I’ve been deep in DeFi for a few months now, and my overall experience with liquidity pools and farming hasn’t been all that positive.
Most non-stable tokens with high yields tend to drop in value faster than you will be compensated in APY, as the tokens generally don’t have much utility backing them.
Pairs which include more high-quality assets (i.e. coins like AVAX, LUNA, etc) may appreciate over time, but if they do, you are often more likely to end up worse off than just holding the underlying asset, due to impermanent loss being higher than the yield.
Stablecoin pairs are best as there is no IL, but the yields are relatively modest. Very rarely are the returns higher than Anchor on Terra. And there’s always the issue of exposure to farm tokens, which need to be constantly sold off, requiring management and eating away at the yields.
Yield optimisers can improve the situation, but in my experience when you account for fees, transfers, and exposure to tokens, you have to farm for a long time just to break even, especially with constantly dropping APYs. Pooling and farming just doesn’t seem that lucrative.
These days, my overall investment strategy has evolved to holding a percentage in Anchor for constant, stable growth, and reserving a modest amount for trading. I feel like that’s the best approach for me as it assures constant growth with some opportunity for high gains on some investments, while limiting risk and volatility.
So my question – is there anything else that’s like Anchor protocol that generates consistent yields in the 20% range on a single stable asset, while not exposing you to farm tokens, or high fees? The anchor model which utilises a treasury seems really logical to me, as the value of your aUST is fixed, and simply grows at a predictable rate.