The DEFI product we’ve all been waiting for is finally here!!
Given the recent release, I’ve decided to write this brief summary of how I’ve been using the Balanced platform. Of course, with big rewards comes risk so please be careful in your investment strategy and have a clear understanding in what you’re doing before deploying your bag.
This week I had a chance to play around on the platform and I have to say, this is amazing. The UI makes it easy for newcomers to utilize DEFI and the transaction fees are very minimal compared to other chains like ETH. Personally, I love the Risk Ratio feature which turns red once the Reward Threshold is exceeded.
Balanced Stats within the first 50 hours of launch:
- TVL (collateral): $63.556 million
- Borrowers: 1,423
- TVL (DEX): $45 million
- LPs: 358 (sICX/ICX), 966 (sICX/bnUSD), 599 (BALN/bnUSD)
- Total fees: $ 150.7k
In this article, I will outline the two main ways to make money on Balanced and share what I’ve been doing on my test run. Hope you enjoy!
When looking at Balanced, there are two different products for potential money making opportunities. Note that Balanced can only be accessed on a computer (no mobile), and again, there are always risks in DEFI and cryptocurrencies in general.
1 — Collateral
The first way to make money that is relatively safe (within the spectrum of risky) is through collateralizing your ICX. On the home screen you can select the amount you want to collateralize which determines the size of your loan. Please note that you should always leave a few ICX un-pledged to cover the cost of transaction fees.
Once you collateralize, you can then adjust the loan you want on your position. Note that you can also leave some ICX as un-collateralized as a safety net should the ICX price fall and the risk ratio needs adjusting (Collateralize more ICX to lower loan percent). As mentioned previously, the Reward Threshold will turn red at the point you will not receive the BALN daily rewards. When aiming for max rewards, the goal is to get as close to the threshold line without crossing. A bot would be really useful for this but for me personally, I stay well below the Reward Threshold line as I’m naturally a HODLer/set and forget.
Current expected APY is 3,237.92% to collateralize your ICX. This is paid out in BALN which makes you eligible for network fees assuming you borrow at least 50 bnUSD. As of now, BALN is currently trading at $42.28/coin.
The loan will be paid out in bnUSD at 25% of collateral value which can be parked in your wallet to be conservative or spent if you want to leverage further. The benefit of leaving some or all bnUSD is that you can repay the loan should ICX price fall and you surpass the Reward Threshold or even get to the point of All Collateral Locked or Liquidation.
2 — Supply Liquidity
The second option to make money off Balanced is to provide liquidity. This is deemed more risky so proceed with caution.
Since Balanced is a DEX, there doesn’t need to be a counter party for a buyer/seller. The LP (Liquidity Pool) will fill any requests and in return for providing the liquidity, you receive a hefty reward in BALN.
- sICX/BnUSD — 2,235%
- BALN/BnUSD — 4,262%
- sICX/ICX — 367%
To qualify for daily rewards, you need to supply at least $50 to a liquidity pool on the Balanced exchange.
- Impermanent loss — When asset value in the pool exchange is less than if you were to have kept in a wallet (LP vs HODL). This occurs during times of high volatility since LPs keep the token set ratio at 50/50. You will notice that the primary coin count will go down in the LP as the price rises and vice versa.
- Smart contract risk — Risks the smart contract doesn’t work as intended or an attack/hack on the contract.
In summary, there are many different ways to utilize the platform. One can simply collateralize their ICX, LP, or both.
Here is my current strategy:
- Collateralize the majority of my bag — 90%
- Loan borrow so the Reward Threshold is 25–30% below current price.
- Wait for daily BALN rewards and send to LP (BALN/BnUSD) using the BnUSD received from collateralizing. I chose to LP BALN since this has the highest APY and also pays out income from the Network Fees.
As noted above, there are many different ways to utilize the platform but I found this to work best for me. Soon you will be able to arbitrate between Balanced and outside exchanges along with purchasing assets outside the realm of cryptocurrency. If you’re not comfortable with the idea, please continue doing research to find what works best for your goals/risk tolerance. The one item I’m watching closely is the liquidation number. Don’t ever get liquidated!!
Hope everyone is $BALN in the near future.
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NO INVESTMENT ADVICE — The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
We hold a position in $ICX / $BALN