A short guide on reward harvesting strategies for Yield Farmers...
You might find this page on Yield Farming Rules useful:
It's important to classify the reward token.
1. If Bullish on Reward Token
Just let the rewards pile up!
Monitor the coin price, and when it pumps, harvest your rewards and take some profits.
Sell rewards if your short-term or long-term conviction changes.
Alternatively, a safer approach:
- Harvest and sell 50% of the rewards at some frequency
- Hold the other 50% (while you are still bullish on it).
2. If Bearish on the Reward Token
You have 2 options to do this: Option 1: Harvest & Sell
- Harvest rewards & sell for stablecoins
- Harvest rewards & sell for long-term HODL coins
Option 2: Compound Rewards Back into the farm
- Passively using an auto-compounders like @beefyfinance
You might find this page about compounding frequencies useful:
Don't forget to account for transaction costs though - if transaction costs are high, then reduce compounding frequency. Here are some tips on various types of transaction costs and how you can reduce them:
You might also find this post about auto-compounders helpful:
You should harvest your rewards more frequently.
Your reward value has a negative expectation over time so you want to minimize how long you hold that coin.
You can also do combinations of strategies:
Example: Once a week, you harvest & sell 50% of the rewards, and compound the other 50%.