🧘‍♂️Yield Strategies for Beginners

Market Meditations | April 20, 2022

Dear Meditators

There have never been so many ways to make money in crypto, from trading to investing to the topic of our next series, yield farming. Yield farming can be defined as the process of using your crypto assets to generate returns in the DeFi (or decentralized finance) ecosystem.

Over the coming weeks, we will be sharing our step by step guide to maximizing returns whilst yield farming. Each feature will feature Nansen tools and we will teach you how to use these tools yourself!

Today’s Meditations: 

  • Introduction to Yield Farming
  • Update to Crypto Acceptance 
  • Robinhood Expands Footprint in Crypto 

⏰ Top Headlines


?‍? It Aint Much, But It’s Honest Work

There have never been so many ways to make money in crypto, from trading to investing to the topic of our next series, yield farming. Yield farming can be defined as the process of using your crypto assets to generate returns in the DeFi (or decentralized finance) ecosystem.

Over the coming weeks, we will be sharing our step by step guide to maximizing returns whilst yield farming. Each feature will feature Nansen tools and we will teach you how to use these tools yourself!

  • Part 1 Finding the hottest ecosystems: Farming can occur across a number of different blockchains. We will show how to find the hottest ecosystems offering the best yields.
  • Part 2: Finding the hottest protocols: Once you have found an ecosystem, you then need to find the specific protocol offering the best yields, this section will assist with exactly that.
  • Part 3: Maximizing yields on specific assets: This section will demonstrate how to find the strongest opportunities for specific assets you may be holding.
  • Part 4: Assessing the strength of a specific yield farm: Farming is a risky endeavor and here we will show how anyone can assess the strength of any farm.
  • Part 5: Tracking the best yield farming wallets: Finally we will show how to find the best performing crypto wallets, setting up notifications to track their every move.

Part 1 will be released next week, right here on the newsletter. For today, let’s cover some Yield Farming basics.

How to Generate Returns Through Yield Farming

  • Providing liquidity: At the core of DeFi are decentralized exchanges which allow users to swap one crypto asset for another. Users can “provide liquidity” by depositing two assets that make another party able to trade them, earning a fee each time a trade is made.
  • Lending: In DeFi you are able to loan others money through the use of smart contracts, receiving interest in exchange for doing so.
  • Borrowing: You are also able to borrow money using your crypto assets as collateral. This allows you to put additional crypto assets to work without selling your initial holding. This is known as leverage and is a highly risky endeavour reserved for more advanced yield farmers.
  • Staking: Some blockchains work via a proof-of-stake mechanism which requires users that run the network to stake, or “lock-up” a specific asset in exchange for returns.

✅ Tip 1: There are many ways to combine the above methods in order to put your capital to work using more than one mechanism, generating additional returns.

✅ Tip 2: Many new protocols incentivize use of their platform by providing additional rewards on top of existing rewards generated from yield farming practices. Whilst newer protocols are very risky, they can be lucrative during this incentivization period.

Size of the Opportunity

There are a number of different blockchains that facilitate yield farming and we can use Nansen to see just how much capital is currently flowing into different ecosystems:

Nansen.ai: 20/04/2022 – Bridge Builder sorted by Volume in (7D)

  • Over the last 7 days, over $1bn has been deposited from Ethereum into other blockchains.
  • Avalanche represented almost $500m of that volume.

Risks

Whilst yield farming can be lucrative, there are a number of risks including:

  • 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 endeavour 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.

Conclusion

There are huge profits to be made from yield farming, however, it can be just as easy to lose your initial investment. By following the guide over the coming week’s anyone will be able to find the best places to generate returns, whilst protecting their profits.

If you want to make the most out of our Yield Farming Tutorials consider signing up to Nansen. Each part of our series will be featuring Nansen tools that you can master and use in your own Yield Farming Strategies. Simply sign up and follow along with the tutorials!

Sign Up Now For Free


?‍♀️ Race to Acceptance

Most people in the crypto space blindly assume that crypto will one day be universally accepted, but is anybody tracking progress?

  • There are plenty of opinion pieces on what needs to happen, but nothing as tangible or complete as they could be.
  • Coincub is a site that provides exchange advice per country, and has issued a ranking list for crypto acceptance is based on nine parameters, including: regulation, tax, bank activity, wallet availability and DeFi acceptance.
  • The Q1 2022 version put Germany top of the list (pushing Singapore down into second) after the domestic savings industry suggested crypto investments would be part of their future offerings.
  • However, like most countries in the list, they still suffer from a lack of DeFi adoption. Only Australia and Canada score well on this, where the list of advocates is growing.
  • The USA ranks third but leads in domestic mining. It also scores lower for investor transparency.
  • Several European countries reportedly have advantageous tax regimes, including Hungary, Cyprus, The Netherlands, Malta and Portugal.
  • The UK ranks 11th, predominantly because banks are cautious about crypto.
  • Surprisingly El Salvador only ranks 36th, due to the weighting of the overall strength of the crypto economy in-country and evidence of sensible policies.

Someone else thinking more about crypto regulation these days is Andre Cronje – read his latest thoughts here.


?Robinhood Expands Footprint in Crypto 

Robinhood has long offered crypto speculation to its users, rolling out crypto purchases for 5 states in February of 2018 and continuously expanding. Crypto proponents complained that Robinhood offered no way to custody the asset (a selling point at the core of the crypto movement), but that is about to change as Robinhood seeks to carve out a slice of the crypto market and expand its footprint.

  • According to a recent announcement, Robinhood is prepared to acquire Ziglu, a crypto wallet and card company. If approved by regulators, this acquisition will pave the way for international expansion for Robinhood.
  • As announced at the Bitcoin Conference, they will be adding the ability to transact on the bitcoin lightning network.
  • They are not just planning to add more functionality but actively listing more coins as well. Compound, Solana, Shiba Inu, and Polygon were listed just last week.
  • According to Ziglu, “we couldn’t be more excited. Ziglu and Robinhood share a common DNA, working to reduce the barriers to entry for a new generation of investors…” Although Robinhood has rolled out wallet functionality to over 2 million users, this acquisition will allow them to offer it to even more users.

The waitlist for Robinhood’s new debit card has already been added to the app. This new debit card feature looks to set Robinhood and Cashapp in direct competition for user base, with the most obvious difference being that Cashapp (a subsidiary of Square) continues offer only one cryptocurrency to its customers, bitcoin. This could be a direct result of the fact that the CEO, Jack Dorsey (former Twitter CEO) is a self-described bitcoin maximalist. Nonetheless, the stage has been set and it appears that Robinhood is preparing to claim a large share of crypto investors.


Join us next Wednesday for the first part of our Yield Farming report.

Part 1 will cover: finding the hottest ecosystems. Farming can occur across a number of different blockchains. We will show how to find the hottest ecosystems offering the best yields.


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??‍♂️✍️ Stories in this newsletter were written by D. BeverlyIsambard 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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