Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover Contango Strategies, which offers automated leverage vaults using perps with low funding rates and competitive fixed yield of Pendle PT’s!
A few weeks ago, we covered a newer strategy that auto-compounds Pendle ETH LP yield using a Beefy Finance vault. This Contango strategy will build off of our knowledge of Pendle Principal Tokens (PTs) offering guaranteed fixed yield, combined with looping a leveraged position of a yield-bearing asset.
Before we break down how to enter Contango Strategies, let’s get to the basics of how Contango works.
Contango allows you to open a perps position built by looping onchain with deep liquidity on battle tested protocols such as Compound, Aave, Spark, Morpho, Silo, Dolomite, and more.
How Contango creates a long ETH/DAI position
With Contango integrated across Ethereum Mainnet, Arbitrum, Base, Optimism, and Gnosis, users can do any of the following:
- create leveraged positions just like perps with low funding
- lever up on liquid staking and restaking yield
- lever up on the fixed yield of Pendle PTs
- create delta neutral plays to farm funding rates
- arbitrage rates differentials on stablecoins
- farm rewards, airdrops, points on leverage
A few of the advantages to the Contango design for perps trading are:
You trade the deepest liquidity onchain, thanks to Contango aggregating from $7B in spot market liquidity and $13B in money market liquidity.
You get the cheapest and least volatile funding rates in crypto, around 3x cheaper and less volatile than market leaders.
You get to choose your preferred chain and protocol, across 6 chains, 13 money markets and more than 160 trading pairs.
You can farm points and rewards while trading, since Contango offers point-farming pairs on Ethena, Etherfi, Renzo, KelpDAO, EigenLayer, and Aave.
Contango also has run an ongoing points program since January 24, 2024, to incentivize product usage and community engagement. As of this post, Contango points is in phase 2 of 2, where a fixed amount of 1,000,000 points will be distributed weekly.
Despite the fact Contango offers a more advanced trader interface for perps trader, there is now a simpler Strategies page, where curated yield positions are built by automating a looping strategy, using spot and money markets. For those of us looking to open leveraged positions while earning Contango points, Contango Strategies is ideal.
Today, I’ll show how I can earn close to 50% APY with a Contango Strategy, thanks to the underlying yield of a popular Pendle eETH PT expiring June 24, 2024 on Arbitrum.
How to Earn ~50% APY with Contango Strategies and Pendle PTs on Dolomite
Before we get started, please be aware of these risks.
- Smart contract risk in Contango, Dolomite, and Pendle
- Front-end spoof attack on the app frontend
- Oracle risks
- Liquidation of a leveraged vault position
- An economic design exploit
- Systemic risk in DeFi
- A depeg in eETH could lead to a total loss of any deposited funds
- Colluding signers on any multisig
Here’s how I get started!
- First, I connect my wallet to Contango on the Strategies page here. I filter by Arbitrum strategies because I prefer to transact on an L2 with deep…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
