How fast can I grow $1,000 in DeFi: Week 5. Crypto Crash!
May 21st 2021
An updated version of this article can be found here.
-24% return on initial funds to date, and -14% for the week. Ouch!
Rewards earned were about +1.3% but the effect of falling token prices was -15%.
I'm sticking with the strategy through the market downturn!
Some notes on where this money is going and how you can help.
Those new to this series can find the Week 1 article here.
Caveat: I see a high chance that I will lose all of this money. If you plan to do yield farming, I suggest you plan on losing all of your money too.
Week 4 Performance:
Over the fourth week, net assets reduced to €708.94, down from €827.31 at the end of last week. Here is the breakdown of returns:
a. Rewards - I earned just over €9 in rewards (down from €15 last week) from selling EGG and CAKE tokens, respectively earned farming EGG-BUSD on GooseDeFi and farming KUN-BUSD on PancakeSwap. Rewards were down further from week 4 because the price of these rewards tokens (EGG and CAKE) dropped during the week.
b. Price movements - both EGG and KUN went down in price, resulting in a decrease in the value of my holdings in liquidity pools by €111. Ouch!
The plan for Week 5
When the market crashes, it's important to hold the strategy - which is to have 50% of the fund in BUSD in a wallet and 50% farming. Since the market crashed, my farming portion is down, which means that I am rebalancing from BUSD over into farming.
Updated farming pool. I'm keeping my farming stakes in KUN-BUSD and EGG-BUSD pools, but have now added to the CHR-BUSD pool on pancakeswap:
My holdings at the start of week 5 are roughly:
50% BUSD (held in a wallet)
20% EGG-BUSD liquidity pool on GooseDeFi, deposited to the farm on GooseDeFi
20% BUSD-KUN liquidity pool on Pancake, deposited to the farm on PancakeSwap
10% BUSD-CHR liquidity pool on Pancake, deposited to the farm on PancakeSwap
Reflections from Week 4 - Holding steady in a crypto downturn
Crypto prices took a tumble during week 4, and with that did the value of my liquidity pools that I'm farming. The value of rewards tokens (CAKE and EGG) also crashed, pulling down the weekly rewards that I earned.
Overall, I see the following improvements to my strategy:
Pay more attention to the quality of the tokens in the pools I'm farming.
Continuing to diversify into more pools, to somewhat stabilise token movements.
Potentially putting the full 100% of the fund to work, i.e. taking the 50% of BUSD in a wallet and putting that into BUSD-ALT stable pools to farm.
A note on where this money is going and how you can help
At the end of 2021, I'll liquidate these funds and donate them to Fathers' Uplift, a charity in the Boston area partnering with fathers to help them reconnect and build, sometimes rebuild, strong relationships with their families. Some of these fathers are coming out of prison, some of them are working to get past addiction.
Until the end of 2021 is to build up this initial fund as much as possible. If it stays below $1,000 worth, I'll true up the balance in the donation. If it goes above, then everything goes to Father's uplift. So the combined goal is to learn as much as possible about yield farming, ideally putting the financial benefit to this charity.
One way to help here is by commenting with recommendations of new cryptos where I can provide liquidity. Right now I'm doing Binance Smart Chain, but I'm open to farming on any chain where transaction costs are less than $1 to get from buying tokens, through providing liquidity, through to staking.
In particular, I'm interested in tokens that have the following attributes - so please include relevant notes on these in your comments:
Locking mechanisms that incentivise long term behaviours.
Tokens that have earnings streams attached to them (e.g. the FARM token).
Tokens earning at least 50% APR (not APY) .
Tokens with at least $25M in market cap today (excluding unissued tokens).
Substantiated concerns about tokens I'm currently farming are also welcome.
I'm open to ALT-ALT pairs as well as STABLE-ALT pairs, but I'll keep a minimum of 50% of the portfolio in stables.