OneRing and the Power of Diversification
Smart stablecoin strategies are key to a well-balanced portfolio
The events of the past week surrounding the de-pegging of Terra’s $UST algorithmic stablecoin and the eventual collapse of $LUNA (our hearts go out to you, Luna community, stay strong through these tough times) hold many key learnings for the cryptocurrency industry, chief among them — The Power of Diversification. Of course, diversification as an investment strategy is as old as finance itself, but oftentimes most investors do not have the time or wherewithal to spread their stablecoin holdings across multiple stablecoins or stablecoin farms. That is where OneRing aims to step in and do the work for you.
Diversification in investing
Diversification is the process of allocating capital in a way that reduces exposure to any one particular asset or risk. When considering the diversification of their portfolio, most investors and investment managers think of spreading their capital across asset classes, industries, and markets.
Ideal asset allocation is not static. Assets’ performance and their correlations to each other change, so monitoring and realignment are imperative. An actively managed investment fund offers remarkable diversification benefits, even with a relatively small investment, and when managed well, provides significant risk reduction and potential for above average returns.
When it comes to cryptocurrency, diversification WITHIN the asset class is as critical an investment strategy as investing across asset classes is for traditional finance investors due to heightened risks in this nascent environment.
Stablecoin risk
There are many questions surrounding the asset-backing of stablecoins. The leading stablecoin by market cap, $USDT Tether, has constantly been plagued by questions of whether parent company Bitfinex holds enough $USD to fully-back the supply of Tether. In recent months, Magic Internet Money ($MIM) lost its peg amid a crisis of confidence due to connections to Wonderland CFO Michael Patryn, the co-founder of the notorious and fraudulent Canadian crypto exchange QuadrigaCX. More recently, Bean ($BEAN) suffered a $75 million dollar hack from which the stablecoin has yet to recover and it remains to be seen if they ever will. Needless to say, holding stablecoins might not be as ‘stable’ as their name implies.
As we are all too well-aware, decentralized finance (DeFi) protocols have also been susceptible to hacking risk and the instance of hacking is on the rise significantly. So far this year over $1.6 billion in crypto has been stolen from DeFi users, surpassing the total amount stolen in 2020 and 2021 combined. The largest of these attacks, the Ronin Bridge attack, saw hackers make off with over $600 million USD in crypto. Protocol risk is a major issue and one that does not seem destined to go away anytime soon.
Long story short, there are plenty of risks associated with stablecoins.
OneRing’s diversification strategy
While stablecoins hold an integral position in the entire cryptocurrency ecosystem, it is clear that diversification within stablecoin holdings is critical for a smart, well-balanced portfolio. One of the key tenets of OneRing Finance is the diversification of risk through the utilization of multiple stablecoins, multiple protocols and farms, and multiple blockchains.
In maintaining a well-diversified portfolio, sometimes you may have to accept a lower apr in order to maintain a proper balance. The key to a healthy portfolio is to earn consistent yield while minimizing risk. To add to that, OneRing will always be transparent in where your stablecoins are deposited and being put to work for you so you can make your own risk/reward assessments.
To enhance our security further, we are enlisting the help of Dedaub to audit the OneRing smart contracts. Upon completion of the audit, we will look to institute an insurance policy for our stablecoin vaults to give our users even greater peace of mind and security. We will release full details of the audit and insurance policies in the weeks ahead.
Stablecoins are a crucial piece of the crypto puzzle, but as we have seen with the events surrounding $UST and others, they still carry significant risk. OneRing strives to reduce our community’s exposure to these stablecoin risks by diversifying our holdings across a broad range of stablecoins and stablecoin farms in order to be ‘OneRing to yield them all’ (safely and securely).
About OneRing
OneRing is the first multi-chain cross-stable coin yield optimizer in the space. The goal of OneRing is to take away the complexity of DeFi 2.0 and make things easy for the user. By this, we will be able to open the DeFi space for a whole new layer of users that want to receive yield on their stables instead of just having them sit in their wallets. With a strong network of partners, KOLs, advisors, and such, OneRing aims to go right to the top and set new benchmarks for the upcoming DeFi 2.0 winter.
