Crab Strategy as Collateral on Yield Protocol

Starting today, users can use Opyn’s Crab Strategy as collateral on Yield Protocol. The Crab Strategy is a delta-neutral strategy consisting of a long ETH and short squeeth position on Opyn’s platform. The Crab strategy is designed to achieve returns in a sideways ETH market with low volatility like we’ve generally had over the last few months.

Using Crab as collateral, users can now unlock liquidity in their position, or leverage up for more crab exposure. As with all uses of collateralized leverage, your borrowing position is at risk of liquidation if you do not maintain sufficient collateral.

Background

Crab v2 is an automated strategy that earns users returns in sideways (crab) markets.

The Crab strategy allows users to earn the squeeth funding rate by being short squeeth while maintaining a delta neutral position by being long ETH. Delta neutral strategies generally involve a long and a short position, where the combined exposure of the positions is targeted to be market neutral.

To stay market neutral, the vault rebalances during the crab auction every Monday, Wednesday, Friday around 16:30am UTC (or upon large price movements in ETH).

More information about the crab strategy from Opyn’s docs.

Ideal Market Condition for Crab

Crab Strategy is ideal for sideways market conditions (🦀crab markets!) when the price of ETH fluctuates within a relatively stable range with periods of low volatility (the price of ETH is calm!).

So, the ideal market condition to deploy capital into the Crab Strategy is when the price of ETH does not move too much up or down between rebalances. ETH can move up or down, but if it moves within a relatively stable daily range, crab strategy holders make a profit. Since the Crab Strategy launched, returns have been quite good in ETH and USD terms.

Quick Start

Here’s how you can get started borrowing on Yield with the Crab Strategy:

1. Go to https://app.yieldprotocol.com/borrow
2. Enter the amount and currency you wish to borrow from the dropdown. (e.g. 1000 USDC) Click Next.
3. Enter the crab amount you wish you use as collateral. Please keep a collateralization ratio above 133% or you will be liquidated.
4. Confirm the transaction on the Ethereum network.