All the changes will take place at the 5th of July 2021.
Before the start of the campaign on increased returns on Ethereum, the annual rates for it were: 4%, 6%, 8%, or 11% based on the amount of Midas locked-in. But, then the market changed. And during the last two months, Midas provided the best interest rates for Ethereum on the market, with up to 20% APR. It was possible due to the ETH rally, increased demand on ETH in lending protocols, and the success of our trading algorithms. You can read more about it in the previous blog post.
Now, when the increased APR campaign is coming to an end, we want to re-consider our interest rates and share our vision on the Ethereum long-term and how can Midas provide yield on this asset in the current market conditions.
Launching 6% APR low-risk Ethereum staking
The first change we will implement will be the launch of a stable 6% APR Ethereum staking strategy. The rates will not change based on your Lock-in level. We consider this as a low-risk instrument. Basically, all Ethereum within this share will be moved to DeFi protocols that provide the opportunity to stake Ethereum on their Beacon chain, such as Lido. It gives a flat 5-6% APR and has over 1.5 billion dollars locked in a contract with multiple security audits. This 6% APR is available for everyone and still provides one of the best rates on the custodial market.
Rates increase for Ethereum DeFi share
The second change is the increase in the APR on the main Ethereum share, from the initial 4%, 6%, 8%, and 11% to 6%, 9%, 15%, 20% APR, based on your Lock-in level, similar we have. You can read more about our Lock-in feature in the Wiki.
Since our interest rates are based on multiple market-based factors (like volatility, DeFi volumes, demand for core assets within protocols), I thought we could not continue with sharing 20% APR due to the recent crypto-market crash. The market deleveraged itself and turned to a flat movement, which led to reducing demand on Ethereum in DeFi protocols and a lack of opportunity to trade volatility, which is our bread and butter for providing yield. Since the demand for lending protocols went down, our investment team managed to find new market opportunities, which I will highlight later in this post.
Why are we so bullish on Ethereum
I strongly believe that Ethereum will take the most important place in the new crypto-economy, because of the network effect it already has. Due to two upcoming forks (London and PoS migration), Ethereum becomes the best asset to hold long-term in crypto, because of the burning fees, staking rewards, and the demand for this asset due to all the transactions within DeFi applications.
Midas vision on the current market and new opportunities for making yield
I treat the last two months as the temporal drawdown before moving to new highs. The fundamental reasons for market growth have not changed: Institutional entities continue to purchase BTC, China mining ban leads to more decentralization for BTC, DeFi-sphere remained untouched. There is a major interest in crypto, and it was more a speculative fall to take money away from everyone who was leveraging from the bottom. And it worked perfectly for crypto-whales.
Therefore, I think we are in the similar state, as we were in the summer of 2017:
Your daily dose of hopium
Combining deleverage of crypto (= low interest rates) and halving of prices of core crypto assets, we searched for the new opportunities that opened on the market. So, we created a few fresh strategies that use a variety of low-leverage market opportunities, such as:
- Leveraged liquidity pool reward mining through Alpha Homorra and Alpaca DeFi protocols (from 10 to 35% APY);
- Liquidty pools for ETHx2-Fli/ETH. ETHx2-Fli is a token, which has underlying assets of self-collateralized Ethereum in Compound protocol with x2 target leverage. While combining with Ethereum in liquidity pool it gives 1.5 leverage on Ethereum, while earning fees from this pair (up to 20% APY);
- Deposit Eth to Aave protocol and borrow USD to purchase Ethereum, depositing it back to Aave. It also gives small leverage that is easy to manage.
- This goes in hand with a 1x leverage shorting for Ethereum, just to hedge if the market will continue to go sideways or down.
There are more strategies like this, that we diversified on at the moment.
Overall, it gave us a stable average of 20% returns, with a great upside on mid-term Ethereum growth and hedged risks.
About managing your risks
I want to be transparent about how we manage your assets. Not everyone is comfortable with the risks that DeFi has in it, which are Impermanent loss and rug pulls. Therefore, we decided to launch ETH staking. In terms of DeFi strategies, we try to avoid or hedge impermanent loss in any form or make it in our favor, while not participating in anything that can be rug pulled.
Keep in mind, that DeFi share is still considered a risky one, so by using it you agree with our market perspective and our strategy. Midas does everything it can to negate black swans events through hedging and diversification, but we cannot be secured from it 100%.
I strongly suggest to diversify your Ethereum on Midas platform on staking and DeFi strategies, just to have eggs in different baskets.