Key Leveraged Farming Strategies
PembRock Finance gives you the tools to farm in any market conditions with the ability to maximize your yields! Here are some common strategies that you can put in place right now with our easy-to-use platform.
Strategy #1 - Farm a token pair without leverage
Farming without leverage means you do not take out any uncollateralized loans and use only your own funds, removing the risk of liquidation. You can choose from any of our constantly expanding number of token pairs to farm with, with any profits automatically reinvested, compounding your rewards!
Strategy #2 - Farm a token pair with leverage
PembRock gives you the ability to maximize your farming profits by taking out undercollateralized loans. This means you can leverage your existing funds by up to 3x, with the ability to adjust your position any time based on the prevailing market conditions.
Strategy #3 - Opening a long position with leveraged funds
With leveraged yield farming, borrowed tokens are immediately put to work, bringing in farming gains while the borrowing interest is paid back.
If you open a long position, it basically means you are confident in a token’s ability to rise, which commonly occurs in a bull market. Longing one coin means taking a short position in another coin and can be done when leveraging by 2x or more. Let’s examine how this can be done with the pair PEM-USN:
Let’s say market conditions are favorable and you believe the price of PEM will go up. To gain maximum profits, you will want to open a long position on PEM.
Go to PembRock Finance and open a PEM-USN position, borrowing the USN stablecoin with leverage.
You can put up $4000, leveraging 3x to borrow 8000 USN (which you will short), giving you a total of $12,000. This is split evenly between PEM and USN.
For the purposes of the example, let’s say PEM is $0.10 and you choose to farm 60,000 tokens, roughly corresponding to 6,000 USN. In sum, your position will come to US$12,000 — the 50/50 ratio of 60,000 PEM and 6,000 USN required within the liquidity pool contract.
Remember, you must return the coin you’ve borrowed, so you are banking on the fact that PEM will outperform USN.
As your initial deposit and borrowed tokens are converted to a 50/50 farming position, your holdings will look like this:
Long 60,000 PEM ($6000) - farmed in the liquidity pool Short 6,000 USN ($6000) - farmed in the liquidity pool
Having $2000 more PEM than your original investment means you are longing the coin with a leverage of 1.5x, while earning triple the farming yields!
Strategy #4 - Opening a short position with leveraged funds
Leveraged yield farming gives you more options — a case in point; it is one of the few products in the DeFi ecosystem that allows you to create short positions. Regular yield farming doesn’t allow you to create these positions, which farmers can become painfully aware of in the event of a market downturn.
Luckily, even in a bear market, PembRock can work for you, with the drop in the price of an asset serving as an advantage. Here we’ll show you another example using PEM and USN, where basically the opposite strategy is employed to ensure you can keep farming profitably.
Imagine the market is facing a correction and you believe PEM will go down. To gain maximum profits in these conditions, you will want to open a short position on PEM.
Go to PembRock Finance and open a PEM-USN position, borrowing PEM with leverage.
As with the above example, let’s say PEM is $0.10 and you choose to farm 60,000 tokens, roughly corresponding to 6,000 USN. In sum, your position will come to US$12,000 — the 50/50 ratio of 60,000 PEM and 6,000 USN required within the liquidity pool contract.
You can put up $4000, leveraging 3x to borrow 80,000 PEM tokens ($8000) (which you will short), giving you your total of $12,000 which is split evenly between PEM and USN.
Remember, you have to return the coin you’ve borrowed, so you are banking on the fact that USN will outperform PEM.
As your initial deposit and borrowed tokens are converted to a 50/50 farming position, your holdings will look like this:
Short 60,000 PEM ($6000) - farmed Long 6,000 USN ($6000) - farmed
With a PEM exposure of 1.5x, you will be earning 3x the amount of farming rewards you otherwise would be, while having to pay back less due to the fall in the value of PEM. While being able to monitor and adjust your positions at any time, PembRock allows you to get the most from your farming, no matter the conditions.
Strategy #5 - Hedging your risk by farming multiple positions with leverage
If you’re feeling cautious, you can actually open multiple positions, combining longing and shorting to give you a neutral hedge while still receiving 3x farming rewards.
You may be asking, why not just farm stablecoins then? This is indeed a valid question, but we should recognize that due to a lower level of risk, stablecoins usually don’t give you the kind of returns that you will get from farming other cryptocurrencies.
Please note, that if you are going to undertake this strategy, it is important to frequently monitor your positions. In a crypto market that is quite volatile, overseeing and adjusting your position accordingly can help you avoid liquidation, especially as you take on more leverage.
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