
- Stablecoin strategies for 20 - 100%
- Overview & comparison of lending, staking, and LP farming
- How to understand LPs and mitigate IL
- Expected returns
- Links to detailed guides
In Part 2, I cover:
- multi-token LPs
- covered calls
- Defi 2.0 / 3.0
- liquidation strategies
Do you believe your bag of shitcoins will 10x in 5 years? 💰
@ 0%: 10x @ 5%: 12.7x @ 10%: 16.1x @ 15%: 20.1x @ 20%: 24.8x @ 25%: 30.5x
I'm going to explain ways to get 5% - 500% on your crypto depending on your risk and time investment.
Let's give your coins a job and send them off to work! 💼
First, let's talk about stablecoins.
It doesn't hurt to have some cash on the sidelines. And by cash, I mean stablecoins earning yield 💸
Yes, there are ways to get 50-100% APY on stablecoins, but it depends on your risk appetite.
Your stable coin bag won't 10x, but:
- It is a hedge to your crypto position &
- It gives you income & liquid capital that you can deploy into good opportunities.
For passive 5-20% yield, you can look at:
- Centralized lending options like Celsius
- Decentralized lending options like Aave, Compound, Hundred Finance, etc
Remember, everything has risk. Specifically, you should be sure to minimize the risk with:
- The Stablecoin
- The Lending Protocol Used (Smart Contract).
If you want 20%+ returns and are willing to take more risk, then try finding a stable-coin liquidity pool with high APY like this:
https://coindix.com/ is a great resource.
This is not set & forget.
I explain about liquidity pools later in this thread so keep reading...
If you're comfortable with more risk, you can also consider leveraged strategies like the Degenbox strategy for 100%+ APY - @Route2Fi has a great post explaining this.
That's a wrap for stablecoins.
If you enjoy the variance, you can also try a no-loss lottery-like @PoolTogether_, which has an expected APR of 25% through daily prizes:
If you're not feeling too bullish on #crypto, you could also go for some high APY market-neutral strategies.
They are more complicated, and not as passive, but have very high APY (200%+).
♥️ If you want to see more market neutral strategies 👇
For your #crypto #HODL bags, there are 3 basic strategies:
- Lending • Staking • Providing Liquidity & Farming
More advanced strategies like leveraged LPs, covered calls, multi-token pools, etc
I'll explain those in part 2 (soon)
Lending your crypto out to borrowers is a very easy and passive way to earn some moderate yields on your crypto.
Pros of Lending:
- Decent yields
- Ease of use
Cons of Lending
- Usually not the best % yield
- Centralized platforms are custodial
Where can you lend #crypto?
- Centralized platforms like @CelsiusNetwork, @investvoyager and @Binance are easy to use, passive & user-friendly.
For many, this might be enough, but remember:
These are uninsured custodial wallets & they don't usually offer the best yield.
Here are the APRs offered by @CelsiusNetwork for various #cryptos:
- $BTC: 3-6%
- $ETH: 3-5%
- $ADA: 4%
- $DOT: 9%
- $LUNA: 5%
- $LINK: 3%
- $MATIC: 9%
- $USDC: 8.5%
- DeFi Lending platforms like @AaveAave, @CompoundFinance, @CreamdotFinance, etc
They are also pretty easy to use, and also open-source and non-custodial.
But lending yields are pretty low right now so you'd probably be better off staking imo.
Let's talk about staking..
In a PoS network, validators stake crypto to secure the network, and in return receive a reward.
When you delegate #crypto to these validators, you receive a proportional reward as well (minus the validator's commission)
Pros of staking
- Relatively safe
- Relatively stable APR
Cons of staking
- Yields are not huge
- Risk of bad validators (slashing)
- More effort than lending
For clarity, I'm primarily talking about delegating your stake, not actually running a validator node yourself, as that can be significantly more technically complicated.
I will release detailed step-by-step staking guides for various coins in the near future.
Staking APRs for some major crypto projects:
- $ETH: 5%
- $MATIC: 17%
- $DOT: 14%
- $SOL: 6%
- $FTM: 10%
- $AVAX: 9%
- $LUNA: 7%
- $ATOM: 15%
(not factoring for token inflation)
Earn Passive Income with Crypto | Staking Rewards
Staking Rewards is the leading data provider for staking and crypto-growth tools. We are currently tracking and 263 yield-bearing assets with an average interest rate of 0% 41262 providers. View All Assets
Rates will vary depending on where you stake.
As you can see, staking APRs are slightly higher than lending APRs, though still not crazy.
However, staking is a bit more effort as each coin will have its own platform where you would have to stake.
If you're working with smaller amounts (< a few $1,000) on a chain like $ETH, you could lose a lot in gas fees.
In that case, best to either use a centralized lending platform, or move assets to a cheaper chain like $MATIC, $FTM, or $AVAX.
The other chains often have better rewards anyway.
For example, you can get 8.29% APY on $BTC on the #Fantom $FTM chain.
3. Providing Liquidity (LP) and Farming
LPs can typically get you significantly higher yields than staking.
Farming those LP tokens can get you even more % APR.
I've explained how Liquidity Pools work before 👇
Pros of LP-ing:
- High yields
- Farming opportunities
- Self balancing
Cons of LP-ing:
- More complicated
- Requires active management due to fluctuating yields
- Impermanent Loss risk
When you provide liquidity, you receive LP tokens that represent your ownership of the LP.
In return for providing liquidity, you get paid a portion of the trading fees proportionally to your ownership of the pool.
You could think of an LP as a self-balancing pie of 2 assets.
For example, if you want to maintain a 50-50 ratio between $ETH & $BTC, then you could LP into $BTC / $ETH pool and earn 30%.
The pool with maintain that 50-50 ratio for you, as the prices of BTC & ETH change.
But the really high APRs often come from farming these LP tokens.
DEXes will offer very high rewards (often in their own tokens) to those who stake their LP tokens.
An added risk with LP-ing is impermanent loss (IL).
Impermanent loss is the risk that you would be better off holding the coins instead of LP-ing.
Read about IL. Understand IL, but don't let IL scare you off.
Learn how to reduce IL. https://twitter.com/shivsakhuja/status/1473794513214738434?s=20
You can minimize IL by providing liquidity for pairs of #cryptos that you are bullish on, and that you expect to have correlated price action.
Ex: if you like $ETH and $MATIC, & you believe they will have correlated price action, then consider the ETH / MATIC LP. (~20% APY)
Now let's explore some LP yields:
- $ATOM / $LUNA: 32%
- $ATOM / $OSMO: 100%
- $LUNA / $UST: 60%
- $LUNA / $UST: 60%
- $LUNA / $bLUNA (stable-pair): 25%
- $LUNA / $aUST: 65%
- $LUNA / $ETH: 15%
- $mETH / $bETH: 12%
- $aUST / $UST (stablecoin-pair): 25%
- $FTM / $ETH: 66%
- $FTM / $AVAX: 50%
- $FTM / $USDC: 170%
- $USDC / $MIM / $UST: 25%
- $FTM / $TOMB: 205%
- $FTM / $WBTC: 58%
- $MATIC / $ETH: 20%
- $LINK / $ETH: 40%
- $MATIC / $USDC: $50%
- $ETH / $USDT: 60%
- $MATIC / $AVAX: 20%
- $ETH / $USDC: 60%
- $BTC / $USDT: 30%
- $BNB / $USDT: 40%
- $SOL / $ETH: 24%
- $SOL / $BTC: 12%
- $SOL / $USDC: 50%
- $ETH / $AVAX: 60%
- $BTC / $AVAX: 40%
- $AVAX / $USDC: 60%
Here's what you're getting on your crypto-stable pairs:
- $ETH / $USDC: 85%
- $LUNA / $UST: 70%
- $SOL / $USDC: 40%
- $FTM / $USDC: 170%
- $AVAX / $USDC: 60%
LP-ing is an especially good strategy if you expect a sideways market.
Here is a great resource to find the best LP / Farming opportunities.
Coindix - Today's best vaults and APY on the DeFi
Monitoring +10,000 vaults on 26 chains to find Today's best vaults on the DeFi.
Part-2 covers various more ways you can earn in #DeFi with higher-risk and higher-reward including:
- Multi-token LPs
- Leveraged LPs
- DeFi 2.0 projects
- DeFi 3.0 projects
- Automated Covered Calls
- Market neutral strategies
Check it out here:
Most common risks:
- Price risk
- De-peg risk
- Smart contract risk
- Wallet loss risk
- Admin key / rugpull
I've touched upon these earlier, but will do an in-depth thread too if interested.
Please also check out these 5 common mistakes people make in #crypto and #DeFi - be safe out there!