DeFi Yields with Stablecoins: ∼40-50% with sUSDe
In the volatile world of decentralized finance (DeFi), there are opportunities to earn high yields, especially with stablecoins like sUSDe. Leveraging platforms like Fluid, users can engage in stablecoin yield farming, and by using 10x leverage, these yields can climb to an impressive 40-50%. Let’s dive into how this works and whether it’s a safe investment.
What is sUSDe Yield Farming?
sUSDe is a stablecoin, and platforms like Fluid allow users to deposit and leverage it to maximize returns. By borrowing and reinvesting, users can achieve high annual percentage yields (APY) on their collateral, effectively turning a modest supply interest into a high-yield opportunity. The key here is leveraging the difference between supply and borrowing interest rates to generate profit, a strategy common in DeFi yield farming.
For example, with an initial supply APY of 10.51% and a borrowing rate of 6.73%, utilizing 10x leverage results in an estimated 44-50% APY. The opportunity arises from the favorable interest rates, but this strategy carries inherent risks.
Yield Steps:
- Visit Fluid Vaults: Go to Fluid Vault and deposit sUSDe as collateral.
- Choose Leverage: Navigate to the leverage page and manually set your preferred leverage, up to 10x.
- Monitor Liquidation Threshold: Ensure your position stays below the 92% liquidation threshold.
- Manage Risk: To adjust or withdraw, use Fluid’s 1-click options to deleverage or pay back debt quickly.
Is This Safe?
While this strategy can provide lucrative returns, it carries certain risks. The main concern is liquidation. Each vault on Fluid has a liquidation threshold of 92%, meaning that if your collateral value falls or your debt grows, you risk losing your position. Additionally, the sUSDe stablecoin is susceptible to slashing if certain extreme conditions occur, like a 10% loss in backing.
To mitigate this, users should keep an eye on interest rates and avoid over-leveraging. The 20% withdrawal limit per 12-hour period is another safeguard, designed to prevent a run on the platform in case of sudden market volatility.
Factsheet:
| Name | sUSDe Yield Farming |
|---|---|
| Yield | ~40-50% |
| Sector | Yield Farming |
| Chains | Ethereum |
Risks to Consider
- Interest Rate Fluctuations: If the borrowing rate exceeds the supply rate, yields can diminish quickly.
- Liquidation Risk: Leverage amplifies risk, and users must keep an eye on their collateral-to-debt ratio.
- Withdrawal Limits: Fluid limits withdrawals to 20% every 12 hours, which could be problematic in a market downturn.
By following these steps and carefully managing risk, users can tap into high DeFi yields with stablecoins like sUSDe. However, it’s essential to stay aware of the platform’s risks and maintain a liquid position.