Real Yield on Avalanche #4 — Leveraging $GLP with DeltaPrime and Yield Yak
Leverage $GLP up to 4.5x with DeltaPrime to enhance yields on the boosted Yield Yak pool, plus additional Avalanche Rush incentives in collaboration with GMX and Ava Labs.
Introduction
Today’s article expands on Real Yield on Avalanche #2 — Staking $GLP with GMX and Yield Yak by utilising DeltaPrime, another platform I’ve previously written about, to leverage your $GLP deposits and achieve significantly boosted yields as a result.
Rather than repeating what I’ve written in those articles, I’d invite you to give them a read if you’d like to get a better understanding of the role of each platform in this strategy.
However there have been some changes recently, which both simplify the process and offer the opportunity for yet further increased returns, which I’ll be covering in the sections below.
Yield Yak and Avalanche Rush
As mentioned in the article linked above, Yield Yak has become the recipient of Avalanche Rush rewards for their boosted $GLP pool, which comes as a result of collaboration with GMX and Ava Labs.
These additional rewards are distributed when certain TVL milestones are hit and maintained. When I previously covered this, the reward schedule was as follows, with up to $100k available in additional rewards:
This has recently been increased to up to $300k in additional rewards if higher TVL milestones are reached:
Looking at the $GLP pool currently, it seems like it’s well on the way to hit the next milestone before long:
With a TVL of $6.8m at the time of writing, it’s just $0.7m away from the next level of rewards.
DeltaPrime
After announcing their partnership with GMX back in November of 2022, DeltaPrime have recently completed their initial integration. This provides the availability of $GLP on the platform, both as collateral for borrowing other assets against, and the ability to mint $GLP directly in your Prime Account.
The boosted $GLP pool from Yield Yak has also been added to the Farms page, allowing you to leverage your $GLP to achieve further increased yields from the pool.
As covered in my last article on DeltaPrime, they offer undercollateralised loans at up to 4.5x leverage for use within their Prime Account. I’ll be making use of this for today’s strategy by leveraging my $GLP in the following manner:
- Deposit $GLP as collateral.
- Borrow 3x in $USDC.
- Mint more $GLP with the borrowed $USDC.
- Add all the $GLP to the Yield Yak pool.
Since this uses the Yield Yak pool, it means that it’ll benefit from the added boost of the Avalanche Rush rewards whilst also autocompounding the earned rewards.
This will help Yield Yak in reaching the next TVL milestones to unlock the next levels of the Avalanche Rush rewards, as it directly contributes to the TVL of the pool.
Wallets
I created a new wallet with the following address to use for this strategy:
0xed9c649df3ee77ac3abe09de3b18ad54568422dd
Which you can track and follow on Avascan, SnowTrace and DeBank, where I have verified my ownership of the address on Twitter:
I then sent 150 USDC and 0.5 AVAX to this address, with the $USDC for use in the strategy and the $AVAX to cover gas fees.
Transferring Staked $GLP
Please note that this section is only for if you have existing $GLP you’d like to transfer to another wallet for use in this strategy, or would like to read about interacting with smart contracts through SnowTrace.
If you don’t have any $GLP yet, please feel free to skip ahead to the Obtaining $GLP section.
Update 13th February 2023 — I have since been informed that you can add the new $sGLP (StakedGlp) contract to your wallet and transfer the token as you would any other, avoiding the need for any of the below.
Thank you to Simon at Yield Yak for pointing this out to me!
When I was walking through the process to test this strategy, I already had some $GLP staked with GMX which I wanted to use for testing purposes. So I tried to send this to a new wallet in order to use it with DeltaPrime, but encountered an error.
It turns out that $GLP (or $fsGLP, as it is represented in your wallet) cannot be transferred using the standard transfer method, such as when using the transfer functionality built in to most wallets. It’s still possible to transfer it to another wallet, but requires interacting directly with the contract in order to do so.
This is mentioned in the on the Contracts page of the GMX documentation, but I didn’t think was particularly easy to find or follow:
So I thought it might be worth explaining the process in detail. To start, I first needed to locate the StakedGlp, or $sGLP, contract. I found it in the Avalanche section of the Contracts page linked above and then located the contract on an explorer. I used SnowTrace for this:
Next, I had to click on the Contract tab, which shows the verified contract source code:
To then interact with the contract, I clicked the Write Contract button:
Before transferring tokens, I had to first call the approve function. This was done by clicking the approve function and then entering the necessary details:
For the _spender value, I entered the address I was sending the staked $GLP from, and then entered the number of tokens I wished to send for the _amount value.
Please note that this is in uint256 format, which means it has to be an integer and must pad any missing numbers after the decimal point with up to 18 zeroes.
For example, to send exactly 10 staked $GLP, I’d have to enter 10.000000000000000000 into the field. Entering just 10 would result in approving 0.000000000000000010 staked $GLP instead.
To approve this, I clicked the Write button, which required a single transaction.
This meant that I was then ready to send my tokens. This was done by clicking the transferFrom function and completing the displayed fields:
For the _sender value, I entered the same address as I’d just approved, which was the address I was sending the staked $GLP from. The address I wanted to send the staked $GLP to was entered for the _recipient value and I entered the same value as I’d just approved for the _amount value, in the same format as before.
Once the fields were completed, I clicked the Write button, which again required a single transaction and executed the transfer of my staked $GLP to my new address.
Obtaining $GLP
When I wrote about obtaining $GLP previously, the only option available was to mint it directly on GMX. As of today, this is no longer the case, as the team at Yield Yak have released their $GLP router for Yak Swap:
Since $GLP is essentially an index of the underlying assets, GMX charges dynamic fees when minting depending on the asset used relative to the pool composition:
As we can see in the screenshot above, $USDC.e currently has a fee of 0%, meaning savings can be had by minting with that over $USDC. On the other end of the scale, $BTC.b has the highest fee of 0.69%, so you’d be losing out if you used that to mint instead.
The new update on Yak Swap automatically finds the cheapest route for you, to ensure you always receive the best rate for $GLP, regardless of the asset you initiate the swap with:
This routed the swap from my original 150 USDC to $USDC.e, using that to then mint $GLP.
This gave me 204.0602787621 GLP as opposed to the 202.9527106172 GLP I would have received had I minted directly. The saving might not seem like much, but that’s due to the relatively small amount involved. On larger swaps, the difference will be much more pronounced.
The exchange itself required one signature, one transaction for approval and a second transaction to execute the swap.
Leveraging $GLP with DeltaPrime
The process of opening a Prime Account is easy to follow, and clearly signposted on the platform. The first step is making a deposit to open the account:
This was done by, as explained in the screenshot, clicking the Deposit / Borrow button and selecting the Deposit collateral option:
Currently, the account must be opened by first depositing $AVAX or $USDC, and not $GLP. However this can be a tiny amount:
I opted to deposit $AVAX to do this, and entered 0.01 AVAX before clicking the ADD FUNDS button to complete the process.
This then required a signature to accept the terms and three transactions:
This is exactly as explained on the Deposit collateral modal in the screenshot above, and the page automatically updated after the final confirmation to display my new balance:
The next step was to then deposit and put my $GLP to use! Adding it as collateral followed the same process as above:
Where I was presented with another modal stating that this time it would only require two transactions, so I entered my full $GLP balance, minus the final two decimal places that it doesn’t seem possible to add, and clicked the ADD FUNDS button:
This did require two transactions, as stated:
Once the second transaction had confirmed, the page again automatically updated to display my updated position:
At this point, I was already earning a yield, as can be seen in the Account APY section at the top of the page. This comes from the underlying yield on $GLP from GMX.
The next step in my strategy was to borrow 3x the collateral amount in $USDC, in order to allow for enhanced returns whilst retaining a healthy buffer in case of downwards price movement.
To do this, I had to click the Deposit / Borrow button for $USDC and select the Borrow option this time:
This presented me with the now familiar modal, where I entered the amount I wished to borrow and clicked the BORROW button to complete the process:
I went with 450 USDC, which was three times the original 150 USDC I’d exchanged for $GLP, and left me with a good health ratio of 40.12%.
Only one transaction was required to complete the borrowing process, and the page updated to reflect the changes to my position:
We can see that the account APY has now flipped negative, meaning I’m losing money at the moment, since I’m paying the borrowing rate on 3x the collateral I’m earning yield on.
To remedy this, I clicked the Mint / Redeem button next to $GLP to mint more of it with my newly borrowed $USDC:
This showed me another familiar modal, where I selected $USDC to mint with and entered my full balance of 450 USDC, before clicking the MINT button:
There was just another single transaction required for this step, and I received 611.9961342553 GLP in return for my 450 USDC. Once again, the page automatically updated to reflect my new position:
To put my freshly minted $GLP to use I then had to click the Farms option towards the top of the page:
Followed by clicking the $GLP farm to expand the details, and then clicking the Stake button next to it:
Which displayed another modal, with the welcomed addition of a max button! I clicked the MAX button to select all my $GLP and then clicked the STAKE button:
This required one final transaction, and again automatically updated the page to reflect the changes:
Some of the transactions involved in this strategy involve relatively complex operations, for example minting $GLP. This results in some expensive transactions.
Running through each of the steps above and implementing this strategy cost me a total of 0.200722403 AVAX in gas fees.
Projections
I was shown an account APY of 43.3% upon confirmation of staking my leveraged $GLP position.
Assuming this remains at the same rate, I can expect to earn the following from my original 204.0602787621 GLP deposit:
1 week — 1.6991942443 GLP
1 month — 7.363175059 GLP
1 year — 88.3581007039 GLP
However, I do not expect this rate to remain the same. GMX have just had their largest single day of fees in their history, with 70% of these being distributed to $GLP stakers:
This distribution of these fees starts on Wednesday, so the APY should rise dramatically then for the next week.
Looking at historical fees on the GMX Analytics page:
We can see that they are highly variable. This results in variable rewards for $GLP stakers every week, but these have consistently been around or above the 20% mark. This is supported by DefiLlama:
If the current rate of 18.25% translates into 43.3% at 3x leverage through DeltaPrime, this means an increase of around 2.37x.
If we apply this to the highest rate previously recorded on DefiLlama at 57.03%, this would mean an APY of around 135.16% with this strategy. This is, of course, assuming the borrowing rates remain at the same level.
For the next week, at least, I’m actually expecting returns above this, as the last week of fees exceeded those of the previous high.
Conclusion
I’ve been a fan of all three of the platforms involved since coming across each of them. GMX has been consistently providing impressive returns based on platform fees through staking $GLP with them.
Yield Yak then expanded on this with their boosted $GLP pool, whilst autocompounding the rewards for you, saving on both time and fees. The new addition to Yak Swap, providing optimal routing when minting $GLP, is a big plus too, as it ensures you get the most for your money.
The most recent addition to this DeFi stack, DeltaPrime, expands on it even further by allowing for up to 4.5x leverage on deposits, leading to significantly boosted returns for borrowers whilst providing sustainable returns to lenders from the fees those borrowing are paying for doing so.
This strategy has some excellent potential, in my opinion, and earnings could be further increased by raising the leverage from 3x. However this comes with additional risk, as it lowers the health of the account and puts you closer to liquidation, so it’s essential to find a level you’re happy with if you’re considering taking a similar approach.
In all, I’m excited to see how this performs over time. The next week in particular should be very interesting to see, due to the incredibly high rate of returns expected. I’m most curious about seeing how this impacts borrowing demand on DeltaPrime, as it could skew the yields if the borrow rates rise significantly.
I’ll also be keeping an eye on the TVL in Yield Yak’s $GLP pool, as I imagine this will increase both from the rates next week and the new integration with DeltaPrime, allowing people to deposit more than they’d be able to without undercollateralised leverage. It’d be great if the pool can hit one or both of the next TVL milestones to receive the relevant Avalanche Rush incentives on top, but I’m unsure how much of the deposits will stick around if rates on the pool drop again the following week.
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You can also find me and all the platforms mentioned in this article at the links just below.