Apollo’s Moonshots: With crypto market stagnant, Apollo turns to more yield-farming
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David Angliss, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares the fund’s weekly take on what’s happening in the fast-changing and volatile cryptocurrency space.
There’s no getting around it – the crypto market hasn’t been experiencing a great start to 2022, with many cryptos down by double-digits after the selloff in January.
David Angliss says Apollo’s flagship Capital Fund has been responding by intensifying the firm’s focus on a low-risk strategy involving dollar-pegged stablecoins known as yield farming.
“Obviously, as the market sort of goes risk-off, we’re really looking towards those market-neutral yield farming strategies.
“The fact that you can earn 10 or 15 per cent on stablecoins is still quite nice – and a lot of people overlook that in crypto.”
Previously, Apollo had left yield farming to its market-neutral Opportunities Fund, and the Capital Fund had gained exposure to such strategies through a stake in that fund. But now the Capital Fund is yield-farming directly.
So far the yields haven’t been as good as last year, when Apollo made 29.9 per cent yield farming. In January, Apollo’s strategies earned it a 1.19 per cent return, which works out to an APY of 14.2 per cent.
But it came during a horror month for cryptos with indexes like the Eureka falling 19.5 per cent, the Crypto20 dropping 28 per cent, Bitcoin falling 20 per cent and Ethereum 30 per cent.
Last year there wasn’t a single month that the Opportunities Fund recorded a loss, even during months where the market was crashing.
Still, while yield-farming stablecoins is low-risk, that’s not to say it’s no-risk.
“Although there’s less price risk with stable tokens – the price risk there is the de-pegging of the asset – there does come other risks, such as smart contract risk and centralisation risk,” Angliss said. “Founders may own private keys to the projects or tokens that are being deposited in.
“So these are all risks you have to aware of as a yield farmer.”
At the moment Apollo is using four different yield-farming strategies: providing liquidity on the Tracer DAO, a platform for leveraged trading on the Arbitrum Ethereum; on Defrost Finance; on the Celer Network bridge; and on the Synapse Network.
The yield with Defrost, the project behind a soft-pegged stablecoin on Avalanche, has been especially good, Angliss says. Tracer DAO also has “awesome products” such as perpetual pools.
In a nutshell, Apollo is providing the capital these projects need in order to operate efficiently. In return, Apollo is receiving rewards in the form of the project’s governance token, which the firm then sells.
For those new to crypto, it’s a bit similar to an “early user reward system,” Angliss says.
“Generating yield by bootstrapping protocols in their early stage, by injecting liquidity into their protocol,” Angliss explains.
“First we’ll scan the market for DeFi protocols that we think have really strong fundamental value, and that we like the token economics of — where their governance token has some sort of fundamental characteristics that help preserve its value,” Angliss said.
For example, this might be a revenue-sharing model where tokenholders share in the fees generated from the protocol, such as with xSushi and LooksRare tokens, he said.
Apollo is careful to review the terms and conditions of each protocol, and only invests in pools that are permissionless, with no KYC (know-your-customer) requirements.
The firm also takes into account vesting schedules, as some rewards aren’t paid out immediately.
Readers interested in learning more can read Angliss’s 23-page report on yield in crypto.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
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