When To Compound Your Fees - Liquidity Pool Yield Farming — Transcript

Full transcript

1. 0:00What's up, guys? My name is Richard and
2. 0:02today we're going to be talking about
3. 0:03when we should compound our fees. So, if
4. 0:07you're new to yield farming or if you've
5. 0:09been doing it for a while, I think it
6. 0:11would be helpful to look at this video
7. 0:13because compounding along with
8. 0:15rebalancing is one of the more important
9. 0:17topics to talk about. And before we dive
10. 0:20in here, you can see my current open
11. 0:22positions currently at a pretty big
12. 0:25negative profit and loss in dollar
13. 0:27terms, right? mainly because all coins
14. 0:30have been dropping quite a bit. And you
15. 0:32can see my earnings are still beating
16. 0:34inurren loss and I'm projected to make
17. 0:36about 40 to 50% APR which would come out
18. 0:41to about like 3,000 to $4,000 a month.
19. 0:45Some of these pools are new here. For
20. 0:47example, ETH and Bonk and ETH and Pepe.
21. 0:50So the APR might not be that accurate.
22. 0:53And if you look at all of my positions,
23. 0:55including the close one, you can see
24. 0:57I've been beating Impermanent loss
25. 0:59pretty comfortably over the lifetime of
26. 1:02yield farming. If you're benchmarking
27. 1:05against ETH, currently my open
28. 1:07positions, I have about 1.62 ETH profit
29. 1:11right now and my closed position is
30. 1:13about 9.7 to 10 ETH profit. So here you
31. 1:17can see I've recently closed my panel
32. 1:20and ETH position with a total net profit
33. 1:23of almost 1.1 E. So the portfolio is in
34. 1:27some pain like probably most altcoin
35. 1:30investors are. But at least I'm getting
36. 1:32much more fees than comparing just
37. 1:35holding into the market. And the goal
38. 1:38with this video is hopefully to help
39. 1:41maximize your gains and also talk about
40. 1:43d-risking when the time is right. So,
41. 1:46the first question you probably have is
42. 1:48when you should be compounding your
43. 1:50fees. If this orange line is my um upper
44. 1:54and bottom range, for example, if we're
45. 1:57looking at ETH and USDC, the green line
46. 2:00is my entry. You can see if I entered
47. 2:03back here in August, Ethereum and USCCC
48. 2:07would have been trading above it for
49. 2:10quite a while until recently. So the
50. 2:13best time to compound is actually below
51. 2:16your entry in my experience. And this is
52. 2:19only if you expect this pair to recover,
53. 2:22right? If you expect Ethereum to recover
54. 2:25and perform well against
55. 2:27USD, then when you compound below your
56. 2:30entry, what happens is that you're going
57. 2:33to be dragging down your entry, right?
58. 2:36So when you drag down your entry, what
59. 2:39happens is that when Ethereum recovers,
60. 2:42right, and it's trading above your
61. 2:45entry, then you're going to be in US
62. 2:48dollar profit. So a lot of times the
63. 2:51goal of these pools, right, Ethereum and
64. 2:54US dollar, is to generate cash flow, but
65. 2:58also to make US dollar profit. So if
66. 3:01that was your goal, then the best time
67. 3:03to compound is below that entry. And if
68. 3:08we look at this crypto to crypto pool
69. 3:10here for MOG and ETH. So I entered this
70. 3:14pool at roughly like
71. 3:170.0028 back here in February. And you
72. 3:20can see the price kind of bounced above
73. 3:23that a bit and then drop below again,
74. 3:25right? And recently I've compounded a
75. 3:29lot of my fees back here and it kind of
76. 3:32dragged my entry from like
77. 3:350.0028 until like
78. 3:390.2656 right here, right? And the reason
79. 3:41why I did that is I want to have smaller
80. 3:44cap memecoin exposure and also I do
81. 3:47believe that MOG would outperform ETH
82. 3:50again when the risk turns back on. But I
83. 3:54could be wrong and the price could just
84. 3:56keep bleeding against ETH and we're not
85. 4:00really going to know until, you know, it
86. 4:02kind of plays out, right? You can see
87. 4:04here the flowchart I drew roughly last
88. 4:07week, right? I was providing liquidy for
89. 4:10soul and ETH. I use some soul to buy
90. 4:13Bitcoin and then I use my ETH to
91. 4:16compound into MOG and ETH. Um, same
92. 4:20thing for other pools here. I use some
93. 4:22pixel and ETH to compound into itself
94. 4:25and then I use ETH to also compound to
95. 4:29MOG and ETH. Same thing with the Pendle
96. 4:31and ETH. So you could definitely use the
97. 4:33fees from other pools to kind of like
98. 4:36balance out your pools and basically see
99. 4:39which pools you want to have more
100. 4:41exposure on. For example, um this month
101. 4:44I might compound a lot of my fees into
102. 4:47soul and ETH if I think the rate is
103. 4:50good. So the then the next scenario is
104. 4:53stuff like for example I was providing
105. 4:55liquidity for Pendle and ETH. You can
106. 4:58see the orange line again my lower and
107. 5:02upper range. So my entry is on this
108. 5:05green line here. I entered roughly in
109. 5:07February. You can see often times like
110. 5:10you're not going to time the perfect
111. 5:12entry, right? It's going to dip below
112. 5:15and then sometimes if the tokens is
113. 5:18doing well, then it's going to like pump
114. 5:20above your entry, right? And as long as
115. 5:23it's above my entry, then I have more
116. 5:26liquidity in terms of ETH than what I
117. 5:29started out with in the pool. So, not
118. 5:32counting the fees. And so when when the
119. 5:34price is above your entry, you could
120. 5:37either compound again, but you know the
121. 5:40risk being that if you compound a lot of
122. 5:42it, it's going to drag up your entry,
123. 5:44right? And if this token retraces
124. 5:47sharply, then you would have been better
125. 5:49off just selling your fees. So a lot of
126. 5:52times when it's trading above my entry,
127. 5:54it's good to derisk some of it. You
128. 5:57could still compound a little bit. um
129. 6:00maybe like 25 to 50% if you believe this
130. 6:04pair is gonna go higher or if you have
131. 6:07like a pretty high upper range like if I
132. 6:10extend my upper range here and I'm
133. 6:12investing for a longer period of time
134. 6:15then I would probably be more
135. 6:17comfortable compounding into this pool
136. 6:19right and a lot of times it helps to
137. 6:22look at your big picture goal so this is
138. 6:25the portfolio tracker that I've made
139. 6:27I'll include the link in the
140. 6:29description, but basically it gives me a
141. 6:32bird's eyee view onto the asset I have.
142. 6:35Right? Currently, I'm pretty heavily
143. 6:38allocated to smaller cap altcoins like
144. 6:42Pixel. Um, I also have a lot of NFT,
145. 6:46right? And unfortunately, not enough
146. 6:49Bitcoin because I did come from the NFT
147. 6:52world. And you can see my goal might be
148. 6:54different from yours. If you're already
149. 6:57like pretty heavily allocated to
150. 6:59Bitcoin, then maybe your goal is to
151. 7:02accumulate stuff like Ethereum and
152. 7:04Salana and potentially the smaller cap
153. 7:08altcoins. So my my personal goal right
154. 7:10now is to basically stack more Bitcoin
155. 7:14and hopefully turn an ETH profit as well
156. 7:17on the new pools that I just created.
157. 7:19And this bottom part, you could also
158. 7:22separate your liquidity pool weight. You
159. 7:25can see I'm pretty heavily um weighted
160. 7:28towards Pepe ETH, Bong ETH right now and
161. 7:31Pixel ETH. And as long as these smaller
162. 7:34cap altcoins are not, you know,
163. 7:36underperforming ETH by a big margin,
164. 7:40then the risk should be fine. But I am
165. 7:43definitely risking more money um
166. 7:45providing liquidity for these smaller
167. 7:47cap tokens, right? Again, like these
168. 7:49stuff is not financial advice. This is
169. 7:52just what I do. I'm sharing this so that
170. 7:54you could, you know, make like different
171. 7:57decisions based on your goals, right?
172. 8:00And you can see back here in January,
173. 8:02the ratio is even more skewed, right? I
174. 8:05had, you know,8% Bitcoin. So, not nearly
175. 8:09enough. And hopefully, you know, I'll be
176. 8:12adding more each month compared to, you
177. 8:15know, in April. Um, right now I have
178. 8:18about
179. 8:191.8%. So, getting there slowly. Um,
180. 8:23hopefully work up to maybe 35 to 50% or
181. 8:27higher. And one thing I probably don't
182. 8:29want to do is I I can see I'm pretty
183. 8:32heavily allocated to ETH and altcoin
184. 8:35pairs is that I don't want to, you know,
185. 8:38increase a lot of these risk further,
186. 8:41right?
187. 8:42For example, I don't really want to sell
188. 8:44my ETH and soul position that's in
189. 8:46profit right now into another um ETH and
190. 8:50altcoin pair. And depending on how the
191. 8:53market move here, if Pepe and Bong is
192. 8:57outperforming ETH by a a bit, then I'll
193. 9:00probably shift this pool into a more
194. 9:03safe pool like for example ETH and rap
195. 9:06Bitcoin or ETH and like Coinbase
196. 9:08Bitcoin, right? And lastly is how often
197. 9:12you should compound. Personally, I find
198. 9:15it best that like I compound monthly
199. 9:18because a lot of the times my thinking
200. 9:20change during the month and price action
201. 9:23changes during the month, right? And it
202. 9:26takes time to kind of like accumulate
203. 9:28these fees, especially if you're on
204. 9:31Ethereum mainet like stuff like Pixel
205. 9:33and ETH or B and Pepe that we just
206. 9:37looked at. So I do monthly compounding
207. 9:40and I do like to think like big picture
208. 9:43instead of you know optimizing for like
209. 9:47APR in the short term. If I'm overweight
210. 9:50a certain pool or if a pool is doing
211. 9:52well right I might consider taking
212. 9:55profit at the end of the month just like
213. 9:58how I took profit on Pendle and ETH. You
214. 10:01could definitely do weekly depending on,
215. 10:03you know, how much capital you're
216. 10:05working with. Like if you're working
217. 10:07with millions of dollars, for example,
218. 10:09then like your weekly fees might be
219. 10:12quite a lot. And auto compounding might
220. 10:15make sense for stuff like you know,
221. 10:17USDC,
222. 10:19USDT or ETH and like some reststaking
223. 10:22pairs or, you know, wrap stake ETH if
224. 10:25your goal is to accumulate those like
225. 10:28stable pairs. And it helps to draw like
226. 10:31a simple map like this. You could do
227. 10:33this on paper, right? Like I write
228. 10:36crypto and stable pools here. I used to
229. 10:40have this ETH and USDC pool and that
230. 10:44dropped out of range. So then I rotated
231. 10:47to this soul and ETH pool that's doing
232. 10:50quite well. So crypto to crypto like
233. 10:53larger cap like Soul and Bitcoin,
234. 10:55Bitcoin and ETH, right? And then you can
235. 10:58list out the small cap token and then
236. 11:01also your your hollow bag. When you have
237. 11:04a flowchart like this, it makes it
238. 11:07easier to manage your positions and you
239. 11:10could decide, you know, where to
240. 11:11compound your fees, right? So last week
241. 11:14I decided to compound more of my fees
242. 11:17into this mock and ETH pool. And this
243. 11:20month would probably be different. I
244. 11:22could decide to sell most of my fees
245. 11:24into Bitcoin, for example.
246. 11:27It really depends on, you know, when you
247. 11:29decide to harvest, what the price is,
248. 11:32and you know, what your market outlook
249. 11:34is. My personal outlook on the market
250. 11:37could be different than yours, right? If
251. 11:40you're really bearish right now, then
252. 11:42you could be more focused on providing
253. 11:45liquidity on pairs like ETH and Soul or
254. 11:48so, Bitcoin if you're still holding on
255. 11:50to crypto, right? But for me personally,
256. 11:54I think um you know there might be more
257. 11:57downside to go, but I don't mind you
258. 11:59know holding through that volatility and
259. 12:02earning fees in the process. Like uh
260. 12:05this other chart in my opinion it's
261. 12:08already quite beaten up and we'll have
262. 12:11to see um how well it holds. The the
263. 12:14stock market is down quite a lot right
264. 12:17now, right? But hopefully it finds the
265. 12:20bottom around this uh 200 week simple
266. 12:23moving average here. And to be honest,
267. 12:26just because like stuff like Pepe is a
268. 12:28memecoin, I don't think it necessarily
269. 12:31means that it's going to be worse to
270. 12:34hold through this draw down. Right? If
271. 12:37we look at Pepe USD compared to um
272. 12:42others, you can see yeah, it dropped
273. 12:45from the peep quite a bit, but you can
274. 12:47see it's been like stabilizing in this
275. 12:50accumulation range for quite a while.
276. 12:53And my plan with this pool is hopefully
277. 12:57u you know it continues to accumulate
278. 13:00here for like a leg up on the risk on
279. 13:03market returns.
280. 13:05You could see some sign that the
281. 13:06momentum is shifting like there's a
282. 13:09bullish divergence here. And the 20-day
283. 13:13EMA is kind of crossing over the 50-day
284. 13:16SMA. And if you compare stuff like Pepe
285. 13:19with stuff like Aerodrome that I
286. 13:21invested in, Aerodrome is a pretty solid
287. 13:24project, but you can see just because
288. 13:27it's like a utility project doesn't mean
289. 13:30that it's going to like, you know,
290. 13:32outperform Pepe, right? Since like
291. 13:35February until now, Pepe has been pretty
292. 13:38much outperforming Aerod Drrome even
293. 13:40though the market condition is really
294. 13:42bad for meme coins. And my thesis behind
295. 13:46Bonk is that Bonk is more than just a
296. 13:48meme coin and it's pretty much one of
297. 13:51the largest coin on Salana. And once
298. 13:53Salana is doing well, Bonk is probably
299. 13:56going to do well as well. You can see
300. 13:58here recently they acquired the exchange
301. 14:02art platform which is like an art
302. 14:04marketplace on Salana and you can see
303. 14:07there's like Bonkbot the Telegram
304. 14:10trading bot on Salana and a bunch of
305. 14:13other apps. So they're definitely more
306. 14:15like a project rather than like a
307. 14:18memecoin. So kind of like both and as
308. 14:21long as the altcoin market recovers here
309. 14:24these pairs should do decently well. So,
310. 14:28that's pretty much it for this video,
311. 14:29guys. I hope you got something useful
312. 14:32out of it. Be sure to check out my other
313. 14:34videos. Hopefully, it helps you make
314. 14:37more money while limiting some of your
315. 14:39risk in the process. Thanks for
316. 14:41watching. I'll catch you guys next