4,000% APY with Cerberus
This article sums up my experience with the Cerberus token, using the protocol to provide liquidity to earn from yield farming and the risks that I am watching out for.
7 days ago on the 27th of May, GoCerberus Finance was launched and RJH van de Kimmenade listed it as one of the defi protocols he was invested in.
Being curious I had a look and saw that by providing liquidity pairs of Cerberus-stablecoin I would be able to get an APY, annual percentage yield of 4,000% percent.
An APY of 4,000% would translate to 11% a day so in an ideal world, it would just require 10 days for me to recover what I put in
However, there are 3 risks that I am watching out for:
A) 9% tax on every transaction: Buying Cerberus tokens incurs a 9% tax, staking it requires a 9% tax, harvesting the yields has a 9% tax, swapping out Cerberus to another token gets a ….. 9% tax.
In other words, for every 100 dollars that goes in, 68 dollars comes out after tax.
An effective tax rate of 32%
B) Impermanence Loss: Losses resulting from the volatility of pairing two assets when providing liquidity. Basically, if Cerberus’ token price moves up or down, the value of tokens when unstaked would be less as compared to holding it without staking.
A better explanation over the mechanism is shown here https://www.youtube.com/watch?v=8XJ1MSTEuU0
C) Token price downward movements: So far this has not been a risk because Cerberus token prices have been steadily increasing day over day from when I started at 2 cents to 4 cents at the time of writing however it is something I am keeping an eye on.
D) APY reductions: Right now the APY is ~3,500% to 4,000%. As more yield farmers join in, the APY will come down. So far, so good….
After considering taxes, my goal of holding it for 10 days to recover cost has become at least 14 days instead.
Am hoping this works out for at least a month.
Unless there’s a E) rug-pull, in which case it’s game over…