Yearn Finance

Feb 14 2021

What Hath (The First Six Weeks of) 2021 Wrought?

We’re a few weeks past the GameStop Short Squeeze Apocalypse. Bitcoin has gone from $28,000-and-change on New Year’s Eve to north of $40,000. Altcoins seem to be flying off the shelves. Decentralized Finance is also on fire — if you pick the right one, natch — and the “degenerates” might be having their day.

So…what next?

Here’s some potential calm for the coming storm: a few ideas that, while they’re not financial advice and you need to DYOR (Do Your Own Research), could help you successfully hedge against the coming storms.

1. Just Buy and Hold Bitcoin

We’re reminded of a couple of conversations we’ve had recently with this little nugget of advice; both of the convos centered around “how do I get started?”

Bitcoin is…well…Bitcoin. If it’s not the centerpiece of a portfolio, that’s fine; but it’s also the core concept behind every single coin anyone uses. Without it, no crypto.

My predictions for this metal bull year of 2021:#Bitcoin $202,100#Ethereum $17,000#Dogecoin $2#Cardano $2 #Silver $45 #Apple $200#Alibaba $300#Tesla $3,000#GME $550#AAL $30#Moderna $50#Novavax $80#Carnival $33#USDRUB 54#EURUSD 1,36#USDJPY 88#USDTRY 5,90 https://t.co/k5cy2y8HZc
— Russian Market (@runews) February 7, 2021

Ignore the fact that there’s a guy with a Twitter handle of “@russian_market” and somehow he got a blue checkmark — which gives him some sort of authority, right? — and take a look at his Bitcoin prediction for 2021.

Also consider the fact he may be smoking something.

[TIME FOR A CLEARLY MARKED AFFILIATE LINK: Get some BTC, or other crypto, on Coinbase here. We’ll both get a bonus with a qualifying purchase.]

But, if our Russian friend thinks Bitcoin is doing a 5- or 6x this year, shouldn’t we look down the list and…and…

2. Ethereum Is on Fire

If you’ve followed this space for a few years, one of the things you have learned is this: without Ethereum, crypto apps don’t work. In addition to being a currency unto itself — and one that’s trading at around $1800 as of this writing — on pretty much any of the app-centered parts of crypto, you absolutely have to have “gas” to operate. That gas is ETH. Without ETH, no trades on Uniswap, no liquidity pools on any other #DeFi app, and no yield farming to speak of.

Chart from CoinGecko, Graphics from Metacoin.co

Even if you don’t understand any of that previous paragraph — and, let’s face it, most of that is Greek to the everyday Joe — realize this point: Bitcoin’s market cap is inching towards $1T, and BTC is four-and-a-half times that of ETH; ETH is NEARLY TEN TIMES AS LARGE as the next crypto coin (Cardano, ticker of $ADA). Ethereum is big, it’s very important to the crypto economy, and it is not going away.

3a and 3b. #DeFi Building Blocks

We’ve made a few mistakes here — without a “warts and all” approach, we don’t think this site would have lasted, actually; we’d rather you read up on the $50 we blew on some crypto app than invest in it yourself and lose your own money — and a couple of those mistakes are related to two trades we made with Decentralized Finance (“DeFi”) coins that have caught fire.

First, item 3a. Yearn.finance is $YFI and, defying logic (er, “DeFi-ing logic”), had you gotten in on the ground floor — or, more accurately, the basement; only really truly early adopters got this price — you could conceivably have turned a grand into $1.4M.

A more accurate description of the “woulda, shoulda, coulda” factor here is that you may have gotten in on perhaps the first or second floor of this high-rise. Our own experience had us taking a chance (by “taking a chance” that means a hundred bucks or so) on YFI when it was priced at $2000 to $3500. So we’re still doing okay. But…

3b.: Uniswap. $UNI. This beaut was an airdrop. Last year, the UNI team decided that the best way to get users on board with its coin was to gift it to ANY account that had used the platform. The airdrop gave 400 coins (or so, as one of ours got a few more than 400) that were valued at around $3 each. We hodled some, sold some others, and it has turned out nicely, hovering above $20 for most of this week. (TBH, though, the fact we sold some a couple weeks ago does irk us more than a little.)

4. Take a Chance on These?

We added a question mark because — AND AGAIN DO YOUR OWN RESEARCH — you are more likely to lose your entire stake in any of these coins than you are to make mad bank (as the kids say).

If you want a couple ideas, though, here goes:

Sushi ($SUSHI), which forked from Uniswap, has done well this year (currently trading in the low teens).

Dogecoin ($DOGE) is the love of folks like Elon Musk; it’s also projected by the Russian guy up there to go up at least 10x this year.

Kimchi ($KIMCHI) was thought to be dead — and may actually BE dead, in that there don’t seem to be any active developers still working on the project; this is called a “Rug Pull” and we explain it a little more in this post — but it is still throwing off triple-digit APY.

N.B. on pools such as KIMCHI: not only are pools like these highly risky, these interest rates will fluctuate wildly; you’re betting that KIMCHI stays stable (it has been ranging from $0.0002 to $0.0004 for the past few months) and that you don’t get totally whacked with growth of the other coin you pool it with. If one of the coins goes way up while the other stays at roughly the same value, you’ll be kinda okay; if one goes up and the other goes way down, you’re going to have some “impermanent loss” from the coin that doesn’t grow. We explain more here:

A lovely YouTube video from Dave

And A Final Few Notes:

We hope this post gives you a few ideas about how to maximize your investments. We need to share a couple other things here:

Past performance (DUH) is not indicative of future results.
DO YOUR OWN RESEARCH.
None of this is financial, legal, or tax advice.
Of the coins mentioned above, we own small positions in the following: $BTC, $ETH, $UNI, $YFI, $SUSHI, and $KIMCHI.

Nov 08 2020

Biden Wins, Crypto and DeFi Pop; Will 2021 Be More of the Same?

After a few days of uncertainty, it looks like Joe Biden will be the next President of the United States. What does that possibly mean for the crypto market, and for DeFi (“decentralized finance”)? Let’s dive in just a little and find out.

BTC: Pretty Bullish 7 Days

Whether or not correlation equals causation this week is questionable; the BTC chart from the past seven days is actually quite interesting, though, as once it seemed it was likely going to be Biden and not Trump, the price went up.

A couple of weeks before the election, I asked my friend Von what he thought a Biden win would do for the crypto markets; this is what he said:

At this point, though, the stock market has been fine — most prognosticators had priced in various scenarios and the markets really like the prospect of a Biden administration being held in check by a Republican Senate — and the Fed has held its own (and held interest rates where they are), and the prospects of an economy tanking seem pretty low.

The bullish BTC case, though, may have little to do with the economy writ large (or your 401(k)’s value) and more to do with things like money supply — the Fed still has the money printer; it still goes “Brrrrr” — and whether or not the US Dollar’s days as the world’s reserve currency could be numbered*.

(*By “could be numbered,” it should be noted, that’s a real real tall order that wouldn’t happen overnight and even the most fervent anti-dollar or pro-gold standard folks probably wouldn’t see that in a decade at the least.)

In any event, the numbers below — the 24-hour “sentiment” from CoinGecko and the percentage gains over most of the measured periods, with a real OMG for the 12-month prices — show that BTC can weather the storm of a Trump administration and a coronavirus pandemic and emerge stronger. The question remains whether these trends continue.

What About DeFi?

One of our biggest DeFi holdings is Yearn.Finance ($YFI) and we’ve bragged about it a couple times here, including in this piece: When You Realize You Should Have Bought More. It has had quite the week, actually, dropping sharply and snapping back to life almost as quickly.

If you think of YFI as proxy for all of DeFi, you might think this bodes incredibly well. And you may be right. Or you may be wrong.

Had you bought in at the low and exited at the top — HA! Nobody Did That! — you’d be sitting on an insane profit.

But that’s not the point here and that’s not the point of most of the DeFi tokens like YFI. The point is APY (Annual Percentage Yield) and that’s where you’ll find much more mystery in DeFi.

Are the assets themselves valuable enough? Or are you playing the “yield farming” and “HODL” game, hoping to maximize on, in theory, an asset you buy at $1000 and get a yield of 50% from AND that asset jumps to $2000 or $5000 or $20,000?

And does the Presidency have ANYTHING to do with that at all?

There’s Much More DeFi Mystery

So many questions:

Will President Biden be pro-innovation in the financial sector?
Will his administration be interested in digital currency at all?
Is anything favorable to DeFi immediately assumed to be anti-banking, or anti-big bank?

Bitcoin might be a little easier to figure out, right? BTC is the people’s currency and just maybe it and the US Dollar can coexist. DeFi, though, is much more mysterious; yield farming is new-ish and YFI is a 2020 innovation. It all happens outside of the purview of any government and, despite YFI failing the “Howey Test” and not being considered a security by the SEC (for now, we guess), you would suspect that the opportunity to tax anything that throws off the kinds of profits thrown off by DeFi is looked at by a Democratic administration as potentially lucrative.

Your Guess? As Good As Ours

The point, though, is that we’re onto a new day in crypto and DeFi. While none of this post should be construed as financial advice, perhaps the best way to ride the actual crypto back-and-forth, and the wild mood swings of the days ahead, is to actually get in the game.

Bitcoin has proved itself resilient. DeFi — as reflected by YFI — maybe a little crazier. 2021 could bring much more growth, or it could see huge pullbacks. But you won’t find out until you actually, well, find out.

Aug 29 2020

When You Realize You Should Have Bought More

Every time you check the price of yearn.finance, or $YFI, it seems to be markedly higher. Here’s a price from yesterday.

Then here’s a price from earlier this morning.

Later on…

Just a few minutes later…

What in the world?

We’d Like to Say We Called It…

When we talked about the growth of the #DeFi space recently, we pinpointed three platforms that we think showed promise. Meta ($MTA) and Curve ($CRV) were the other two, and we locked in on those and plan on “setting it and forgetting it.” (Neither of those, we think, will see the type of exponential growth that has been shown by $YFI; supply may keep both of those coins from going crazy.)

(Here’s another screenshot, from 10:45 a.m.:)

Our reasoning for buying YFI was that it was being used to “lock in” assets, coupled with other coins — a cornucopia of options, it seems — to maximize yield. Token holders are rewarded with a share of the trading fees that is proportional to their holdings.

Let’s take a screenshot, do some math, and tease this out…

That’s a daily figure; whether the average fees are like today’s fees is a BIG question. Still…

The fees — 0.3% of each transaction — appear to be somewhere around half of that figure on an average day. But our $1 million example would get its share based on its percentage of the liquidity provided, so numbers could actually be higher on an average day. (August 17, very quick scan, tells us that liquidity was only $6 million or so that day, so a $1 million stake would have netted $5934 in transaction fees.)

WHAT?

No Matter How You Slice It…

We posited a guess recently that the value of this platform, based entirely on a calculation of 30,000 tokens divided into $1 billion market cap, was $33,333 each.

Turns out, if the platform keeps getting used to trade with these insane volume levels, we may have to revise that upward.

Reminder: Do Your Own Research. Not investment advice. We’re not responsible for you gains or losses. We hope you have plenty of gains.

If you need to get started in crypto, visit this link to Coinbase and, if you make a qualifying purchase, we’ll both get a bonus. Enjoy.

Aug 23 2020

Should You Invest In Something You Don’t Understand?

There used to be an adage in finance and investments that you’re best investing in those things you understand. This is why, as the (possibly apocryphal) story goes, Warren Buffett bought Dairy Queen: he understood ice cream and the franchise model, and “got” the concept immediately.

Warren Buffett is also old.

These days, the markets are dominated by Robinhood investors, by youngsters with a dollar and a dream, and by speculators hoping that Hertz will go up from pennies to dollars simply because pennies are cheap and dollars aren’t.

The Market #DeFi -es Logic

That’s deliberate, what we did with the subhead: logic is possibly defied by the decentralized finance market, colloquially known as #DeFi. Decentralized platforms — coins? tokens? businesses? not sure WHAT to technically call them — have entered the market and gone from zero to OMG in a few short months; one of these #Defi #Darlings (yearn.finance, or $YFI) has rocketed from 800 bucks to $13,000 in four weeks.

DAI token earning 50% interest — Is this an actual interest rate?

The screenshot above is from the Yearn website, and, specifically, the “Vault” tool on the page, where you can upload you coins — above is a DAI Stablecoin — and leave them there and make 50% interest. Right?

As we told you a couple weeks back — here’s the post on the Liquidity Machines Going BRRRRR — we were brand new to the concept of “yield farming,” and “liquidity machines,” and “stablecoin lending,” and interest rates that are straight up fire.

We had a couple ideas in a subsequent post (The Oldsmobile of the Crypto Market) for platforms that *could* catch fire; but, in the same breath where we told you to “do your own research,” we were doing our own research.

And we’re still not sure how it all works.

Curve Liquidity Provider token earning 97% interest — Only 97 percent?!?

However, we have picked up a couple of things — and we thank a couple of power-DeFi users, who we’ll talk about later — so we thought we’d share some of the knowledge here.

First, Think About Your Bank

It’s actually quite fun to think about this Defi space as the equivalent to a bank: if you want to break into the top tier of banking in the US, you need to have trillions of dollars in assets. Like this, from a chart from MX.com, showing the top 5 banks.

Top banks by total assets. — You probably bank at one of these institutions, America.

Obviously, this counts your money and my money and everybody else’s money in this list; lots of deposits, lots of withdrawals, and maybe a few mortgages and certificates of deposit and car loans and…the list goes on.

The banks above make their money from interchange fees — the tiny percentages charged for transactions — or from banking fees — gee, why does my bank charge me $5 monthly just to keep my money there? — or from the margin spread between what they lend at and what they pay in interest.

(A truism from community banking way back when was the “3/6/3 Rule:” Pay 3% in interest on savings, charge 6% in interest on loans, and be on the golf course by 3:00.)

These days, you need a lot of money in your vaults — I mean on a ledger somewhere, because it’s all a line entry on a computer spreadsheet — to really make it as a bank.

So, if we want to compare banking to Defi, how do we do it? Probably with a metric called “TVL,” or “Total Value Locked.”

We’re Just Getting Started

The website Defipulse.com has a great chart of where the industry stands when it comes to how much value is locked up in these decentralized finance platforms. Hint: It’s the top of the first inning and the pitcher hasn’t even faced the leadoff hitter yet.

Locked and Loaded?

Hardly enough is locked to even be ready to begin to just start to think about scratching the surface: $6 billion is nothing to the big boys or even the not-so-big boys. So it’s still really early.

Again, this is not financial advice, do your own research, and don’t invest more than you can afford to lose; but if you’re ready to start learning, we highly recommend resources from a chap called “Defi Dad.” One of his videos, on the site “Bankless,” is below.

Top of the First…Who’s the Leadoff Hitter?

If we’re just getting started and we think about this as the top of the 1st inning in a nine-inning game — and we think about DeFi as the visiting team playing against the Big Banks — we need a leadoff hitter. We need our Rickey Henderson.

For the uninitiated, Rickey Henderson was a baseball Hall of Famer who led off the first inning for his team by hitting a home run 81 times. Second-best on the list, Alfonso Soriano, did it 54 times.

(Dexter Fowler led off the top of the first with a home run in Game 7 of the 2016 World Series for the Cubs, but I digress.)

Had to share…

Anyway, if we’re going with our Rickey Henderson in this space, it has to be $YFI.

TVL $1,040,341,676https://t.co/JiHslRvOmq pic.twitter.com/SoZfX2GT8T
— yearn (@yearnfi) August 22, 2020

Positive development for $YFI.

If you want to learn more about Yearn.finance, we suggest checking out this site: learnyearn.finance. They’re bullish as heck about the coin itself, and — while encouraging you (like we will) to “do your own research” — they make the case that the price of $YFI is possibly way undervalued.

The Flippening (Kinda) and Warren Buffett

Hey, let’s get back to Warren for a hot second as we wind up this post. One share of Buffett’s Berkshire Hathaway is $311,000. He hasn’t split the stock and doesn’t plan on splitting the stock.

Earlier this week, the price of $YFI exceeded the price of $BTC; while it’s not a “flippening” in that the market cap of YFI is dwarfed by the market cap of BTC, it’s still a psychological victory.

And, with the total number of YFI tokens capped at 30,000, with no more ever to be minted and 99.87 percent of the tokens circulating, if Yearn’s market cap were to get to 1 billion, that implies a price of $33,333.33 per token.

Bullish Case

If you aren’t convinced that we’re early in Defi, we suggest you check out the resources we’ve listed, do your own research, and strap yourself in.

In any event, DeFi is just getting started.

Speaking of getting started…

Here are a couple CLEARLY MARKED AFFILIATE LINKS, in case you want to buy a little of crypto to get into the game:

Crypto.com has a good chunk of the coins and you can tie them to their debit cards, which are pretty nifty;

And Coinbase.com will also get you started and is simple to use.

Both give bonuses to us with qualifying crypto purchases, and those bonuses help us keep the lights on, so to speak.

Aug 04 2020

The Oldsmobile of the Crypto Market

Back in the 1980s, Oldsmobile came out with a pretty clever ad campaign, using a slogan “this is not your father’s Oldsmobile.” Here’s one such ad and it’s a fun 30-second investment of time.

That ad is kinda cool for me to see, for a couple of reasons. One: the dashboard and its electronic numbers, now standard everywhere, were ahead of their time, and it seems as if everyone I knew had a car with those display numbers at some point in the late 80s or early 90s. Two: my Dad talked often about his all-time favorite car, which was a Cutlass Supreme. It was a late 60s or early 70s model, so this ad is showing something that is not *my* father’s Oldsmobile, natch.

Enter DeFi, and $YFI

After a busy couple of weeks in the Bitcoin, cryptocurrency, and (especially) DeFi spaces, it’s now obvious that “this is not your father’s market.” We talked about the concept in our post about Liquidity Machines; it’s obvious that it’s the Wild, Wild West (Kool Moe Dee version preferred), and there is quite a bit of new-sheriff activity happening just about everywhere.

We thought we’d outline just a few real-world examples — “ripped from the headlines” — that we are trying (again, we like experiments) with our own portfolio. Our first one is no surprise: Yearn.Finance, ticker symbol $YFI.

YFI burst upon the scene two weeks ago. It has had quite the run. See chart; drool.

What’s most amazing about this coin is that the founder, Andre Cronje, has said that the YFI coin has no value and that he’s building tools that might have bugs in them.

https://twitter.com/AndreCronjeTech/status/1235455431469920261?s=20

Andre’s pinned tweet

No matter: YFI is the yield-farming technology that underpins so many liquidity swaps that even if it is deemed by the founder to have no value, it does actually have value. Quite a lot of it. Plus scarcity: only 30,000 of these will be created.

Using stupid-simple math, if this becomes a $1 Billion platform, each coin will be worth $33,333. Financial pundits call this an “asymmetric bet.” And it’s one we’re willing to make.

Of Course, We’re Also Investing in Meta

Funny enough, I first saw this platform in a tweet and the platform looked slick as heck. Here’s a Medium post explaining more: Medium Post on Meta.

Oddly for us, we had a tiny tiny stake in Balancer — at least a couple months ago — but decided to focus other opportunities, so we moved away from that platform.

What makes this one unique is its goal to insure users against the instability of dollar-pegged stablecoins as one side of a liquidity pool. Other coins talk about risk of loss of the value of a stablecoin were it to fall significantly below zero; with questions about coins like Tether commonly brought up, the potential for a loss is real. As explained by the token team:

This, to be honest, is purely opportunistic: low “market cap” right now, huge upside, and worth watching. (YMMV, DYOR, all that stuff.)

Nice name, logo. And the project is cool, too.

Finally, Watch for Curve

Curve is lurking in the background somewhere, waiting to launch its token. Curve has invested in Yearn, and, if there’s ever an asset that may very well pop almost instantaneously, Curve is possibly it.

Here’s a snapshot of Curve’s current pool APRs and its volume:

Whales are already using Curve and have been since earlier this year — cumulative volume on the platform has exceeded $1.5 Billion — and there’s thought that Curve is possibly “The Next Big Thing.” This is because, as with other platforms like it, you’re adding liquidity to pools and sharing in the trading fees.

(Speaking of “The Next Big Thing,” though, we should caution everyone that we were told in 1988 that Bros would be the next big thing in music.)

When the coin is released — “any day now” — only 2 million will be released each day. Scarcity will set in. Volatility is almost assured — so you’re really going to be on a roller coaster here. But that roller coaster, like the rest of the coin- and token- and liquidity-driven assets, could give you a nice pop. OR…well, you could end up like the career of Bros.

Or like the Oldsmobile: a relic of the past, a nice story about the growth of automobiles, and a defunct brand name.

CAVEATS

As with any and all of these, what are the lines you should keep in mind? “Bet with your head, not over it.” “Don’t invest more than you can afford to lose.” “You may get rekt.” And “this website is not investment advice.”

Good luck. Happy Liquidity.