🧘♂️How to Yield Farm
Market Meditations | April 5, 2021
You don’t have to day trade for serious profits.
You don’t have to be a day trader to make serious profits.
The correct DeFi investments can generate high returns.
That’s why we have created a FREE yield farming guide for beginners.
Read, enjoy and share with your network. Let’s all build generational wealth together.
Crypto. Bitcoin declined by about 5% during the weekend as sellers remained active at the $60,000 resistance level. Typical of a consolidation phase, we see buyers active at support met with sellers at resistance. As always, to maintain our bullish structure, we want to make sure we don’t close below the 0.382 level.
Legacy. Stocks climbed toward another record as unexpectedly strong economic data bolstered confidence in the recovery.
Delighted to say this article is brought to you by FTX, you can use my link to get a discount. Right now I’m earning up to 100%/year lending on FTX. If you’re new to passive income and making money while you sleep, check out our beginner’s guide.
Yield Farming 101
We’ll say it right from the start: this segment is NOT for the faint of heart. One of the many benefits of a crypto bull market is that those who have spent the time and energy to study and apply their knowledge can compound their profits using highly complex and innovative strategies, one of which is known as yield farming. Market Meditations has done this hard work for you. In this article, we’ll explain what yield farming is, reveal a step-by-step tutorial with examples to help you get started, and elaborate on the risks involved. Is it easy? No. But with the right knowledge, this is a once in a lifetime chance to seriously increase your gains ?
What is Yield Farming?
Yield farming is a strategy that allows you to lend your crypto via decentralized protocols in exchange for rewards. You lend funds through a smart contract rather than a middleman like a bank. Different protocols and yield farming strategies generate different returns and rewards are changing by the minute. By constantly monitoring different protocols and testing new strategies, you can deploy your capital against the protocol and strategy that pays you the highest reward at that moment. The most convenient way for a beginner to maximise profit and minimise frustration is to use a platform that aggregates different lending protocols and automates yield farming strategies. Let’s take a look at a step by step example on how to get started.
Step By Step Example: How To Deposit
1️⃣ You’re currently holding 50 ETH on FTX.
You’re a beginner looking to take advantage of yield farming to increase your profits during the bull market. What’s next?
2️⃣ Find an aggregator lending protocol that allows you to deposit crypto like ETH into liquidity pools and earn rewards.
Liquidity pools are smart contracts that allow individuals to borrow, lend, or exchange tokens without middlemen. We’ll use Rari Capital as our example of an aggregator lending protocol for demonstration purposes only. Rari is NOT a sponsor of this newsletter.
Navigate to https://www.rari.capital/, click “Launch Portal.” Other platforms may ask you to “Launch App” or “Go to Vaults.” All you’re doing is launching the application that will allow you to lend your crypto.
Next, connect your wallet. Connecting your wallet does NOT give the portal access to your funds. It simply allows you to deposit funds into the pool and withdraw profits to the wallet. When using decentralised pools, you don’t need to sign up for an account, submit an email address, or choose a username. Your wallet address becomes your identity and no KYC is involved. Many choose to use Metamask as their wallet.
Select the pool of your choice you’d like to lend to. Rari, for example, has an ETH pool that, at the time of writing, pays out 21.15% APY. The APY is constantly changing based on the supply and demand for ETH in the pool. Pools across different protocols are often named after the coin to deposit (e.g. deposit BTC into a BTC pool, USDT into a USDT pool, etc).
Click “access pool” (or another variation of this wording). Select the amount of ETH you’d like to deposit (e.g. 20 ETH) and confirm the transaction. That’s it. You deposited 20 ETH into the ETH pool and are now earning 21.15% APY. If the APY changes, so do your rewards.
Step By Step Example: How To Earn Rewards & Withdraw Profits
Here’s where it can get a touch complicated. When the bank lends out your USD, they pay you interest in USD. With yield farming, however, your rewards are often paid in the platform’s native governance token, not in the asset you deposited. Let’s walk through a step-by-step to help you interpret this:
You deposited 20 ETH into the pool. You no longer have access to this ETH until you withdraw, because the aggregator is using it to generate yield with its strategies
What you do have is a verifiable transaction on the blockchain that states that the protocol owes you 20 ETH. In order to represent the 20 ETH the protocol owes you, a smart contract sends you the platform’s governance tokens in the amount that equals the total value of ETH you deposited. For example, 20 ETH = 3,224 RGT (Rari’s governance token) at the time of writing, so when you deposit 20 ETH, Rari sends you 3,224 RGT. Let’s make this even simpler.
You originally had 50 ETH in your Metamask. You deposited 20 ETH into the Rari ETH pool. You now have 30 ETH in your Metamask and 3,224 RGT that you may redeem for 20 ETH at your leisure. In exchange for lending your ETH, Rari pays you 21.15% APY in RGT.
When you’re ready to cash out, simply click “withdraw funds” and the smart contract will convert your RGT back into 20 ETH. You may also “claim” the interest paid out in RGT and immediately convert it into another crypto or stablecoin or reinvest into another pool to earn even more yield and compound profits.
Aggregators like Rari optimise yield by leveraging different DeFi protocols to maximise your profits automatically by implementing strategies that will generate the most yield that moment, switching between strategies in real time. You don’t have to use an aggregator. You can always create strategies yourself and monitor different protocols on your own, but the tradeoff is time, convenience, and expertise.
Risks & How To Protect Yourself
Yield farming is high risk, high reward. If you’re not careful, you can lose your funds. Unlike centralised platforms, there is no customer support to recover your money. Let’s look at some things you need to be aware of if you’re considering yield farming:
1️⃣Smart Contract Bugs:
Risk: Yield farming is controlled by smart contracts that remove all middlemen. Hackers can introduce bugs into the computer code and if done successfully can rob some or all of your funds.
Action Item: Diversify your yield farming strategy by leveraging different protocols and make sure every protocol you’re using has been audited. Do not yield farm with 100% of your portfolio.
Risk: this is an event in which a liquidity provider has a temporary loss of funds because of volatility in a trading pair. The higher the volatility of the asset(s) you deposited, the bigger the loss of funds.
Action Item: Provide liquidity with coins that do not have big price fluctuations (e.g. stablecoins). This allows you to benefit from the rewards without worrying as much about impermanent loss.
Risk: It can take time for beginners to adjustto theuser interface of platforms and because of the decentralised nature of such protocols, there is very little room for error. Even simple mistakes like clicking the wrong button or pop-up can cost you big.
Action Item: Start small and test to get comfortable. Be patient. Prioritise your education (we’ve listed some resources for you at the end of this article).
Risk: It’s very easy for someone with malicious intent to hack into your systems if you fail to set up proper security. Defence softwares and VPNs are just the beginning.
Action Item: Read our 9 Step Essential Cryptocurrency Security Guide to make sure you’re up to speed.
For a complete list of decentralised protocols and aggregators Koroush AK uses, read our Passive Income Guide.
? For more comprehensive crypto guides and insights, be sure to join our free Market Meditations community?
MARKET NEWS & ANALYSIS
Cryptocurrency Market Cap Hits $2 Trillion
According to a cointelegraph report, the market capitalisation of all cryptocurrencies in existence surpassed $2 trillion today.
For a cryptocurrency like Bitcoin, market capitalisation (or market cap) is the total value of all the coins that have been mined. The growth has been led by the impressive growth of Bitcoin, Ether and other Altcoins in 2021. Other interesting insights:
This now means that the crypto market as a whole has become approximately as valuable as Apple.
It was less than 3 months ago when the market cap surpassed $1 trillion.
As long as Bitcoin does not see a major sell off, the market’s short-term outlook remains optimistic for April and into the summer.
Gucci and Other Luxury Fashion Brands Poised to Launch NFTs
Gucci and a number of other luxury fashion brands are reportedly close to launching non-fungible tokens (NFTs). Today, Gucci confirmed to news outlet Vogue Business that it’s “only a matter of time” before it will release an NFT. And so too are several other luxury fashion brands. Fashion collectible platform Neuno, for instance, is working with 5 luxury brands on launching NFTs. “We want to be the universal 3D wardrobe that plugs into everything. For example, imagine if somebody bought the iconic J Lo Versace dress on our site” – says the CEO
The NFT space continues to grow and develop in new and exciting ways. They have grown significantly in popularity in recent months, particularly after one of Beeple’s NFTs sold for nearly $70 million. For more on NFTs, check out our podcast with Andrew Steinwold.
SCAN THE WEEK
On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.
Monday, 5th April
Blockchain and Cryptocurrencies Workshop ?
During this online workshop, topics discussed will include pre-Bitcoin computer science breakthroughs to Bitcoin and the rise of alternative currencies that challenge the way we think about money, through Ethereum and the rise of smart contracts, arriving at the present day explosion of tokens, enterprise networks, and decentralized applications.
Tuesday, 6th April
Enjin & GameTalkTalk Integration ?
Eco-friendly #NFTs are coming to South Korea’s largest social gaming app and its 3 million users, powered by JumpNet launching April 6.
MM Podcast Release #60: Investing in NFTs, Web3 and the Future of Crypto with Charles Read ?
Charles is the founder of Web3 venture capital fund Rarestone Capital.
Thursday, 8th April
U.S. Federal Reserve Chairman Jerome Powell Speech ??
Powell will speak on The Global Economy at the International Monetary Fund Debate on the Global Economy. The speech will be available to livestream using the link above. In particular, traders and investors will be looking out for comments about inflation, the speed of recovery and further monetary stimulus.
MM Podcast Release #61: Lessons from History’s Greatest Traders with Koroush AK ?
In this episode, we breakdown lessons from some of the best traders in history to provide actionable insights that you can apply to your own trading.
Friday, 9th April
Elrond First DeFi 2.0 Module ✅
The first module will go live on hypergrowth day 95, with each subsequent module to follow roughly two months after. The bridge module will enable global liquidity to flow seamlessly through the Elrond Network, granting any project the opportunity to leverage Elrond’s high throughput, low costs transactions, and compelling user experience.
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Disclaimer: 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.