4 Strategies to increase your Crypto Earnings

Defi is disrupting the centralized financial ecosystem, with the introduction of products and opportunities that cost less as well as eliminating KYC procedures and the human element that most times is bias in granting access to opportunities. Its  growth opportunity has been phenomenal as more and more funds are being locked up in Defi.

Below are some 4 key strategies that you can use to increase your crypto earnings in Defi.

1:Yieldfarming

Yield farming is the practice of lending your crypto assets  to generate rewards from your crypto holdings, thus locking up crypto assets in yield farming protocols and getting compensations as rewards. These compensation can be interest or sometimes a governance token. The interest earned are expressed as an annual percentage yield (APY). As more funds are added to the related liquidity pool, the value of the returns rise for variable interest holders while the rate for stable rate interest holders remain fixed.

Yield farming most times allows you to borrow other crypto assets using your deposited funds as collateral. Thus you earn money on your deposited yields while you get to borrow funds for your other trading activities.

Some yield farming APY(Annual Percentage Yield) can be very high. A higher yield also comes with high risks.

Aave, Compound, Makerdao and Uniswap are some popular decentralized exchanges that offer yield farming opportunities.

2: Day Trading

Day trading involves buying taking advantage of short term movement in prices by buying when price is below a set level and selling when price is above another set level on a daily basis to take advantage of daily price differentials. The objective of day trading is trading on daily price movements rather that monthly or yearly price movement.

3. Investment Holding

Holding of crypto assets involves buying crypto assets that are actively traded with the intention of reselling it at a higher price in the future when there is an appreciable increase in value. In 2019, the price of bitcoin was hovering around $9,000, two years on the price was around $50,000. A holder of bitcoin in 2019 will have made considerable gains in the value of the asset if sold in early 2021.

4. Arbitrage

Arbitrage involves the taking advantage of price differences across markets or exchanges. Most of the time, this involves buying and selling the same asset (like Bitcoin or Ethereum) on different exchanges, sometimes the exchanges may be more than two.  The price differences do not last for long as other investors keeping monitoring the exchanges for market inefficiencies using automated bots, as trades are executed, the opportunity is levelled out and price equality is restored.

Other Arbitrage opportunities like flashloan arbitrage enables holders to borrow funds without collateral, execute an arbitrage then repay the loan in a single transaction. This arbitrage is highly technical and requires some knowledge of programming. Aave, Uniswap, Sushiswap and Dydx offer flashloans without collateral.

Conclusion

With decentralized finance exploding with interest and liquidity, so are the risks involved. Some individuals may like to take advantage of the openness of the Ethereum chain and offer products with excessive yields. Users must beware and transact only with reputable and credible projects on the ecosystem.