Curve is now the largest DeFi protocol with $22B in Total Value Locked across seven blockchains.
We’ve covered the Curve Wars extensively and the consensus among investors seems to be that Curve will consolidate and build on its position as the leader in stablecoin swaps. Convex Finance makes it possible for yield farmers to obtain boosted $CRV yields without locking any $CRV tokens themselves.
In this tutorial, we’re going to show you how to maximize your $CRV and $CVX earnings through leveraged yield farming on Abracadabra, a collateralized lending platform and issuer of the Magic Internet Money (MIM) stablecoin.
Whether you’re looking to build a position in $CRV and $CVX through yield farming or just looking for a good yield on your crypto assets, you can use Abracadabra to leverage your position based on your risk tolerance.
It’s a straightforward process, but we’ve put this tutorial in the advanced section since it involves the use of leverage.
A few things to note before we get started:
- As these protocols are on Ethereum, setting up these positions will cost a significant amount in ETH gas fees. In addition, a borrowing fee is charged at inception. However, the strategies require little maintenance once in place and are intended to be longer-term positions.
- Leverage introduces liquidation risk.
- Taking advantage of multiple money legos is great but also introduces additional smart contract risk.
Leveraging Stablecoin Yields
Step 1: Head over to Abracadabra. You can see the available collateral options on the ‘BORROW’ page. We’re interested in the two Convex pools shown below.
The base yield for the pools can be found on the Convex website and is comprised of $CRV and $CVX tokens.
Step 2: Add Liquidity on Curve Finance.
Stablecoin farmers can earn up to 8x the base Convex yield by leveraging 3pool LP tokens. As the pool is made up of established stablecoins only, higher leverage can be used with minimal risk of liquidation.
3pool is Curve’s main stablecoin pool comprised of DAI, USDC and USDC in equal proportions. You’ve probably seen it referred to as 3crv when paired with other DeFi tokens.
You can deposit a single asset or a combination of stablecoins here.
Important: Make sure you click on Deposit and DO NOT stake your LP tokens in the Curve gauge. We’ll be depositing the Curve LP tokens into Convex through Abracadabra.
Step 3: Wrap your Curve 3crv LP tokens for cvx3crv using the Abracadabra interface.
Click on ‘Deposit’ and confirm the transaction. You’ll be asked to approve spending your Curve LP tokens before you can wrap your tokens. The ‘Nothing to Do’ button will change to ‘WRAP’ when you have a non-zero token balance.
Step 4: Once you’ve obtained your cvx3crv tokens, you can set up your leveraged farming position in a single transaction. Click on the ‘Change Leverage’ button and move the slider to customize your position.
As this is purely a stablecoin pool, you can potentially go up to 8x or higher with a low risk of liquidation barring a Black Swan event.
Once you’ve selected the amount of leverage you wish to use, confirm the transaction. The recursive deposit-borrow-deposit loops are handled behind the scenes and you are done!
Step 5: Claim your $CRV and $CVX rewards periodically from the Convex Finance website. You’ll find your rewards under Abracadabra. You also have the option to claim and stake your rewards in a single transaction using the toggle pictured below.
Leveraged Exposure to BTC and ETH
For the more adventurous degens out there, the process is exactly the same for the tricrypto pool, which provides exposure to Bitcoin, Ether and USDT in equal ratios.
Deposit assets here and follow Steps 3-5 for cvxtricrypto.
The USDT component acts as a valuable cushion during times of excessive volatility, and since collateral is added asymmetrically in the last borrow-deposit loop, some leverage can be employed relatively safely.
Please note that the risk of liquidation is far higher when using tricrypto as collateral since volatile assets are involved! Choose your leverage accordingly.
Disclaimer: All opinions expressed by yyctrader in this tutorial are solely his own and do not reflect the opinion of The Defiant. This post is for informational purposes only and should not be relied upon as a basis for investment decisions. Please do not follow any opinion as a specific strategy.
Disclosure: The author holds SPELL tokens and has leveraged positions on Abracadabra.