My Defi adventure 4: Farm wrecked

I have tweeted earlier that Defi farming is like chasing chickens - going from one farm to another and not a single one that can lay eggs for good.

I threw in the towel for one of my Defi chicken farms today.




First reason is that the yields changed too quickly; second reason is that the tokens got dumped too quickly (resulting in price plummeting). Both reasons warrant a farm change. So chasing farm yield is like chasing dividend stocks, just that the scenario is in a 100x fast forward mode. Yeah, you got the picture.


In order to catch the good chicken (hot farm), which is of limited lifespan to lay eggs (hot tokens) for you, you need to spot them like REALLY early and harvest really quickly. Just like how some have made a million bucks on Titan and got out before the catastrophe. Keep wins and not impermanent losses.


Here's a simple overview of the Defi farming process:




What's APY?

We often see APY (%) in Defi farms used to depict the rate of return.


The annual percentage yield (APY) is the real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest. [Source: Investopedia

Here's a simple APY calculator.


It is different from annual percentage rate (APR), which is defined as the annual rate charged for borrowing or earning through an investment. The key difference lies in the factoring of compounded yield which APY does and APR does not [Source: Investopedia]. Thus, APY will always appear higher than APR or the simple interest /yield. 


In order to achieve as close to the APY stated as possible, you will need to do routine harvesting and compounding eg. daily. Of course, by doing which, you will also incur high gas fees that eats into your yields. (Unless you are using low cost side chains like Polygon.)


There are yield optimizers that could also help you with that, such as Beefy finance. It does auto-compounding (of your yields) so you will see an increase in the LP tokens overtime. There are also yield aggregators, such as Yearn, which uses bots to help you "chase" high yields and take a cut from your earnings. For more in-depth details, you can refer to this article on yield farming here [external link].


Takeaways


Fortunately, it was only a small portion of my Defi wallet to write off for my "garang" farming adventure. 

The mistakes I made:

  1. Aping in at the wrong time when all tokens crashed together with ETH from ATH.
  2. Aping in to chase high multi-digits yield (yield pig!).
  3. Went into the wrong farm - the farm lacked economy (and influencer shilling) for its token. Nothing promising.
  4. Harvested but did not sell my harvested token quickly. Failed to compound faster than its price fall.
  5. Did not withdraw on a price rebound of the farm token cos I was on too much "hopium". I even averaged up.
  6. Sensed downward spiral a tad too late and finally closed my LP.



A lot of shilling from influencers may be price driving but it may also mean imminent dumping, depending on the action phase. Let's just know that by the time any "good lobang" news get to the "common investors" (aka me), it's probably already milked pretty dry (where most of the actions are sadly over). 


Since my edge is not in this game, I have to recognize it and move on.

Here is another blogger's farm-wrecked article.

Collecting "eggs" from my remaining farms

My Kyber DMM, Curve and Beefy-Sushi farms are still running (Beefy works by DCA-ing my staked LP token pairs.). Since they are mostly comprising of boring stables parked in more reputable dApps, I shall just let them run while I sleep for crypto winter. No more itchy fingers to do new farming!


Routine monitoring and harvesting are still required for the current farms, to make sure my chickens are still alive, clucking and laying eggs. (There were instances of pool migration or smart contract-UI button mis-sync that have resulted in no allocation of rewards. If chicken died, I meant a rug pull.)


Before embarking on DeFi, first you got to be sure about your objective there. If you are going to go around chasing high APY then make sure you are the earliest of all early birds in sniffing out potential price pump projects and catching airdrops. If you are going to be lazy and slow, then choose a pair of tokens with high price correlation to do LP farming on a reputable dApp (and sleep). If you are going to trade, you could use Aave / Compound to do "loan and short" or just stick with Cefi like Gemini that allows limit order placement. 


Avoid juggling too many balls as you might find yourself stretching your resources too thin, or become overwhelmed by too much information for making timely decisions. 


Defi series:


And usual warning here that crypto is high risk. DYODD before investing in any. 
Till next time!


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