This blog post is part of Crypto Exponentials DeFi Education Series. Bear market survival Stablecoin strategies bring you the know-how on different Types of Stablecoins, how to find Stablecoin strategies, best Stablecoin strategies working in this market, and equip yourself to beat the bear markets.

Intro

While the cryptocurrency industry is known for its incredible bull runs and peaks, volatility cuts both ways and bear markets can be long and brutal. Thankfully, however, since the development of Decentralized Finance (DeFi) in the last bull market cycle users have new opportunities to protect their portfolios from prolonged bear markets. 

Moving forward, one of the safest ways for investors to hedge against the turbulent market conditions while also making some humble gains is yield farming with stablecoins. Stablecoins are digital assets that are intended to maintain a “peg” to a real-world asset or currency, most commonly the US dollar, through a variety of means. 

For those who don’t know what to do with their fiat-pegged assets, we have gathered relatively safe stablecoin farming strategies to help you minimize risk during the relentless bear while maintaining passive income on your assets.

Let’s Start With Types of Stables

Check my blog on stablecoin types

Traditional Categories

1. Fiat backed
2. Crypto backed
3. Commodity backed
4. Algorithmi

These are four different categories that make much more sense. Commodity-backed stables are rarely used in DeFi.

I also want to touch upon the top 3 trends in DeFi that is making stablecoin play easy in the ecosystem, namely -Aggregators, Cross-chain , & User-friendly UX/UI

Now How Can These Stablecoins be Ranked by Perceived Safety:

1. Paper Backed Backed by FIAT, Treasuries, Bonds Ex: USDC
2. Overcollateralized: Minted/Borrowed against collateral of greater value Ex: DAI
3. Partial-Algo: Mostly backed by crypto, partially algo-pegged Ex: FRAX
4. Algo: Bad Idea Ex: UST

Get An Idea On Stablecoin Risks

1. Paper Backed: Centralized, can be frozen / seized, dependent on underlying institution (Circle, e.g.);
2. Overcollateralized: Bad debt, black swan liquidations
3. Partial-Algo: Reserve currency death spiral, backing % not fixed
4. Algo: De-peg death spiral

So Get To The Meat, How to Find Stablecoin Strategies

• First, know which yields to look for
• Have a good set of tools
• What are the picks

Let’s dive in

Know which yields to look for

Not all yields are made equal. You want to aim for yields that are sustainable and reasonable. I want to be able to get 7-25% for 1-3 months. So which types of yields fall in that range? There are a few options

• Big name Dex LPs
• Money Market Loops
• Leveraged Composable LPs
• Institutional Lending Let’s discuss

Big Name Dex LPs

Find top 1-2 Dexs on a chain and look at their stablecoin farms:

• Decent Swap Fees
• Likely to have constant/continued incentives
• Likely to be supported/subsidized by foundations
• Likely to have good security

@beefyfinance may aggregate for you

Money Market Loops

Find a money market where you can get paid more to lend a stablecoin than you pay to borrow one. If you’re borrowing a different stablecoin, convert it to the initial, deposit as collateral, and repeat.

Pro-Tip: @Reaper_Farm does this for you sometimes.

Leveraged Composable LPs

The following DeFi Platforms allow you to borrow stables against stablecoin LPs. Collateralize LP > Borrow Stables >Make more LP > Repeat > ??? > Profit

• @Kamino_Finance
• @NazareFinance
• @SturdyFinance
• @GearboxProtocol

Institutional Lending

Lending to institutions can offer 7-20% on stables. Just remember: These are undercollateralized or uncollateralized loans. There’s a chance the borrower defaults. Here are the two examples,

• @ClearpoolFin
• @maplefinance

Have a good set of tools

DeFi tools are powerful. Have the following in your arsenal ➼

• ➼ @DefiLlama
• ➼@beefyfinance
• ➼@stable_fish
• ➼ @0xNanoly (formerly known as coindix)
• ➼ @ApyVision

DeFiLlama has two tools to help with stableyields.

1. Yields > Stablecoin Pools https://defillama.com/yields/stablecoins…
2. Strategies (use stablecoin collateral) https://defillama.com/yields/strategy?lend=USDC&borrow=&announcement=true…

With “strategies,” you’ll be getting a delta neutral yield against stable collateral.

@beefyfinance is something you’ve probably used if you’ve been around DeFi for awhile. You can sort by stables & check out historical data. This will give you an idea as to how consistent you can expect the yield to be. I like consistent yields between 7-17%

@stable_fish is similar to DeFiLlama’s “Stable Pools” but has a variety of other protocols. They have ‣ historical APYs ‣ historical profit ‣ airdrop alerts ‣ gas estimations ‣ etc Really cool tool worth checking out. Just make sure you vet the protocols as well.

@0xNanoly (formerly Coindix) : Nanoly Stablecoins: https://nanoly.com/kind:stable-sort:apy:desc… (they have non-EVMs!) APY Vision > Search > Stablecoin Pools

@ApyVision:https://app.apy.vision/search Great filters, excellent data

Then Comes, What Are the Picks?

Be aware that nothing is constant in DeFi. Stablecoin strategies always change and you can scout for the best at any time by mastering the above tools. Here are the picks for now,

• @GearboxProtocol : 20-30% (Various, Leverage)
• @SturdyFinance : 14-18% (Various, Leverage)
• @0xconcentrator : 15-20% (MIM3CRV)
• @Reaper_Farm : 15-25% (Sonne AVs)
• @beethoven_x : 17-23% (USDC/DEI)
• @Kamino_Finance : 15-22% (Loop on @HubbleProtocol )

Leaving you with the following to explore

• @LiquityProtocol chicken bonds
• @HubbleExchange insurance pool
• @HedgeLabs & @HubbleProtocol stability vaults
• @dammfinance money market
• @CurveFinance BLUSD-LUSD3CRV
• @ribbonfinance stable vaults
• @HopProtocol shared L1 yields

Final Thoughts…

Building your stablecoin strategies for bear markets is a two-folded game. How you approach it determines whether it’s a tool for active income generation or a passive one. An investor can be a mercenary, be in constant research for better yields and juggle their funds between protocols, or settle with one protocol and be happy with it. The former is riskier and requires effort but is potentially more profitable while the latter mostly optimizes for security and peace of mind. Try to find the strategy that suits best to your risk appetite. Once you decide it, leverage above framework & tools to find the best market opportunities for yields. 

NEED HELP TO WIN IN DEFI? TALK TO CRYPTO EXPONENTIALS EXPERT NOW 📲

Disclaimer: As with everything on this site, this article is for informational purposes only and is not advice of any kind. I simply share my experiences and my opinions for information. I am not a financial adviser and I am not providing investment advice or financial or legal advice of any kind. Cryptocurrencies (and most business opportunities) are high risk. Many of the opportunities I discuss exist in new, high risk and unregulated markets. Some methods require significant investment of time and/or relevant skills. Please do your own research and due diligence; do not blindly follow anyone!

RECOMMENDED

1) Break FREE From Your Bank & Pay IRL Bills From Your Web3 Wallet!

Any bill . Any token. Any chain

2) Blockchain Income Accelerator

At Crypto Exponentials we believe that wealth like a tree grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. Blockchain Income Accelerator offers a starting point. Learn more

TALK TO THE EXPERT NOW 📲