If you are like many of us, then during this market you still have your long-term holdings and some stablecoins waiting for the next buying opportunity. We feel you. We are doing the same thing.
Do you know what else is going on now? Binance and other exchanges that have Earn or Staking programs are dropping their rates. They know you want it so they don’t have to pay out as much. Therefore, in this article, we have 3 great Crypto Passive Income solutions for you.
These 3 solutions are based on liquidity pools, so let’s see what they are first.
All liquidity pools (LP) are NOT created equal. You have 3 different factors to consider:
- Coin 1 of the pair
- Coin 2 of the pair
- The coin you get paid in for your interest rate, which is usually a 3rd different coin.
So you can be earning on a great trading pair in an LP but the coin you get paid in is a piece of junk so you end up making no money. Well, this situation won’t happen with these options. Here we put in quality and receive quality in return. Let’s check them out.
Pool #1: FTM-USDC
Of the 3 things we still have in our portfolios, this pool satisfies all 3. We have a quality long-term holding in Fantom (FTM) and a quality stablecoin USDC in Beefy Finance. So, why Invest in This Pool?
FTM is down 35% from its all-time high despite being a great project with excellent fundamentals. It’s relatively undervalued compared to its Layer 1 peers based on a few factors including a Market Cap to TVL of 0.6. This is a good sign of hidden value.
— Beefy Finance (@beefyfinance) October 3, 2021
Here is a step-by-step guide to investing in this liquidity pool:
- We click “Buy Token” if we don’t have these tokens or “Add Liquidity” if you have them both and you are ready. For Beefy, we use a wrapped version of FTM.
In the Add Liquidity screen, to invest in an LP you need to put in equal dollar amounts of both tokens. One advantage of Beefy is there are no deposit or withdrawal fees to enter and exit the pool.
It’s because Beefy Finance aggregates good yield farming opportunities they have this one listed but it’s a Sushiswap pool. This pool is relatively small with only ~$120,000 TVL but we cannot imagine why with these rates and the payment options that are available.
2. You see there is an option to put your newly minted FTM-USDC token into the farm and click on “Approve“.
3. Once Approved, next to it on the right of the screen you will see that amount deposited and your Balance. Now we get to what makes this such a great opportunity over some other pool options.
We have 4 different options on how we get paid. They are:
- The same LP token you deposited
- A combination of USDC and FTM
- Or USDC
This flexibility is awesome. And if you are a long-term holder of FTM, then what’s better than the chance to earn more FTM while you wait?
4. Select your coin and click “Approve” and then you’ll get paid. This pool has all the things we are looking for right now. It has:
- Great APR
- Uses 2 quality coins we already have (or are likely to have or want to buy)
- Great payment mechanism
You can even use this as a way to DCA into owning more FTM.
Pool #2: AVAX-UST
Our 2nd pool is another good example with another high-quality long-term hold project in Avalanche and another quality stablecoin, UST. This offer is on Pangolin.
Why Invest in This Pool? Well, Avalanche has the 4th highest TVL of all chains at more than $10 billion. While UST is the 3rd biggest stablecoin after USDT and USDC. Also, it’s the largest algorithmic stablecoin in crypto. Again, 2 high-quality coins we likely already have.
Our new farm later today will provide huge rewards as our second round of Super Farming.
Read more: https://t.co/RQEIIlLNpd
— Pangolin 🔺 (@pangolindex) January 27, 2022
Pangolin is the 5th largest AVAX-only DEX with $230 million in TVL. Trader Joe is the largest with a market cap 7x larger ($250 million vs $38 million) than Pangolin. Lots of room for Pangolin to grow. As you can see right now on Pangolin, this LP pays 73% and has $14.7 million in TVL making it one of Pangolin’s larger pools.
This is a boosted farm so the bonus rate is not likely to last long. But an excellent APR will remain on this popular pool. Deposits are pretty straightforward here. Here is a step-by-step guide to using this liquidity pool.
- Click on the “Deposit” to the next screen. Then you can see your deposits as well as your reward ratios, which update constantly.
And now the biggest reason to invest in this pool. The payments. Here we have 3 great options:
- PNG the Pangolin token. It’s a relatively low market cap coin at $38 million but if you like using the DEX then maybe you want to own it.
- LUNA, the native token of the Terra Luna blockchain and close cousin of Terra’s stablecoin UST.
- OR Wrapped Avalanche WAVAX
There are no bad options but it’s clear that PNG is the higher risk option while LUNA and Wrapped AVAX are getting more of a high-quality top 20 project token. But again, great choices and payment options in this pool.
Pool #3: Staking UST in Anchor
And our 3rd choice today, instead of a pool with 2 coins is a regular staking option. But it’s more than regular, it’s excellent. Staking UST in Anchor. We’ve mentioned why UST is a quality stablecoin that you’re likely to hold already.
Deposit $UST and earn a yield directly in your wallet 🐙
Fast and simple ⚡️
— XDEFI Wallet (@xdefi_wallet) November 12, 2021
So, why Invest in this Pool? Anchor, which like UST, is already part of the Terra Luna ecosystem is the most bank-like app in DeFi. The fact that both are part of Terra means no bridging or compatibility issues. With one wallet you can easily do everything.
Their earn program is amazing and it currently pays 19.47%. And it’s just like a bank savings account. No locking, no-nonsense. Just deposit and earn.
Terra is getting lots of traction, especially in the DeFi world. Despite only 17 apps, they have the 2nd most TVL at $14 billion trailing only Ethereum. And Anchor is by far the largest at almost $8 billion TVL.
Also, Anchor is the most convenient option to stake UST. First, you need to go to “Earn” and then deposit your UST from your wallet. It’s easy and you start earning right away. Anchor starts calculating your interest immediately.
And this is not a one-time thing. They’ve had this yield over 19% for quite some time now. So this is a safe strategy to earn an excellent interest rate on a stablecoin, UST.
Moreover, Binance is only paying 7% on UST right now. Kucoin too. They know they have us where they want us. People are buying and holding more stablecoins so yields are dropping. Also, unlike Binance, if you deposit more into Anchor, the rate stays the same. $100,000 pays 19.47% just like $100 does. Not so at Binance. This is an added advantage to Anchor.
Lastly, while you hold the deposit, it’s not UST as you deposited but it’s aUST, which is a yield-bearing asset. That means you can take this aUST and go “Earn” even more money with it.
Risks of Investing in a Liquidity Pool
These options have lots of positives going for them, but what are the risks? Let’s take a look.
Risk #1: APRs are Volatile
The APRs change daily based on supply and demand metrics or algorithmic changes or other reasons. It may get to a point where the APR does not appeal to you anymore and you need to track regularly to see if that happens.
Risk #2: Keep Booking Profit
Because rates change, and so do the prices of your underlying coin or the coin where you are getting paid, you need to watch this regularly and book your profits as you go. Otherwise, some might turn into losses.
Risk #3: Impermanent Loss
Our 3rd option of UST on Anchor does not have this risk but the other two options do. By definition, we chose pairs to put into a liquidity pool where one side is a stablecoin. That means that we expect that half to not move more than a percent or 2 in price.
Not so with the other side. Fantom or Avalanche could regain high flyer status. And if they do, and you maintain this LP, you risk impermanent loss.
This is something you have to watch on at least a weekly basis if not every other day. You must ensure that when your high-quality coins recover, you aren’t caught losing money on this LP investment.
If you are currently stuck in the position of:
- Some high-quality coins you are holding for the long term
- Some stablecoins
Then, these 3 options are a good place for you to park those coins and make money while you wait. But these investments do need monitoring. With proper care, you can make an easy double-digit return while waiting for the next buying opportunity.
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