Disclaimer: does not work anymore.
Earn passive income and do not care about the volatility of the market. Yes, that is right. You can enjoy some high-yield (up to 48 % p.a.) passive income without the risk of being liquidated or the underlying asset nuking. With the use of mAssets (synthetic assets mirroring the price of the underlying asset) you can get exposure to stocks like GOOGL, AAPL, FB or even ETFs like QQQ through blockchain and farm yield on those positions at the same time.
Farming yield on US growth stocks or ETFs already seems like a great proposal. With a long-term outlook that means not only having exposure to the growth of the stock but also enjoy some passive income on the side. But what if you fear a bubble forming? Stocks are at ATH, crypto is booming and all while the economic outlook isn’t so nice. You have few choices… have some part of your portfolio in cash and be ready to deploy it once the market crashes; DCA in periodically; or you can be delta neutral and enjoy some nice APY through blockchain pouring into your pocket.
Mirror Protocol offers exposure to US stocks, ETFs, and other cryptocurrencies through synthetic mAssets (this means you don’t own any rights to the underlying assets) which mirror the price of the underlying asset. The prices converge through combination of arbitrage, minting liquidation process (users can borrow mAssets by depositing variety of collateral they can also be liquidated if the prices fall too much) and governance polls (which can adjust some details or offer additional incentives to sell/buy assets to converge both prices).
Now, the TVL of Mirror Protocol is hovering around 1,8B UST (it is running mainly on Terra, though you can use Ethereum as well, but the liquidity is way lower). Some other stats are:
Yield rewards are paid out in MIR token (native token of the protocol which can be either staked furthermore in the governance contract (around 8% APR) or sold continuously while pocketing the profits). Rewards distributed between users are halved every December, so make sure you jump in while the yields are still this high. The MIR token is tradeable on Coinbase and other big exchanges (https://www.coingecko.com/en/coins/mirror-protocol).
Other protocol which you will be using, in case you choose to follow this strategy, is Anchor Protocol. Another Terra-native protocol which acts as borrowing and lending platform. Users can enjoy steady and beautiful APY of 19,47% on their deposit. Anchor is one of the biggest platforms on the Terra chain and the total TVL is 4,2B UST. Here you can check out their webapp — https://app.anchorprotocol.com. We will deposit our UST into Anchor to earn yield on our collateral which we will later use to open short position.
The strategy
The actual strategy is very simple… it’s exactly 3 steps.
1st step: open Anchor protocol’s page “EARN” (https://app.anchorprotocol.com/earn) and deposit exactly 66% of your total investment (we will present an example with some numbers as well).
You will in return for your deposited UST (which will accrue the interest) receive some aUST (Anchor-wrapped UST which represents your share of the pool). We will later use the received aUST as a collateral.
2nd step: open Mirror farms (https://terra.mirror.finance/farm) and choose your mAsset. We will go with mGOOGL because of its lower-ish volatility (we still must make sure to not get liquidated).
1st part of this step: open “Short farm”
Here we will choose aUST as our collateral and set collateral ratio to 200 % (recommended is 200 %, minimal required collateral ratio is 150 % — if it goes lower the protocol will start liquidating your position to maintain the ratio).
Then we hit confirm and we are now farming interest on our short position. The protocol will automatically sell our minted mAsset and lock-up the value of those for 15 days (i.e., we will receive one half of our deposit in UST back in 14 days. We have received sLP tokens which represent our position and are staked in the short farm.
2nd part of this step: “Long farm”
To do this, you must click over to the “long farm” page. Now, as you can see, we must provide the mAsset we just shorted (in our case mGOOGL). We will buy it and we will buy the same amount as we shorted. Now, we will always have mAsset ready to repay our short position and close it. And since we bought it two minutes later, we paid the same price. We are now Delta Neutral. But, and this is where the money are made, we can use this mAsset to provide liquidity and earn additional APY. We only have to deposit it into the pool with corresponding amount of UST and boom. We are now farming short position, as well as long position.
3rd step: enjoy some passive income and yield.
Pictured process:
Investment model in Excel where we used 250 % min. coll. ratio for maximal safety:
