5 DeFi Strategies to Earn with Beta Finance
Beta Finance is the permissionless money market protocol for lending, borrowing, and shorting any crypto asset. We are the first incubated project of Alpha Launchpad. Our mission is to offset crypto volatility and facilitate stability in crypto markets for healthier adoption by individual and institutional users.
In this article, we present 5 DeFi strategies that traders, yield farmers, and other DeFi users can deploy using Beta Finance to earn better yields. These strategies are organized by the different levels of difficulty to execute.
Beginner
Lend your tokens
If you want to earn an additional yield on your tokens, then deposit your tokens into Beta markets. In return, you will receive bTokens, which represent your capital lent and accruing lending interest. This enables you to passively earn interest from other users borrowing and utilizing your assets. Since money-markets may be created permissionessly with Beta, any crypto token may be made interest-bearing.
Short a token
Suppose you have the view that an asset will go down in price. You can take a position on this by short selling. If Beta has liquidity for that money market or asset, you can easily short it on Beta, given you provide sufficient collateral. For example, you learn that ProjectX has recently been exploited. You believe that this may lead to the value of ProjectX tokens going down in the short term. You can then perform a 1-click short on Beta Finance. To learn more about how to do that, check here.
Intermediate
Delta-neutral farming
In finance, delta neutral describes a portfolio of related financial assets, in which the portfolio value remains unchanged when small changes occur in the value of the underlying asset. Often when yield farming in DeFi, you want to reduce your exposure to price volatility in the farmed asset and the asset used to farm. People value stablecoin farms with consistent stablecoin APY because they are less volatile. However, most stablecoin farming pools are oversubscribed and still suffer from the volatility in the farmed asset. You can mimic the behavior of a stablecoin farm in a non-stablecoin farming pool by shorting the asset you are using to farm.
For example, you want to farm the 1,200% SHIB APY, but only have 100,000 USDT, not SHIB. While you do not want to take a directional view of SHIB, you need to buy and get hold of SHIB to enter this farm. What you can do is to simultaneously buy $30,000 of SHIB and short $30,000 of SHIB on Beta using 70,000 USDT as collateral. Your position is now delta-neutral as long as your collateral assets fully cover your borrowed assets, maintaining the LTV requirement. You are now able to take SHIB tokens to farm the higher-yielding SHIB pool while being delta-neutral. By maintaining a delta-neutral position, you collect the difference between the SHIB farming APY and the Beta SHIB borrow APY.
Advanced
DEX-CEX arbitrage
Currently, arbitrage between DEXs and CEXs is only realizable when a token trades at a premium on the CEX to the DEX. In this case, traders would buy spot on a DEX and simultaneously short on a CEX. The converse case is not possible since most tokens cannot currently be shorted on a DEX. This has led to persistent premiums on DEXs to CEX listed margined tokens. With Beta, arbitrage in the converse case can be captured since one can short on a DEX and simultaneously long spot on an exchange.
For example, say TokenA is trading at a 10% premium on SushiSwap to its price on a CEX. You do not want to take the risk associated with withdrawing TokenA from the CEX and then selling it on the DEX. Prices could significantly change in that timeframe. If TokenA is available on Beta, you can easily realize this arbitrage by shorting some TokenA on Beta and simultaneously buying it on an exchange. By doing so, you have plenty of time to transfer TokenA from the CEX to Beta to repay your debt. If you had shorted TokenA for $11,000 on Beta and bought $10,000 TokenA on the CEX, realizing the arbitrage would net $1,000 minus borrow and transfer fees.
Basis trading
Basis trading is a trading strategy that consists of purchasing an asset and the sale of its related derivative (for example, the purchase of a BTC and the sale of a corresponding quarterly future contract). A basis trade can be long or short. For instance, you notice that perpetual futures for SUSHI on an exchange are trading at $7.80, a significant discount to on-chain SUSHI at $8, due to a liquidation event. Thus, a gain of $0.20 per token can be realized if you long SUSHI futures on the exchange and simultaneously short SUSHI on-chain with Beta. When prices converge, you close the position for a $0.20 profit per token.
Conclusion
We have presented five strategies to earn with Beta Finance. The beauty of DeFi is that smart contracts or DAOs can implement these strategies freely. However, advanced strategies may require more involved technical tooling.
Stay connected with Beta Finance
We have more to share with our community as we progress to launch Phase 1 on August 18, and we will share more details about the opportunities for users of Beta Finance. We’ll continue to keep the community updated through our socials, so be sure to follow us on Discord, Twitter, and Telegram!
We are hiring!
Beta Finance is looking to expand our team and is actively hiring. If you are passionate about DeFi and excited to build the next generation of infrastructure for DeFi, we’d love the chance to learn more about you! Whether you’re a Solidity developer, Web3 magician, business development & marketing, or DeFi strategy specialist, please reach out to careers@betafinance.org.
