A sample portfolio in DeFi Basket using recently integrated assets from Jarvis.
Introduction
DISCLAIMER: DeFi Basket does not provide financial advice and none of the returns presented here are guaranteed. As usual, you MUST do your own research before investing anywhere, including in DeFi.
There’s a great new world of stablecoins in DeFi. And they’re not pegged to the USD. Many of them offer safety and stability similar to that of the United States Dollar.
What if we could build a portfolio with some of the top 10 most traded fiat currencies in the world? On top of that, what about investing in them while earning double-digits APY?
That’s why we’ve teamed up with Harvest and Jarvis to make their products available in DeFi Basket. Jarvis built many vaults to promote liquidity among these stablecoins while providing good rewards. Harvest took these opportunities and built specific vaults to farm all those rewards.
However, implementing an investment strategy based on these products is quite hard, so they are only accessible to a small minority of the most technically savvy DeFi users. By making them ridiculously easy to invest in, DeFi Basket fulfils its mission to democratize access to DeFi.
In this brief post we’ll detail a possible investment thesis on these stablecoins for your own evaluation. In the end you’ll have a link to our DeFi Basket portfolio, where you’ll be able to clone and invest yourself. All that while maintaining custody and full control over your assets.
You’re also able to build your own portfolio using one or all of these new assets, together with the other assets already available in DeFi Basket. It’s up to you.
Portfolio Composition
Our portfolio is composed of four different Harvest’s vaults. Each is based on one single currency: Euro (EUR), Japanese Yen (JPY), Singaporean Dollar (SGD) and Canadian Dollar (CAD).
We chose these four currencies because they’re currently presenting the highest returns on Harvest. They’re also backed by strong central banks, and, together, compose a diversified exposure to different industries: commodities, technology, services, among others.
The mechanics of the investment is pretty much the same for all the four vaults. We drew a representation of all the transactions required to deposit into Harvest’s Jarvis vaults. We used the JPY vault as basis to explain the complete transaction.
The first step is to exchange your initial crypto into one of the stablecoins accepted by Jarvis (USDC, in this case). The next step is to mint using Jarvis exchange one of the token from Curve's 2JPY pool, in this case jJPY. Next you need to provide liquidity to Curve's pool. Considering our example for the JPY vault, you provide liquidity to Curve’s 2JPY pool.
After that, you stake the LP token from Curve in Harvest. From this point, Harvest should make things automatic for you. It will stake the LP into Jarvis Network and automatically farm all the rewards. For the 2JPY vault, returns are composed of transaction fees from Curve, JRT rewards from Jarvis, and miFARM rewards from Harvest. This is the same rewards scheme for CAD and SGD. For the 4EUR vault, JRT rewards is replaced by DEN rewards.
All that may seem quite complex to implement, and it is. It took this author a couple of hours of research and trading to implement this strategy at first.
That’s why we created DeFi Basket. Our product makes it absurdly simple to invest in these vehicles. You just deposit your money in one single cryptocurrency and everything is taken care of. DeFi Basket will do all swaps and deposits, allowing you to keep custody of your money for the entire time. You’ll also be able to monitor the progression of your investment using DeFi Basket’s portfolio monitoring functionalities.
Volatility
An important aspect of investing in stablecoins is that we expect to have low volatility. When we’re trading in USD and we benchmark our portfolio against USD, then there’s naturally no volatility due to currency fluctuation.
When we choose to invest in currencies different from the USD, volatility starts to become a concern. So why are we saying that these are stablecoins? There are two main reasons:
Economics. EUR, JPY, SGD and CAD are all among the top 10 most negotiated currencies in the world. This increases their liquidity and stability. Also, they’re emitted and backed by Central Banks of developed countries with very strong economies.
Historical data. We see very low fluctuation of the value of these currencies against the USD in the last 3 years. If we take their value on Apr 8th, 2019 and compare it to today’s value we see the highest positive fluctuation happening on the CAD, which gained 6% in value. The highest negative fluctuation happened on the JPY, which lost 9.7% in value.
In terms of largest fluctuations happening within the 3 years timespan, the largest positive variation happened on the CAD with +21% when recovering from the pandemic’s big dump. The largest negative variation happened on the JPY with a -16%, from the peak of Dec ’20 until this week.
Therefore, we believe that variations from the four currencies should offset each other and present an opportunity for quite stable APYs.
Returns
We already discussed the volatility on the face value of each currency against the USD. On the returns side, though, APY may be quite volatile. For example, APY might change from 35% to 25% in a matter of a few days, depending on the volume invested in each vault and on the rewards provided by each protocol. Our observations demonstrate that, so far, it’s been quite difficult for any of the chosen vaults to yield returns below 20%.
In the table below we make a simple calculation of estimated APY considering today’s values. We also assess the impact of currency volatility against the USD, comparing their fluctuations from Apr 8th, 2019 until today. Even when we factor that in and calculate an adjusted APY, returns remain quite attractive.
Risks
Currency risks. There are risks from currency fluctuation of the JPY, CAD, SGD, and EUR against the USD. These are mainly impacted by real world events and are quite unpredictable.
Rewards risk. This portfolio builds part of its returns on marketing rewards from Jarvis and Harvest. Rewards may vary throughout the investment period.
Protocol risk. Every action on a DeFi protocol carries all the risk embedded in that protocol, be it smart contract risk, risk of liquidation at loss, or simply price risk.
Build your own!
Now it’s the time of the truth. If you want to invest in DeFi and earn big APY with stablecoins, you may click on the links below:
- Build your own personalised portfolio with DeFi Basket.
- Clone our own Stablecoins Maxi portfolio with DeFi Basket.
Annexes
Enlarged versions of the historical prices for each currency. Highlighted the largest volatility in a three years period.
