🧘‍♂️ALERT: 3 Profit Tips

Market Meditations | December 16, 2021

Let’s Dive Deep Into DeFi

Dear Meditators

Today we’re looking at some of the most popular platforms offering exposure into the world of DeFi 2.0. We will consider 3 tools:

  1. SushiSwap

  2. Curve

  3. Anchor

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Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

? DeFi-ying Expectation 

With around $3 billion Total Value Locked (TVL), SushiSwap is well-established in the world of decentralised finance, using its AMM to facilitate competitive rates. 

  1. SushiSwap offers rewards to liquidity providers in its native governance token, SUSHI.

  2. Holders of SUSHI tokens are entitled to participate in voting on platform developments and proposals.

  3. When providing liquidity to a pool, investors are rewarded with Liquidity Provider (LP) tokens, which can then be put to work yield farming. 

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❓AMMs are DeFi’s answer to the conventional order matching system used by centralised exchanges. Instead of matching buyers with sellers, liquidity is pooled into a smart contract which automatically matches supply to demand.

Curve is a decentralised exchange with the main goal of enabling users and other decentralised protocols to exchange stablecoins while offering low fees and slippage. 

Investors deposit crypto assets into liquidity pools in exchange for earning yields on these investments.

  1. Curve offers revolving bonuses to base APYs as the desired balance of each liquidity pool is maintained.

  2. Some pools are “incentivised”, which offer rewards to people providing liquidity to specific pools with certain coins. 

  3. Curve reliably offers lower fees than some competing exchanges, like UniSwap.

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Liquidity Pools are pools of coins or tokens which are locked in smart contracts and used to facilitate trades between these assets. Liquidity providers earn rewards for depositing assets, while traders pay fees to use the underlying funds.

Finally, Anchor takes a slightly different approach to earning returns using Terra stablecoins

It offers attractive yields for those depositing into the protocol, and some surprising interest rates for loans.

  1. The current APY yield for stablecoin deposits on Anchor is almost 20%.

  2. Anchor offers collateralized loans, giving a potential solution to unlocking otherwise inaccessible liquidity.

  3. When borrowing assets on Anchor protocol, sometimes the rewards for taking a loan can outweigh the interest to be paid, resulting in a net positive “cost” of borrowing. 

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❓ Slippage happens when price changes in between the time of an order being placed and resolved. High slippage can easily result in heavy losses.

DeFi is complicated and ever evolving. Properly understood and implemented it can be used to garner some remarkable profits. As always, high reward comes with high risk, so should you choose to become a DeFi degen, do your homework before showing up to class.

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? Big Mistake 

In Big Mistakes by Michael Batnick he talks about the Law of Holes.

But what is the definition of this?

  1. When you’re in a hole decide if you should keep digging

  2. When you’re in a hole keep digging

  3. When you’re in a hole stop digging

? Crypto Exchange Shut Down 

It was just reported that a scam crypto exchange was just taken down in South Korea! 

  • Crypto exchange scammed over 12,000 users

  • Posed as a South Korean affiliate of Bitbuy and committed fraud by promising big returns in compounding interest. 

  • 19 people arrested after a lengthy goose chase. Fraudsters sent investors coins to different wallets and converted them to fiat. That was just recently tracked down. 

A red flag should have been that the exchange promised compound interest gains of .5% every 8 hours. In their fraudulent video with actors, they explained a simple method to make $84,000 in 150 days

Though the actor in the video was just that – an actor, she was also an accomplice to this fraudulent activity. This is not only an interesting legal question but a moral question as well. If you know that something is wrong, should you go forward with it if it means making a quick buck? 

Here are some things to remember: While scams are made more public in the crypto sphere, as recognition goes up, it will be easier to identify and avoid scams by seeing the signs that point to a product being too good to be true

3. When you’re in a hole stop digging

Perhaps that was an easy one. But even so, it truly is easier said than done. Take Mark Twain for example. 

  • In 1880, Twain invested in a typesetting machine. His fundamental analysis led him to believe that this new machine would replace a similar human operated machine

  • It was almost immediately an unsuccessful venture

  • However, Twain kept throwing money at it. At one point, he even offered to pay $7,000 a year until the machine could bring a profit.

This is a classic example of someone not obeying the Law Of Hole. As a trader, this is equally important as the downside of a trade is limited. If this interests you be sure to check out the full review of Big Mistakes by Michael Batnick. 

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??‍♂️✍️ Stories in this newsletter were written by Misael Calleja, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

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