🍃Yield farms hands on
Last updated
Last updated
Savings is suitable for users unwilling to bear any losses, it can continuously and steadily make money.
If you are willing to take on low risks and achieve better returns, it is recommend to use strategy in yield farming.
| Strategy | Strategy Feature | Suitable user | Suitable | Risks |
|---|---|---|---|---|
Leveraged yield farming are a medium to long-term product, so please do not rush in and out. Instead, let them go for a longer period of time in order to accumulate more rewards.
The dual stable tokens strategy, also known as the Dancing Gun strategy. Mole uses algorithms to adjust the price range to the highest yield in real-time, automatically adjusting positions and reinvesting, which is equivalent to opening a bond fund position. It is suitable for the vast majority of users and has very few retractions.
The suitable coin pairs for the dual stable tokens strategy are as follows:
1, BUCK-USDC 2, wUSDC-USDT 3, wUSDC-USDC 4, wUSDC-BUCK 5, USDT-USDC
1, Deposit USDC & BUCK in any ratio. You can only provide either token, or both kinds in any ratio as the principle.
2, Choose either token as the debt token you want to borrow from.
3, Choose the leverage number you want.
Dual stable tokens farms are difficult to trigger liquidation unless a malignant black swan event occurs, with extremely low probability.
If we look at the situation in the above chart, borrowing BUCK with x5 leverage would result in the following situation:
Situation: Both BUCK and USDC experienced a significant decline
It will NOT trigger liquidation because although the price has fallen, the debt also decreased. Malignant black swan events often result in both of BUCK & USDC decline at the same time. It will not cause liquidation.
Situation: BUCK has significantly decoupled and fallen, while USDC remains unchanged
It won't trigger liquidation, instead, congratulations to you that you are making a profit. Because your BUCK debt has decreased, and you have less debt to repay, so you will earn more.
Situation: USDC has significantly declined, while BUCK remains unchanged
When USDC declined to around 0.7x with maximum leverage of x5, liquidation will be triggered. If the leverage is small, the liquidation will only be triggered if the price declined more.
Overall, it can be seen that the dual stable tokens strategy is very robust. It is actually difficult to liquidate when you use high leverage. There are other DeFi projects where the leverage number for dual stable tokens is usually around x10 times. Mole only sets x5, which is very stable. Sincerely recommend to farm on it.
If user open a position using market neutral strategy, the rise and fall of token prices can't impact the position value. User is able to earn steady farming rewards. This is also a recommended strategy by Mole.
Also, market neutral strategy can earn double amount of farming rewards. It is like you open a little hedge fund position by yourself.
Only applicable to farm trading pairs of one non stable token and one stable token. Moreover, the up and down fluctuations of this non stablecoin should not be too intense.
At present, there are WBTC-USDC farm, WETH-USDC farm, SUI-USDC farm, and CETUS-USDC farm that meet this condition.
Among them, the advantage of WBTC-USDC farm is its stable price, but the disadvantage is that its storage pool in Mole is relatively small, and the amount of WBTC that can be lent out is very small.
The advantage of WETH-USDC Farm is its stable price and good volume in Mole's savings pool, making it a suitable market neutral strategy. Recommend using WETH to open a neutral position in the market.
The disadvantage of SUI-USDC farm and CETUS-USDC farm is that the prices are not very stable. If the prices sharply rise or fall, it is easy to cause frequent rebalancing (adjustments when getting out of the liquidity provider price range, also known as rebalancing), resulting in frequent unpredictable losses. So, it is more suitable to adopt a market neutral strategy when the market is relatively stable. Of course, impermanent losses can also be compensated for with high rewards. If the stable period is relatively long, the impermanent losses can be compensated for. After all, the sharp rise and fall of the market is short-term, so it is often possible to compensate for them with high rewards until profits are made.
Do as following to use market neutral strategy. Note that it is only suitable to token pair with one is non stable token and the other one is a stable token.
1, Add the principal in any ratio, you can add only one token or both. Very convenient.
2, Set the leverage ratio to 2, borrow non stable token such as SUI, not USDC, otherwise it is not market neutral strategy. We will explain later.
The following are two positions opened using this strategy, limited by market conditions, for reference only and not for practical use.
The opening time of the first position is February 24, 2024, and the screenshot is March 14, which is about 19 days. It increased by 10.66% in USD standard, which is equivalent to an annualized rate of 204.78%
Second position:
The opening time is June 3, 2023, and the screenshot time is March 14, about 283 days. It increased by 106.79% in USD standard, which is equivalent to 138.02% on an annualized basis. Despite experiencing a sharp decline and rise in SUI price, it is still making profits steadily.
Leveraged yield farms look at the rise and fall of USD standard indicators.
The position value is influenced by two factors, and the sum of these two factors is the total position value.
The position value up and down is influenced by the net exposure.
Let's take a look at the situation of Uni V2, it is simple. Uni V2 is just for demo, the real algorithm online is Uni V3 because the cooperated Dex Cetus uses Uni V3.
Remember a mnemonic: holding means LONG, borrowing means SHORT. Position value up and down is impacted by the exposure.
When we say $100 SUI, it means the SUI value $100 dollars. When we say 100 SUI, it means 100 single coin SUI. E.g. if the price is 1.5, then , 100 SUI = $150 SUI.
Assuming the principal is $100 (can be composed of any proportion of dual tokens, such as $20USDC + $80SUI, or $100SUI + 0USDC)
Assuming the user borrows $200 SUI, it becomes x3 leverage. Total position value is $300 (=$100 principal + $200 SUI) . If use Uni V2 algorithm, the SUI : USDC tokens pair will be formed at the ratio 50% : 50%. Therefore the tokens pair is formed by this position:
Position: $150 USDC+$150 SUI. The position will be deposited into Dex. And the debt is $200 SUI. Holding means LONG, borrowing means SHORT:
After offsetting the two, the net exposure is $150 USDC long and $50 SUI short. USDC is a stable coin. There is no impact to LONG or SHORT for stable coin. So, in this case, the total impact is the exposure that SHORT $50 SUI.
So what the exposure will be by using Uni V2 with market neutral strategy:
Assuming the user's principal is $100, and the user borrows another $100 SUI debt, it becomes an x2 leverage. So, based on a 50%: 50% token pair ratio, the exposure is as follows:
The net exposure is 0 SUI, which means it is not affected by the price fluctuations of SUI. At the same time, it can enjoy a farming reward of $200 position, which is 2 times of its principal.
Uni V3 is different from Uni V2 that its token pair ratio is no longer at fixed 50%: 50%. It is at variable ratio instead. The ratio is affected by the price range of Uni V3 and the token price.
Because the ratio is no longer 50%: 50%, the net exposure displayed on Mole farm page is no longer 0 SUI. There will be a slight fluctuation around 0. It is a normal phenomenon. It is still be approximated as zero exposure. Also user can enjoy two times of the farming rewards than original principle.
Please read the common misunderstanding:
If the user is very optimistic about a token price goes up. E.g. SUI, then the user can achieve this goal by borrowing USDC and adding leverage. Turn net exposure into long SUI exposure.
1, Add token pair in any proportion as principle.
2, Borrow USDC, the leverage can be casually set between x1 and x3. The higher the leverage, the greater the risk. Please pay attention to the risk of liquidation.
Tip: If you want to LONG the same amount as your principle, you just need to set the leverage to x2.
3, Check the indicator Exposure is LONG SUI.
Also users can get the farming rewards no matter they do LONG or SHORT.
Assuming principal is $100 and borrowing x2 USDC, which means borrowing $100 USDC in debt. The position should be 50%:50% in token pair. The exposure is as follows:
Opening a position like this is LONG SUI which is the same amount as your principle.
It is like you open a little index fund position by yourself. If your principle is $100 SUI, then you can benefit if the price goes up. Also enjoy farming rewards.
As previously explained, due to the non fixed 50%:50% token pair ratio in the liquidity provider of Uni V3, the token pair ratio goes up and down, resulting in numerical fluctuations in exposure. It is okay with the exposure approximate like Uni V2.
If the user predicts the token price will fall, assuming SUI, can benefit from the price goes down by SHORT it. Make the exposure of position to SHORT SUI.
1, Add token pair in any proportion as principle.
2, Borrow SUI, the leverage can be casually set between x2 and x3 (needs to exceed x2). The higher the leverage, the greater the risk. Please pay attention to the risk of liquidation.
3, Check the indicator Exposure is SHORT SUI.
Also users can get the farming rewards no matter they do LONG or SHORT.
Assuming principal is $100 and borrowing x2.5 times leverage SUI, which means borrowing $150 SUI debt. The position should be 50%:50% in token pair, so it is $100+$150 = $250 ($125 for each). The exposure is as follows:
Opening a position like this is the effect of SHORT SUI.
As previously explained, due to the token pair ratio of Uni V3 is not fixed 50% : 50%. The ratio fluctuates up and down, resulting in numerical fluctuations in net exposure. It is okay with the exposure approximate like Uni V2.
In addition to a small trading fee, the main reason is that market maker algorithms have impermanent losses. Shortly after opening the position, with price fluctuations, also there may be a possibility that adjust the position when price exceed range, impermanent losses may be realized. Impermanent losses can impact loss about from 0.5% to 5% in 2 weeks. Don't worry, this is determined by the algorithm characteristics of Uni V3 and is a normal phenomenon. Farm is a medium to long-term product, and users can try to keep it for more than 2 weeks. With the accumulation of rewards, it can substantially be compensated.
What is impermanent loss?
https://academy.binance.com/en/articles/impermanent-loss-explained
The answer is obviously not. in Dex's own liquidity farming, it is actually equivalent to x1 times leverage. That is without leverage.
Do a simple analysis based on Uni V2:
Principal $100, without borrowing leverage, the exposure is: long $50 USDC+long $50 SUI
So the exposure is LONG $50 SUI. If SUI rises, the position value will increase, and if SUI falls, the position value will decrease.
But most users are not aware of position value up and down. They pay attention to the farming rewards which Dex displays on the page, thinking that receiving rewards every day is definitely an increase. But in fact it is not.
Carefully calculate the token pair value in Dex. Due to the impermanent loss caused by Uni V2 or Uni V3 algorithms, the overall value may drop in Dex as liquidity provider.
Mole position details display the overall increase or decrease for the position value. Even for 1x leverage, which means no leverage. Mole will help users to optimize the price range and auto adjust positions to prevent prices from exceeding the price range to prevent from not receiving rewards.
As shown in the figure, a common misunderstanding is that the position will be liquidated if the SUI price fluctuates by ± 24.95%. But actually it is not.
A simple example, for a market neutral strategy, the debt ratio equals to the debt value ($100 SUI) divided the position value ($200 SUI). The debt ratio of market neutral strategy is 50%. When the price of SUI increases by 100%, its debt ratio remains at 50%. So the market neutral strategy will not be liquidated in this situation.
If the debt ratio exceeds the liquidation threshold, it will be liquidated.
Refer to the "Product Principles" ->"Leveraged Yield Farming" ->"Liquidation" chapter
When adding liquidity in Cetus farming page, user sets a price range, a leverage will show up. For example, if a price range ± 10% is set, a leverage of x20 will show up in Cetus. This leverage is an evaluation relative to the benchmark price range in Cetus. It is completely different from Mole's leverage. Mole leverage is the multiple times of the position value compared to principal value. It is based on token values.
Mole also sets up the price ranges when set up a position. It is like price range leverage in Cetus. But it is not displayed in Mole.
Dual stable tokens
Stable and high yield rate, with minimal drawdown. Auto adjust to a high-yield price range and auto compound for reinvestment.
It's like taking a position in a bond fund position.
All users
All market condition
Extremely low
Market Neutral
Enjoy farming rewards. No impacted by token price. It is like you open a little hedge fund position by yourself.
Advanced users
Price stable, not goes up & down too much.
Medium & low risk
LONG Strategy
Enjoy farming rewards.
Position value goes up when token price goes up. Position value goes down when token price goes down. It is like you open a little index fund position by yourself. If your principle is $100 SUI, then you can benefit if the price goes up. Also enjoy farming rewards.
Advanced users
Bull market. Price goes up
Medium & high risk. May be liquidated
SHORT Strategy
Enjoy farming rewards. Position value goes down when token price goes up. Position value goes up when token price goes down.
Advanced users
Bear market. Price goes down
Medium & high risk. May be liquidated
