Make 106% APR on Mango Markets
The beauty with DeFi now is there’s more creativity and autonomy with how someone can generate yield. While this is true one must also be aware that there’s more risk to consider while exploring these options. So please be careful, do research and always test with small amounts.
Recently there’s been more coverage on generating yield from longing SPOT and shorting PERP which simply means you’ve deposited a specific asset (SPOT) and you’re selling perpetual swap contracts (PERP) for the same amount of tokens.
This in essence gives you a “delta neutral” position which simply means that if the price of the asset goes up your SPOT value increases and if the price of the asset goes down the PERP value increases - making each position effectively canceling each other out so that your total account amount remains unchanged.
The first step to this process is to identify an asset that has more or less consistent positive funding rates. Positive funding rates are key for you to generate yield from shorting the PERP of that asset. If the funding rates are generally negative it means you’re paying if you short it.
On Mango Markets you can do so by checking the Stats section and running through the various assets to see which one has more or less consistently positive funding rates. There’s no such thing as 100% positive funding rates, there’s going to be times where it goes negative and it does cost you to hold that position but because it’s more or less positive in the medium to long run it should make sense.
You can then check on the asset PERP page to see what that funding rate translates to when converted to an APR. Yes sometimes the rates can be insanely high. For example this was the rate for MNGO earlier today which translates to about 106% APR.
Performing the trade is straightforward except for people who’re new to Mango Market I’d advise being careful to uncheck the “Margin” check box when purchasing SPOT of any asset. Mango Markets has that checked by default because I assume most of their users prefer it but just take note of it prior to executing your trade.
I’d recommend checking out this video by CryptoData for the step by step execution and also understanding the various risks involved with this approach:
I’d also recommend reading this overview from Blockgraze who’s actually had the guts to try it out with significantly larger amounts and has outlined the risks clearly in his post:
How to profit from high funding rates
Note:
Any views expressed in the post are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
Donations:
SOL: AtRcwWXyMFxgEwonMBw8xZZy86fHbgGNZ9D41CqH2WFe
ETH, AVAX, MATIC: 0x47E48Be9b750B259a173F1f60B6c0309Cd9050d5
BTC: 3QtA2U6ZYbMdqiz93wzUhhZeQKo241atfB
LightningNetwork: chasingyield@bitrefill.me