{"id":72684,"date":"2025-06-09T08:53:30","date_gmt":"2025-06-09T08:53:30","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=72684"},"modified":"2025-06-09T08:53:30","modified_gmt":"2025-06-09T08:53:30","slug":"handpicked-defi-strategies-in-the-low-medium-and-high-risk-category","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=72684","title":{"rendered":"Handpicked DeFi strategies in the low, medium and high risk category"},"content":{"rendered":"

As of early June 2025, the Total Value Locked (TVL) in DeFi stands at approximately $112 billion<\/strong>, with an average yield around 2.2%<\/strong>. While this average may seem modest, DeFi yields vary widely, with some strategies offering returns exceeding 60%<\/strong>, depending on the associated risk and the specific DeFi vertical.<\/p>\n

This article explores selected DeFi strategies across low, medium, and high-risk categories, sourced from platforms like DeFiLlama, Pendle, and Aave, and evaluated based on specific risk parameters:<\/p>\n

Low risk<\/strong>: Liquid staking via established protocols like Jupiter or Jito offers stable, organic yield without exposure to impermanent loss.Medium risk<\/strong>: Leveraged lending and restaking strategies such as those on Scallop or Ethena can boost returns, but require active monitoring of incentives and collateral health.High risk<\/strong>: Yield curve trading and LPing volatile pairs present the potential for outsized returns, but come with complex risks tied to price volatility, slippage, and structural assumptions about future\u00a0APYs.<\/p>\n

Low risk strategy: Liquid staking of SOL on Jupiter: c.9%\u00a0APY<\/h3>\n

Rationale<\/strong>: Liquid staking of SOL via Jupiter allows investors to earn staking rewards while maintaining liquidity. The yield is generated from newly block and MEV rewards and transaction fees, without relying on protocol subsidies.<\/p>\n

Risk Considerations<\/strong>:<\/p>\n

Smart Contract Risk<\/strong>: Potential vulnerabilities in the staking platform\u2019s code.Validator Performance<\/strong>: Slashing risks due to validator misbehavior.Peg Stability<\/strong>: Possible deviations between the liquid staking token and the underlying SOL.<\/p>\n

Medium risk strategy: Leveraged Lending of SUI on Scallop (APY up to\u00a022%)<\/h3>\n

For this strategy I have chosen to deposit blue chip SUI as collateral on Scallop Lend, earning a supply APY of c.5%. Subsequently, I borrow the same SUI (maxing out my LTV of 80%), and I deposit that again in the same pool. I profit from an ongoing rewards campaign that as good as fully refunds the borrowing APY I need to pay. Looping this process 10 times will lead to an APY of\u00a0c.22%.<\/p>\n

Risks<\/strong>:<\/p>\n

Scallop Lend is a newer protocol that is bootstrapping liquidity by organising the rewards campaign, subsidising borrowing APY nearly fully. It is likely these subsidies are paid out of token inflation<\/strong>, and hence, are not likely to be sustained<\/strong> in the longer run. If the rewards campaign ends I will need to start paying a c.9% on borrowed funds, and this strategy becomes much less profitable.Scallop lend smart contract risks<\/strong> (bugs, hacks,\u00a0etc)SUI token price volatility<\/strong> exceeds return from this levered yield farming\u00a0strategy<\/p>\n

High risk strategies: LP\u2019ing, yield farming, yield\u00a0trading<\/h3>\n

Going further up the risk curve, for this option I have decided to accept possible impermanent loss (e.g. as a result of changes in relative liquidity in DEX pools), in return for a higher potential yield. Impermanent loss increases significantly as token pairs and their liquidity pool depth\u00a0differ.<\/p>\n

High risk: LP\u2019ing WSOL-RENDER on Raydium for an APY of\u00a030\u201367%<\/h4>\n

This strategy involves providing liquidity to the WSOL-RENDER pool<\/strong> on Raydium<\/strong>, a concentrated AMM on Solana. As of June 2025, this pool offers a current APY of c.30%<\/strong>, with a 30-day average reaching c.67%<\/strong>, driven by trading fees and incentives.<\/p>\n

The algorithm forecasts that yields will remain above 24.2%<\/strong> for at least the next 4 weeks, offering an attractive opportunity for high-risk yield\u00a0seekers.<\/p>\n

Risks:<\/strong><\/p>\n

Impermanent Loss:<\/strong> Volatile price swings between WSOL and RENDER can erode\u00a0returns.Volatility:<\/strong> RENDER is a speculative asset, increasing directional and liquidity risk.Protocol Risk:<\/strong> Raydium and Solana both carry smart contract and ecosystem risk.Unrated Pool:<\/strong> This pool is not yet rated for risk by major DeFi analysts (e.g. Exponential.fi).<\/p>\n

This strategy is suited for advanced users who can monitor pools closely and accept volatility in exchange for high potential rewards.<\/p>\n

High risk: levered yield farming of Ethena on Pendle and Aave (50\u201380% APY depending on loop iteration)<\/h4>\n

Objective:<\/strong> Maximize yield by leveraging sUSDe through Pendle\u2019s PT (Principal Token) and YT (Yield Token) mechanisms, combined with borrowing strategies on\u00a0Aave.<\/p>\n

Steps:<\/strong><\/p>\n

Acquire sUSDe:<\/strong> Obtain some of the Ethena algorithmic stablecoins USDe, which are yield-bearing thanks to the funding rate of the underlying delta neutral hedging business\u00a0modelTokenize on Pendle:<\/strong> Deposit sUSDe into Pendle to receive a Principal (PT-sUSDe<\/strong>) and Yield token (YT-sUSDe<\/strong>).Sell YT-sUSDe:<\/strong> Immediately sell YT-sUSDe on the Pendle marketplace to realize the present value of future\u00a0yieldsUse PT-sUSDe as Collateral:<\/strong> Deposit PT-sUSDe into a lending protocol (e.g., Aave) as collateral to borrow additional USDeDepositing PT-eUSDe from Pendle into Aave enables borrowing USDe at a 89,7% LTV. Note: borrowing PT-eUSDe is not enabled, but USDe can still be borrowed against\u00a0it<\/p>\n

5. Repeat the Process:<\/strong> Use the borrowed USDe to acquire more sUSDe and repeat the loop, amplifying exposure and potential returns<\/p>\n

Risks:<\/strong><\/p>\n

Yield Fluctuations:<\/strong> the profitability of the strategy depends on the yield from sUSDe remaining stable or increasing, which in turn depends on the funding rate of the underlying ETH\u00a0market.Collateral Management:<\/strong> using PT-sUSDe as collateral introduces risks related to collateral value fluctuations and potential liquidation. In spit of USDe being a stablecoin, algorithmic stablecoins have depegged in the\u00a0past.Market Dynamics:<\/strong> the effectiveness of the strategy is influenced by market demand for PT and YT tokens, as well as the liquidity of the underlying assets.High risk: (levered) yield trading on\u00a0Pendle<\/p>\n

High risk: (levered) yield trading on Pendle (return depends on your expectation for APY evolution)<\/h4>\n

Similar to what often happens in the TradFi fixed income market, Pendle allows users to split a yield-generating asset into its Principal Token (PT)<\/strong> and Yield Token\u00a0(YT)<\/strong>.<\/p>\n

Pendle introduces an Implied Yield<\/strong>, akin to the Internal Rate of Return (IRR)<\/strong> in TradFi, derived from the current market prices of PT and YT. This Implied Yield reflects the market\u2019s expectation<\/strong> of the annualized yield until maturity.<\/p>\n

Traders compare the Implied Yield to their own expectations of future APY, and can take directional or arbitrage positions<\/strong> accordingly:<\/p>\n

If Implied Yield > expected APY<\/strong> \u2192 the market is overestimating yield \u2192 Buy PT, Sell\u00a0YT<\/strong>If Implied Yield = expected APY<\/strong> \u2192 the market is accurately pricing yield \u2192 no yield arbitration possible<\/strong>If Implied Yield < expected APY<\/strong> \u2192 the market is underestimating yield \u2192 Sell PT, Buy\u00a0YT<\/strong><\/p>\n

Example<\/strong>: currently, staked Lido ETH implied yields on Pendle are roughly inline with the yields offered by\u00a0Lido:<\/p>\n

Pendle\u2019s Fixed APY denotes the implied yield: holding the PT until December 2025 is expected to yield 2.775%, inline with the staking yield on ETH on Lido of\u00a0c.2.8%<\/p>\n

Scenario 1<\/strong>: you expect Lido Staked ETH rewards will rise: APY > implied yield: buy YT and hold till maturity. Use leverage to boost returns (accepting higher risk if yield expectations end up disappointing).<\/p>\n

Example<\/strong>: we expect Lido Staked ETH rewards to grow to 5%, e.g. as a result of higher gas fees and a rally in ETH network usage. In this case, a profit of $29 can be made buy buying the undervalued yield token on Pendle, implying an ROI of 80% and an annualized IRR of\u00a0145%:<\/p>\n

If we expect the staked ETH yield to grow to 5% APY, versus a current implied APY of 2.8%, it is better to buy the yield token for $37, which is expected to evolve to $67 in value over the next 201 days, implying a profit potential of $29.8 (80%), or an annualized IRR of\u00a0145%.<\/p>\n

Scenario 2<\/strong>: you expect Lido Staked ETH rewards will fall: APY < implied yield<\/strong>: the value of the staking rewards is expected to drop, so it is better to buy the principal tokens and not the yield token, locking in the implied yield of 2.8%, exceeding the staking rewards which we expect to end up being lower (e.g. as a result of a drop in Ethereum network activity and lower gas\u00a0fees).<\/p>\n

Conclusion<\/h3>\n

Ultimately, success in DeFi comes from understanding not just the APY<\/strong>, but where it comes from<\/strong>, how sustainable it is, and how it correlates to your expectations of risk, volatility, and market conditions and to what extent this overlaps with your risk appetite.<\/p>\n

Handpicked DeFi strategies in the low, medium and high risk category<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":"

As of early June 2025, the Total Value Locked (TVL) in DeFi stands at approximately $112 billion, with an average yield around 2.2%. While this average may seem modest, DeFi yields vary widely, with some strategies offering returns exceeding 60%, depending on the associated risk and the specific DeFi vertical. This article explores selected DeFi […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-72684","post","type-post","status-publish","format-standard","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/72684"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=72684"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/72684\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=72684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=72684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=72684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}