The material is published for informational purposes only and does not constitute an investment recommendation. Cryplogger is not responsible for the investment decisions of readers.
Terra strengthens its position in the DeFi segment, increasing the gap from BNB Chain. Despite the correction of the market and the native asset LUNA, the general TVL ecosystems holds the milestone of $15 billion.
The secret of Terra’s success lies not only in the stability of the UST exchange rate, its central element, but also in the many interesting decentralized applications.
In this article, we will look at the capabilities of the Spectrum Protocol yield optimizer and the “optimistic strategy” using the Anchor and ApolloDAO platforms.
- The Spectrum Protocol is integrated with many protocols in the Terra ecosystem. The project offers high profitability due to automatic reinvestment, restaking and accruals in the native SPEC token.
- The use of secured loans in UST at Anchor opens up a wide range of high-yield strategies.
- Using the Ape Board service, you can conveniently track your portfolio of assets in Terra and other DeFi ecosystems.
Spectrum Protocol
The project is positioned as “the first and innovative yield optimizer in the Terra ecosystem.” The platform interacts with large projects like Mirror, Anchor and Pylon, offering increased profitability through autocompounding and restaking.
Spectrum Protocol is in the top ten of the DeFi Llama ranking, where projects are ranked by TVL.
In the Vaults section of the project, you can see the various vaults (Vaults) and their annualized returns, taking into account compound interest (APY).
The screenshot shows that the APY of the ANC-UST LP storage is 135.99%. This is much higher than the “standard” rate of return on Anchor deposits (~19.5%). In addition, due to the presence of a stablecoin, the volatility of the value of a pair of assets in storage should be lower compared to the range of fluctuations in the price of a single ANC token.
As an example for the previous material, farming positions mARKK-UST LP and mSPY-UST LP were opened. At the time of writing, the annualized returns (APR) of these pools are 14.5% and 12.09%, respectively.
These pools are also present on Spectrum Protocol, but their profitability is much higher due to auto-compounding strategies and reinvestment of staking rewards.
For example, the mARKK-UST LP storage APY is 21.2% instead of Mirror’s “standard” 14.5%. Therefore, to maximize the return on investment, it would make sense to move assets from one protocol to another.
By clicking on the corresponding vault in the Vaults section of the Spectrum Protocol service, a window with information appears.
In addition to the TVL and APY options, there are three deposit options:
- mARKK+UST — you can invest ARKK synthetic shares and UST stablecoin in equal proportions;
- mARKK-UST Terraswap LP – assets of the respective liquidity pool on the Terraswap platform;
- UST is an opportunity to deposit an algorithmic stablecoin of the Terra ecosystem, which is then automatically converted into the necessary assets.
To withdraw funds from the Mirror Protocol, you need to click Withdraw in the Farming subsection of the My Page. The following window will appear:
After clicking Unstake and confirming the transaction, mARKK and UST coins will appear in the wallet.
You can now deposit assets into the mARKK-UST vault, but before doing so, you must click Connect Wallet in the upper right corner of the Spectrum Protocol website.
The screenshot below shows that the coins appeared on the balance sheet. There are also options for maximizing profitability:
- Auto Stake – automatic reinvestment of staking rewards (APY in this case is 21.06%);
- Auto Compound – auto compounding strategy with APY at around 21.2%;
- Mixed – a combination of the first two options with the ability to adjust the balance between them (with the “50% to 50%” setting, the yield in annual terms will be 21.13%).
In all of the above options, profitability is generated due to three components:
- rewards in native MIR tokens of the Mirror Protocol project;
- increasing profitability through reinvestment;
- rewards in SPEC tokens of the Spectrum Protocol project.
The option with autocompounding has a slightly higher percentage, so we will choose it. In the fields for depositing funds, click Max, and then Deposit and confirm the transaction. In our case, the commission was 0.35 UST.
The following fields will appear at the top of the Vaults page:
- My Total Value – the value of funds deposited by the user and accrued rewards;
- Total Rewards – the value (in UST) of accrued rewards.
The Manage Rewards option allows you to claim accrued rewards (Claim Rewards), as well as transfer accrued SPEC coins to staking.
The stakes and staking options are presented in the Gov section. For example, with a 180-day SPEC blocking, the yield in annual terms will be 51.89%.
Staking in the Spectrum Protocol involves holding a highly volatile asset. Therefore, it will not be superfluous to pay attention to the SPEC price chart.
The asset has fallen in price by almost 88% in less than a year. However, given the depth and duration of the price fall, we can assume that in the future the SPEC token will stay in a flat or recover slightly. However, much depends on the degree of turbulence in the cryptocurrency market.
A similar algorithm of actions can be applied to the farming pool mSPY-UST LP on Mirror. This will increase APY from 11.7% to 50.4%.
Optimistic strategy using Anchor and ApolloDAO
This strategy was suggested by the user Rebel DeFi. It is based on the optimistic assumption that, driven by demand for UST and Terra ecosystem services, the price of LUNA will continue to rise in 2022.
Over the year, the capitalization of the stablecoin TerraUSD increased by more than 20 times – from $579.44 million to $12.13 billion (as of February 21, 2022).
Over the same period of time, the corresponding LUNA indicator increased 6.4 times – from $3.01 billion to $19.3 billion.
The correlation between the indicators is obvious. Therefore, flat or growing demand for UST is likely to be beneficial to LUNA’s price. On the other hand, the market may continue to fall for a long time under the pressure of the Fed’s policy and geopolitical instability.
The strategy proposed by Rebel DeFi uses the Anchor and ApolloDAO services discussed in the previous article.
First you need to get LUNA tokens – they will be needed for collateral.
Let’s use 1000 UST for our example in order to buy 20.31 LUNA on the exchange Terraswap.
You can convert purchased LUNA to bLUNA in bAsset section of the Anchor platform.
Received bLUNAs must be deposited as collateral on the Borrow page using the Provide function.
Next, you need to issue UST with an indicator LTV at 30%. To do this, at the top of the page, click Borrow and set the slider to the appropriate value.
In our case, we get 240 UST out of the maximum available to borrow $801,397.
Rebel DeFi proposes to divide the amount received into three parts. The first part – 80 UST in our case – is used to re-purchase LUNA, then convert them to bLUNA and increase the amount of collateral.
We repeat the algorithm described above, but with 80 UST: we buy 1.62 LUNA, convert it to bLUNA, and add it to Anchor.
As a result, the amount of collateral will increase from 20.3 bLUNA to 21.92 bLUNA, and LTV will decrease to 27.93%.
In other words, we have more bLUNA at our disposal, the cost of which will increase under the implementation of the optimistic scenario. In addition, position security is increased by reducing LTV by a few percent.
In the upper right part of the screenshot, you can see that the Net APR indicator has a positive value of 2.28% (Distribution APR > Borrow APR indicator). This means that the protocol, in fact, pays extra to borrowers with native ANC tokens.
As already mentioned, we have divided the borrowed 240 UST into three parts. We have 160 UST left because one-third of the funds were used to repurchase LUNA.
Now you can deposit the second third in Anchor at a rate of 19.46% (as of 02/21/2022).
Deposited funds can be withdrawn at any time. For example, if the price of ANC collapses, there will be an opportunity to lower the LTV by paying off some of the debt.
So that leaves 80 UST (excluding some of the stablecoins that must be kept to pay transaction fees). These funds can be placed at a much higher percentage on the ApolloDAO platform.
Let’s choose the ANC-UST Astro storage, the yield of which exceeds 120% (74.29% – basic APY and 52.44% – accrued ApolloDAO tokens).
As a result:
- funds are invested in the native Terra token (LUNA), the value of which will grow subject to the further development of the ecosystem, price stability and high demand for UST;
- there is a reserve in Anchor in case the value of bLUNA drops;
- if the price of LUNA goes up, you can generate more UST to buy more bLUNA later;
- part of the funds is involved in the high-yield storage of the ApolloDAO project (as an alternative, you can choose a pool with a high APY on the Spectrum Protocol platform).
You can conveniently track your portfolio of assets in Terra and other DeFi ecosystems using Ape Board — an analogue of the DeBank platform. To start working with the service, you need to insert the address of the Terra wallet in the Address field and click Go.
After that, the service will calculate the total value of assets, the amount of unclaimed farming and staking rewards, the total debt of the user, and will also provide data in the context of individual protocols.
conclusions
Despite rapid growth, the DeFi segment is still in its early stages of development. The landscape of ecosystems is constantly changing, new projects appear, leaders change.
When investing in DeFi, do not forget about multiple risks – potential hacks, bugs in smart contracts, falling token prices, liquidation of positions due to a decrease in the value of collateral assets.
The inflation of many coins is so high that even the most tempting APY figures are unlikely to cover the fall in the value of assets in the pools.
When interacting with decentralized applications, it is better to focus on more or less liquid tokens, the prices of which are not near historical highs. This suggests using pools with not the highest APR/APY.
No matter how tempting the strategy is, you always need to immerse yourself in its features, study tokenomics and other important aspects.
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