When DeFi Doesn't Breaks Even - Cashing Out UMA-USDC LP From Tetu Finance

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Written by

#Club1BCH

1 year ago

Topics: UmA, Tetu, Polygon, Cryptocurrency, Yield farming, ...

Dived into Tetu in April 2022, when an UMA LP was added for SuperUMAns. The pool incentivized the users by paying xTETU, the yield bearing token rewards.. The reward APR was the result of staking each side of the LP in auto-compounding pools by TETU and another reward distribution to all liquidity providers.

I swapped 377 USDC for 10,000 TETU, staked them as xTETU, and then locked as dxTETU. The Diamond Vault (dxTETU) was the governance vault that provides gains in early penalty fees, emissions rewards and investment fund gains.

I wanted to enhance my TETU farming rate, and decided to provide USDC-UMA LP, obtaining 0.63% of the pool. The $TETU value was at $0.034, UMA at $7.23 and USDC was at $1, keeping that USD peg according to standards. And then.... the crypto crash came!

The USDC - UMA LP was deposited into Tetu yield farming vaults to earn rewards, and 90% of the profit auto-compounds to the underlying assets. I farmed $TETU at a decent rate, between 55% and 64%, and added the rewards into dxTETU for extra rewards.

The automated yield farming strategies used by Tetu were just the beginning, as KPI options were added to the safe and secure yield farming opportunities across multiple blockchains.

The TETU KPI was powered by UMA's Optimistic Oracle, paying out at least 0.25 $TETU per KPI. The redemption price will grow up to 1 $TETU if the TVL in the pool would reach $300,000.

My share of TETU KPI was 13,229 tokens, and I redeem them on the UMAverse. The conversion was at 0.31 Tetu per KPI, according to the TVL on the 30th of September 2022. I received 3557 $TETU for KPI options, mainly because TVL was not the best metric during a perpetual bear market.

As every good thing comes at an end, the USDC-UMA pool was deactivated. I was forced to withdraw my LP and was disappointed by the result. Tetu also changed the governance system and xTETU rewards stopped soon after.

I added $2652 into the pool, equal shares of USDC and UMA, and withdrew $1200 less. The $UMA share was double, from 183 to 397 tokens, but the value was 45% lower. One $UMA is still one $UMA, and at least I ended up with more voting power in the new UMA 2.0 staking system.

After one year of farming, the time to cash out has come. I was fortunate enough to watch $TETU gaining 70% in value after the new governance system was announced, and sold on top of the curve.

It is good practice to check multiple DEXs before selling, specially when the amount of crypto is high. I was ready to sell 63307 TETU for 1045 USDC, when I decided to check Kyber Swap for another quote.

Selling $TETU on Kyber Swap was more profitable then selling on the platform powered by $TETU, which was strange. I sold the same amount of tokens for more money, and $27 is a considerable difference.

Was yield farming on Tetu profitable? I entered the Tetu adventure with $2652 UMA-USDC LP, and spent 377 USDC to buy $TETU tokens. Nearly one year later I was forced to withdraw the LP for $1452 and sold all the farmed $TETU for 1073 $USDC, summing up the exit amount to $2525.

The result is as disappointing, with -504 USD in the wallet. Ten months of yield farming and a big bag of KPI options only reduced the damage, as this DeFi experiment was made at the wrong time! I will go back to single staking!