🧘♂️Beginner’s Yield Farming Series
Market Meditations | June 3, 2022
For the past 6 weeks, we have demonstrated how you can maximize your returns and protect your assets through yield farming.
Today we are going to summarize our 5 step process for being a successful yield farmer.
All you need is a Nansen account. Once you’re set-up, simply follow along with the steps. It couldn’t be easier to start your yield farming journey. What do you say, farmer? ??
- Nansen x Yield Farming Tutorial
- Optimism’s Less Than Optimistic Airdrop
- Terra in Trouble Again
With Nansen’s On-Chain data, you get an edge over everyone else by tracking the behaviour and on-chain activity of prominent wallet addresses.
- Exciting New Opportunities. Follow Smart Money, identify new projects, and trace transactions down to the most granular level.
- Perform Due Diligence. Get more information on projects or tokens before you invest.
- Defend Your Positions. Create real-time custom alerts and get notified when and where a wallet has been moving its funds.
- Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in.
⏰ Top Headlines
- Polkadot’s Moonbeam Adds Liquid Staking Giant Lido
- Binance’s VC arm raises $500 million fund — its first with outside capital
- Immutable proposes the Otherside metaverse should be built on its Layer 2 network
- Kraken CEO defends listing LUNA 2.0: ‘Bitcoin traders don’t pay the bills’
? A Fresh Harvest
Step 0️⃣: Set up Your Nansen Account
Nansen is the tool that powers our yield farming tutorial. To begin, set up your account using our link. Nansen offers a range of seasonal discounts for crypto investors and traders who are ready to take their wealth to the next level.
Step 1️⃣: Understand The Risks and Returns
Before you begin it is essential to understand how to make money, but also how you can lose your money whilst yield farming. Risks include:
- Smart Contract Risk: Vulnerabilities in the code of smart contracts sitting behind DeFi protocols.
- Impermanent Loss: This relates to liquidity provision with a detailed explanation found here.
- Systemic Risks: Yield farming is a novel endeavor and there are many ecosystem-wide risks that are not yet fully understood
- De-pegging of Assets: Many opportunities rely on assets that are tied to the value of another. This tie can be broken, potentially making your assets worthless.
To learn more about the risks and returns of yield farming, check out part 1 of the series.
Step 2️⃣: Find Hot Ecosystems
Now that we understand the basics – it is time to start our search for profit. We can use Nansen to narrow this search by identifying how many top crypto investors are transferring their funds to specific ecosystems:
Nansen.ai: 01/06/2022 – Bridge Builder sorted by number of Smart Money Depositors
- The Wormhole bridge (which facilitates transfers to the Solana chain) has the most smart money depositors in the last 7 days indicating there may be an opportunity there.
To find the full lesson, check out part 2 of the series.
Step 3️⃣: Find Hot Protocols
Once we have found the hottest ecosystem, we can dive deeper, finding exactly how much money is flowing into specific protocols. To see exactly how to do this, check out part 3 of the series.
Step 4️⃣: Earning Yield on Safe Haven Assets
Due to the inherent risk of yield farming, it is essential that some of our portfolio is kept safe. One method is to identify which assets top crypto investors are buying in times of uncertainty, tracking their movements to locate the best opportunities for yield:
Nansen.ai: 01/06/2022 – Smart Money Token Holdings
- Over the past 7 days, we can see that smart money has accumulated traditional assets such as BTC, ETH, and USDC rather than focusing on altcoins.
To find the full lesson, including how to find yield on these assets, check out part 4 of the series.
Step 5️⃣: Track the Activity of Top Crypto Investors to Protect Your Assets
Now that we have identified profitable opportunities, we can use Nansen to track exactly who is involved. This allows us to understand whether any top crypto investors believe the opportunity to be profitable.
Not only can we do this before entering the opportunity but Nansen allows us to set up smart alerts, giving us live notifications upon any notable activity. This allows us to track smart money in real-time and stay ahead of the rest of the market.
To learn more about tracking smart money, check out part 5 and part 6 of the series.
Yield farming has produced huge profits in the last few years however it can be difficult without a strategy. Using our 5-step process we are able to maximize our returns and minimize our risks. All you need is a Nansen account.
? Optimism’s Less Than Optimistic Airdrop
Optimism is a rollup-based layer 2 network on Ethereum. For months, the crypto community has anticipated an airdrop for users of the network, which finally dropped today. Unfortunately, the airdrop didn’t live up to the hype.
- The ticker for the airdropped token is OP, and it will serve as the governance token fueling the DAO, the Optimism Collective.
- 231,000 addresses were eligible to claim 214 million OP tokens or 5% of the total 4.29 billion supply.
- The average distribution was 860 tokens per address but many in the community were upset that some users were able to claim the airdrop ahead of the official announcement.
- According to Optimism’s official Twitter account, the all-time high demand on the chain caused RPC delays. In other words, the Optimism communication protocols could not handle the heavy load of users trying to interact with the chain.
- Apps like Uniswap and Metamask defaulting on top of Optimism were unable to communicate execution requests, prohibiting transactions from occurring.
Optimism aims to achieve faster and cheaper transactions than on the Ethereum chain but today their communication protocols could not live up to that. This isn’t the first network to have a congested airdrop but it is garnering attention because its primary use is to be the scaling solution for Ethereum but when it came time to scale, users were locked out.
? Terra in Trouble Again
It’s going to take some time for Terra to be out of the news. After UST, their native ‘stablecoin,’ tanked and lost its peg to the dollar. The coin destroyed roughly $40 billion worth of value for investors. But they released Terra 2.0! So all is well – or is it? Terra is now being investigated by Korean prosecutors. Let’s learn more about the investigation.
- Korean prosecutors have launched an official investigation into the TerraUSD crash.
- Reportedly, they are summoning employees of Terraform labs and at least one employee has already testified.
- This employee stated that there were concerns about UST’s design from multiple people within Terraform Labs.
- The team could have known about Terra’s flawed self-correcting mechanism and warned Do Kwon about the possible collapse.
- Per the JTBC report, prosecutors are looking to see if Do Kwon neglected the design flaws.
- Prosecutors are also looking to see whether or not local crypto exchanges went through proper listing reviews before listing UST and Luna.
This story is still unfolding at the time of writing. Though Terra 2.0 has already launched, if Do Kwon is found guilty of neglecting design flaws, this could impact Terra 2.0 causing many to lose trust in anything backed by him.
- 1/ Think having direct ownership of in-game items is cool? So do 97% of gamers. This is what @12am uncovered in a survey of over 400k gamers. (full article) – Polygon Studios
- Tron Jumps 11% As Impending’ Golden Cross’ Puts Bears On Notice, Cardano Drops: by @godbole17 – Forbes
Decentralized finance saw a meteoric rise in both popularity and investments last year, but it hasn’t stood the test of time very well.
One positive takeaway is that with so much attention focused on this emerging market, innovation has accelerated. The gold rush might be paused, but luckily for us, prospectors have left their tools behind.
With so many heading for the hills, is there still a reason to stake your claim? Join us tomorrow as we take a look into how to research and identify staking opportunities in a less-than-ideal market.
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??♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.
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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