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- Defi Farm #23 - October 2nd Weekly Update
Hi everyone,
Welcome to the 23rd weekly edition! It's hard to believe October is here already. Let's dive in 🤿Over the past 7 days:SPY: -2.52%BTC: +1.1% ETH: -1.7%
Major L1's:SOL: -3.1%AVAX: -4.9%Near: -4.6%Algo: -5.8%FTM: -3.0%
Today I'll go over:- Exploring UniV3 positions- Interesting news from this week- Cool projects and protocols I came across this week
Exploring UniV3 Positions
Uniswap V3 operates with a concentrated liquidity model as opposed to the more common regular liquidity models of most DEX's.
What is concentrated liquidity? In a sentence: Concentrated liquidity pools allow you to only provide your assets as liquidity at certain price ranges. This is opposed to normal liquidity pools where you deploy your assets for liquidity at any price level.
The interesting thing about V3 positions is that the tighter you set your range, as long as those assets are trading in the range, the more fees you're collecting. This unlocks some interesting dynamics for both yield farming but also DCA'ing into and out of certain assets.
Let's go over a quick example.
Let's say you enter a USDC-GMX pool and set the range to $20-$50 GMX/USDC. While GMX ranges between $20 and $50, you're collecting fees. If GMX ever goes above or below that range, you're not. If you leave your position when GMX = $19, your whole remaining position will be returned as GMX. Conversely, if you leave your position when GMX = $51, your position will be returned as USDC.
You can start to see how this dynamic can be helpful if you want to scale into and out of positions passively.
The yields on V3 positions are interesting. Especially if you are okay with actively tracking prices and making sure that your position is in-range. (Bonus points if you're on an L2 chain with low gas fees.)
I think this position is a great example of the power of collecting fees in a tight price range.(Revert finance is a great resource for reviewing V3 positions and doing research.)
Two weeks ago, this position deposited GMX and USDC into the liquidity pool with a range of $34-$41 per GMX. They're earning almost 300% APR in trading fees while GMX is in that range. With the amount of time GMX has spent in this range recently, they've collected 254 GMX and $9,455 USDC in trading fees.
All in all, when accounting for IL, diff loss, gas fees, etc this position has made this wallet $17,000 (an 11% return) in 14 days. Not bad.
V3 pools have been around for a while and I'll admit that I've been a bit of a laggard to start exploring them. This week I'm going to open a few small positions to begin experimenting and learning. I'll report back with any results!
Hopefully, everyone knows this by now...but just in case....proceed with caution! If you don't fully understand V3 pools and you don't understand the risks and how they can go wrong, don't put any amount of money into them that you would feel bad about losing.
Interesting news and things from this week
Some cool stuff happened this past week. Here is just a small sampling.
SWIFT is now working with Chainlink on a cross-chain interoperability protocol that will allow SWIFT messages to instruct on-chain token transfers. I'd be VERY surprised if this does anything for the LINK price...LINK tokenomics are not set up for great value accrual. However, pretty big deal for continued adoption!
DeFiance Capital is raising a $100 million round to invest in liquid tokens.
Solana network had an outage, again.
MetaMask released a portfolio feature to help wallet owners via all of their assets across chains.
Circle (creators of USDC) announced the launch of a cross-chain transfer protocol. This is a great thread that explains why this is insanely awesome. (This is probably the most important thing to happen this past week.)
An IRL airbnb property in Cyprus has been listed as collateral for a $519k USDC loan. All on-chain 🤯
TokenTerminal launched a new "Sound Business" page that highlights protocols that are operating at a profit (earnings - token incentives given out). This is a cool page but I wouldn't make decisions strictly based on this. Keep in mind that basically, all web3 companies are in "scale" mode. It's not usual for scaling companies to not turn a profit for many years. (Look at almost every recent web2 tech company that has gone public.)
Interpol issued a Red Notice to locate and arrest Do Kwon 👀
Interesting protocols/projects I found this week
Aevo (link) - Aevo is next-gen defi options protocol built on top of Ribbon finance. Set to launch in Q4 of '22.
That's all I have for this week! Stay safe out there and as always, stay yielding!
If you ever want to chat with me and nerd out about defi/web3, I made some time available on my calendar each week. Feel free to schedule some time!
-Andy