Hey folks, if you’ve followed along with my other numerous articles on stablecoin strategies, you’ll know that I’m constantly in the search for new ways to enhance my yields. I’ve mentioned 0vix’s folding strategies in the past, but things have definitely heated up with their recent partnership with Gains Network
What I’ll show in this article is how you can easily make more than 35% APY on your stablecoins — a return which is pretty fantastic in my book, especially considering that it’s all based off of overcollateralized stablecoins.
So how does 0vix allow you to get more than 35%? Let’s see what you could do with $1000 dollars after 1 year…
Step 1: Putting your stablecoins up as collateral (12.63% APY) — $126.30 after 1 year
First, let’s start off with your collateral:
I’m choosing $MAI as my collateral because at least at the time of writing this, $MAI offers the highest APR/APY rates on 0vix at 5.21% APY in native $MAI and 7.16% APR in $VIX — this totals to 12.37% APY just from my collateral.
12.37% APY off of a $1000 dollar investment comes out to $12.37
12.37% APY on your stablecoins alone isn’t that bad, but we’re not going for “isn’t that bad,” We’re going for degen returns right? So LFG.
Step 2: Borrowing at a profit (26.63%APY) — $133.15 after 1 year
So now that you have your $1000 dollars worth of $MAI setup as collateral, let’s borrow $500 dollars worth of $gDAI at the following rates:
According to the current rates, I’ll be losing 5.37% APY (cost to borrow), but gaining 8.30% APR in $VIX, and 10.60% APR in $GNS — this nets to about 13.53% APR in profit you gain just from borrowing. Additionally, the borrowed $gDAI is a yield bearing asset currently earning another 13.1% APY:
Therefore if I’m doing my math correctly, on your $500 dollars worth of borrowed $gDAI, you will be earning a 26.63% APY net profit (13.53% +13.1%) which on a $500 dollar investment comes out to $133.15.
This puts our cumulative total profit from steps 1 and 2 at $298.93, or in other words about a 29.893% annual return on our initial $1000 dollar investment.
But wait, we’re not done.
Step 3: Depositing your $500 dollars worth of $gDAI as collateral (9.46% APY) — $47.30 after 1 year
Going back to supply side, currently you can earn the following rates for supplying $gDAI:
As you can see in the graphic above, 1.54% APY can be earned in native $gDAI, 3.48% APR in $VIX, and 4.44% in $GNS, totaling approximately 9.46% in returns after one year.
So if we redeposited our $500 dollars worth of $gDAI on the supply side, 9.46% off of a $500 dollar investment is worth approximately $47.30.
Now adding steps 1, 2, and 3 altogether, on your initial $1000 investment, you would earn approximately $346.23, or in other words a return of 34.6% APY.
Things to Consider
There’s a few caveats with these crazy returns, and in no particular order…
- If you’re unfamiliar with the the distinction between APR and APY — in a nutshell APR indicates that the returns are not compounding, which makes sense because the $VIX token is only being pre-mined and rewards do not compound. There’s been no official announcements towards $VIX’s token price or when the pre-mining period will end, so for simplicity’s sake, in the strategies above I simply transformed $VIX and $GNS’s APR rates to APY’s.
- As I mentioned before, $gDAI is a yield-bearing asset so theoretically it should continue to increase in value. Therefore if you borrow $gDAI, you cannot do so in perpetuity unless you add more collateral, because without doing so, eventually the $gDAI you borrow will outweigh your collateral, threatening you for liquidation.
- If you’re unfamiliar with $MAI, it’s the overcollateralized stablecoin of . Since it’s collateralized by locked assets, $MAI has proven to be relatively safe, but still when taking out leverage, I just think it’s generally safe practice not to max it out. Therefore, the loan-to-value ratio of 50% rate I selected (or in other words, borrowing 50 cents on the dollar) is what I believe to be a conservative rate, but if you wanted to go full-degen, you could technically borrow something closer to the 65%.
- This strategy also gives you exposure to two different altcoins: $GNS and $VIX. This means that the rates could be higher or lower depending on their price fluctuations.
Regardless, the strategy is ultimately based on stablecoins, so the chance of $MAI or $gDAI’s prices collapsing is relatively minimal.
Once again borrowing/lending/leveraging always has its risks, so please proceed with caution. Now if you have no clue what leverage or liquidations are, I’m going to ask that you do NOT engage in any of these strategies, or at the very least make sure you DYOR find out your risk tolerance before aping in. These yields are VERY attractive, but please make sure you don’t fly too close to the sun…
And as always, thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you, especially when it comes to leverage. Cheers everyone!
