Since the market drawdown a week ago, I’ve been thinking about what DeFi applications might be best suited for this market structure. Earning yield on stablecoins is always a popular strategy but what about those of us who are still bullish on the markets and want to keep buying the dip? What about those of us wanting to continue to buy a SoV like ETH or WBTC that has upside in a bull market?
Dollar-cost-averaging (DCA) is one the most basic investment strategies in crypto and traditional markets. The idea is you continually buy a fixed amount of an asset periodically over time. For example, I could commit myself to buy $100 of ETH no matter the price, every week on a Sunday.
Over time, I will likely have moments where I kick myself having bought at local high prices but I also should have wins to celebrate, having bought at market lows. In DeFi or CeFi, we can commit to a DCA strategy but it requires us to be regimented in our buying habits. Thankfully, like Alchemix which automates the payback on your loan with earned yield on your stablecoins, Inverse Finance automates DCAing into ETH, WBTC, or YFI with your stablecoin yield.
It is a protocol that offers passive no-loss investment in any token by following a DCA strategy using yield earned on your stablecoins, deposited into Yearn vaults.
Here’s how it works:
- User deposits DAI or USDC and receives a vault token in a 1:1 ratio.
- The vault then invests DAI or USDC in a yield optimizer such as Yearn.
- Earnings are continuously and automatically swapped to ETH, WBTC or YFI, and distributed to depositors as long as they hold the vault token.
- Your DAI or USDC is withdrawable at any time.
Inverse Finance Vaults are interesting for 2 reasons:
- You save money on gas fees since the vault converts all users yield at the same time instead of one transaction per user.
- Second, it allows you to follow a DCA strategy while keeping your principal protected from market volatility. TLDR, I’m using my stablecoin profits to buy a SoV and hence not at risk of losing my original investment pending an unforeseen failure/hack of the Inverse Finance protocol.
How to Earn Up to 11% on DAI and Auto-DCA into ETH, WBTC, or YFI
Before we get started, please be aware of a few major risks.
- Smart contract risk is always a risk. Inverse Finance is unaudited.
- Oracle failure could also contribute to a loss of funds.
- The quoted APYs are likely to change by the time one hops into this tutorial.
- As always, this is not financial advice.
Here’s how to get started!
1 – Go to the Inverse Finance App under Vaults.
2 – Based on whether I want to earn with USDC to DCA into ETH or earn with DAI and DCA into ETH, WBTC, or YFI, choose a vault. As of this writing, the estimated yield earned in each vault is:
- 6% APY on USDC DCAing into ETH
- 11.21% APY on DAI, DCAing into WBTC
- 11.12% APY on DAI, DCAing into YFI
- 11.22% APY on DAI, DCAing into ETH
3 – Specify how much USDC or DAI to deposit.
4 – Click Deposit and you’ll be prompted to confirm 2 transactions: an Approval followed by a Deposit.
5 – Return to this dashboard in the future to Claim your newly acquired ETH, WBTC, or YFI that’s been bought with stablecoin yield. The Withdraw tab will allow you to withdraw stablecoins at any time from the vault.
