Farming Solana Beach
*Disclaimer: this is not financial advice and should not be viewed as recommendations to buy or sell any asset, this is purely educational and the information below is solely my opinion, please do your own research and develop your own conviction*
Crypto has obviously been a passion of ours and something we take very seriously. We grew from entering originally in hopes of getting rich, dealt with the tribulations that came with euphoria, greed and ignorance, found our purpose and discovered a love for innovation, disruption and technology.
When I first came across Solana, it made sense to me that it had an opportunity to disrupt the crypto world as the potential Android to Ethereum’s iOS, but foolishly, and as a result of me not having a large enough Ether position heading into EIP-1559, I exited Solana to maximize my ETH position. At the time, I thought there would be plenty of room for opportunities and growth later on and that Solana wasn’t really in the growth cycle yet, but more of a speculative idea that could eventually blossom in the future.
And initially I was happy with my decision, Ether was my main focus during the crash we just endured and I was able to accumulate the minimum that I felt I needed. DeFi started to rebound and NFTs began exploding again, with folks losing their mind over JPEGs. And then I started to notice something, Solana was creeping up alongside Ether and people began to talk about it on Twitter, people I normally didn’t see involved in crypto conversations, people who were predominantly stock investors whose foray into crypto stopped at the doors of bitcoin and ethereum all of a sudden were discussing NFTs on the Solana ecosystem. And this is when it started clicking in my head and I felt that oh shit panic moment that I suddenly messed up, was underinvested and quickly needed to right my wrongs.
I initially wanted to slowly dollar cost average into a Solana position, we were in the low 70s and this was a new all time high, but I didn’t want to chase and get greedy by thinking this was going to go parabolic. I looked at the Solana chart, and noticed something interesting, every time it had broken out of a base previously, in its limited existence, it would see its price increasing for a total of three months before pausing or seeing any real selling pressure. We were in the first month of this break out of consolidation, so I decided to use a little more size than I initially wanted. We then proceeded to become a rocket ship and headed towards 100, with some volatility along the way that I took advantage of.
Once we broke the 100 level, I remembered a rule I had discovered on Twitter that Jesse Livermore coined: when a stock breaks 100 for the first time, it usually keeps on running. So when Solana broke through 100, I added more, and as it pumped to 120 and 128, I added more, and when it sold off down to 113, I added more, knowing that, of course I could be wrong and it could retraced, but also knowing past trends and past adages, and decided to take my chances by sizing into the core sized position that I wanted. This allowed me to have exposure while Twitter started waking up to what Solana was and how it quickly could become a preferred platform for new users, users who felt they missed out on the rise of Ethereum, and users who simply weren’t willing to spends hundreds of dollars in gas to be able to engage in DeFi and NFTs.
And now that Solana has broken out again, doubling my cost average and tripling from when I first started buying it back, Twitter has exploded with tons of new people taking positions and talking about the bullish use cases available for Solana. And this is great for crypto adoption and great for holders, but it leaves me feeling vulnerable and wanting to step away from the buy button and instead, enter into a holding period. And from this holding period, and the desire to continue saying and throughout this article multiple times, I decided that I would rather learn about Solana’s DeFi ecosystem and engage in yield farming stablecoins rather than buying any more tokens until we see a pull back to the 21 ema or a consolidation period. So this is where we will focus our attention this week.
TVL
So the really crazy thing is when this first started gaining attention, Solana had barely any TVL, in fact, its DeFi network was pretty barren and filled with just some hardcore believers, lowkey liquidity miners, and probably some market makers affiliated with Alameda and SBF. But now we’re quickly seeing TVL grow with dominance heading toward Saber’s way, which we’ll talk about in a little bit.
TVL is a bit of a flawed metric when it is measured in dollar value, as opposed to token value, so that should always be kept in mind, since we could see TVL explode if Solana went to $1,000 overnight. But, regardless, it’s worth eying to get a gauge for what is happening on the network.
When this first started Solana had $1B in TVL, which was nothing compared to where Ethereum was at the time, which was near $85B. But very quickly, over the course of a couple of weeks, we’ve seen TVL grow from $1B to $3B to now $12B. And as people start to realize how much value is present on the Solana network, and how seamless and cheap it is to just bounce around between pools and protocols, that TVL will probably get close to $30B which, to me, for no real reason fundamentally, looks like fair value in comparison to Ethereum which should be over $100B by that time.
So let’s get into some protocols that are worth talking about which are helping fuel this increase in TVL. Just be aware, that I have no clue how secure these smart contracts are and have not looked into their audits at all and I would only use money I am completely comfortable losing in its entirety as exploits or rug pulls are a real issue in DeFi. Do NOT invest more than you can lose.
Saber.so
Saber is receiving a lot of pressure from Curve.Finance for forking their open source code without Curve’s permission, which, to me, just seems ridiculous since the code is entirely open source and Saber has taken a cool idea and attached it to a really attractive interface with an easy to use frontend that puts Curve to shame.
Personally, I can’t figure out what the hell is going on on Curve, it’s the most visually unappealing thing I’ve seen on the internet since the first time someone showed me 2 Girls, 1 Cup. Ok, maybe that’s being harsh, but Curve honestly has a really bad user interface that is not attractive to newcomers and isn’t the most friendly place to be when wanting to yield farm and engage in the awesomeness of DeFi.
Saber is pretty clear and easy to use, users make the swaps they need to have the equal amount of coins they need to deposit into the liquidity pools present, which they then could use the liquidity pool tokens generated to be staked in order to receive some yield. This sounds complicated and convoluted but it’s not.
The USDT-USDC pool is currently paying out 5% APY, which isn’t a lot in theory, but pretty awesome for passive income generation. Users will need to first deposit the Solana version of USDT and USDC into the pool, an equal amount on each side, so let’s say 5 USDT and 5 USDC, when they deposit those into the pool, they’ll receive a token that they could deposit into the USDT-USDC farm to earn that 5% yield. This is great because you can quickly earn some value while having stablecoins locked up in the ecosystem while you wait for a pull back in your favorite coins. And since you’re on the Solana network, it’ll barely cost you any money to do this and there really isn’t any minimum that you should use to make this worthwhile. You could truly take $10 and make this an opportunity to earn 5% on that over the next year without spending more in gas than you’re actually investing.
If the USDT-USDC isn’t lucrative enough for you, and you’re ok with the risks that could come technically from depegging, the UST-USDC pool is paying 15% which is a pretty awesome deal. And if you’re in the market for speculation and comfortable with the risks, you could venture out further into the realm of high risk possibilities and jump in the wBUSD-USDC pool or the wDAI-USDC pool and earn 29% and 27%, respectively.
Just make sure you’re using the tokens from the Solana ecosystem and not trying to bridge over anything from Ethereum. The easiest way to do this would be to just transfer SOL to your wallet and swap it for wDAI or USDC, etc. on Raydium.io or Saber.so.
Saber has other pairs that you can take advantage of, depending on your risk levels and desires, like stSOL-SOL or wFTT-FTT.
Mercurial.Finance
So the one thing I would say is, it’s probably for the best to have a bunch of different protocols that you work with in order to protect yourself from exploits, rug pulls, security breaches, etc. This could be annoying and cumbersome, as you might need to write down everything you do to efficiently keep track of it, but it’s the best thing to do to maximize your yield and maintain a decent security presence.
Mercurial.Finance has a cool 3 pool that’s paying a pretty decent yield that I would consider taking advantage of. You can earn 26.7% right now by locking up USDT, USDC and wUST in a 3 pool on Mercurial. Since you have three stable coins here, you really don’t need to worry about impermanent loss and your risks are minimal, as the only way to lose money would be an exploit in the smart contract, a depegging issue for UST or the world discovering that Tether is a scam and tanking its value.
Solend.Fi
Solend doesn’t have the cache or TVL presence that some of these other protocols currently have, but it does $88.5M in supply so far.
You aren’t getting double or triple digit APYs here, but you can generate some good yield through depositing USDC for 5% and 7.45% by supplying USDT.
Just be aware I’m not sure how secure this protocol is and I would highly recommend learning more about it and diving into their bug bounty program before investing any sums of money that I wouldn’t want to lose.
SolFarm.io
Solfarm is a pretty cool protocol that’s basically a yield aggregator very similar to Yearn.Finance with a cleaner user interface and the ability to engage in leveraged farming which I won’t get into since I’m not crazy about leverage to be completely honest.
Regardless, SolFarm has some pretty sick APYs to take advantage of currently. Again, I don’t know anything about their security, but I do think the protocol is very interesting and I plan on diving into it more as a potential investor eventually in their token, TULIP, which has a max supply of 10m on CoinGecko (need to confirm that) and is a bit of meme with the name and the whole idea that crypto is the same bubble as the Tulip bubble was in the old days.
Anyway, back to the yield farming aspect of SolFarm, users can generate an insane APY of 151% in the UST-USDC LP. In addition, they can still earn an insane rate by depositing into the DAI-USDC LP which is handing out a 27% AP. If users don’t care about impermanent loss, there’s some triple figure APYs in the 150% range that can take advantage of by supplying ATLAS and USDC, and some other coins. But, of course, the math needs to be done on whether or not that makes any sense to people.
I personally would rather just take advantage of yield farming stablecoins since my goal is to build a cash position while waiting to deploy it in my favorite ideas during weakness.
Humble Farmer
I currently don’t have any positions in any of these products, but I do think I’m going to be depositing some money into them in the near future if Solana continues going higher. I personally can’t rationalize averaging up right now, even though I’m super bullish on the space, and I would rather wait to see a base being built or a pull back to the 21 ema to increase my allocation.
So in the time being, I will be watching these farming strategies and will be looking to deploy some small amounts of cash into each of them. The goal here will be to create a crypto presence while becoming bankless to a certain extent since banks suck and do nothing but take advantage of their users.
There are plenty of risks here in crypto, DeFi is awesome, but does leave you susceptible to phishing attacks, smart contract risks, security exploits and rug pulls so you should keep that in mind when engaging in these yield farming strategies.
Over time, these APYs will also come down as more money is deposited into the contracts, so take that for what it is and be prepared to see those numbers decrease over time, leaving you vulnerable to looking for other opportunities elsewhere to get the yield you want to generate.
Just remember, never invest more than you can afford to lose and do not view this as financial advice, this is just me putting my thoughts out there and me creating a game plan for where I personally want to try and park some money while I wait for the Solana ecosystem to cool down.