Alpaca Finance Shares Another Yield Farming Strategy, How to Earn High Yield on Stablecoins

The protocol continues to find ways to mitigate the risks of leverage farming, this time sharing the relatively risk-free strategy of farming yield on stablecoins.

Alpaca Talks Yield Strategy

In an effort to educate their community, Alpaca Finance has shared yield farming strategies centered around stablecoins. The protocol dropped a blog post on their Medium page that went into the various benefits that farming these yields offers to users. The team explained that during times of volatility, finding low-risk investment options is crucial to maintaining a positive portfolio.

Volatility Beckons Stability

Alpaca Finance is a curious platform for investors. As the first leveraged yield farming protocol on Binance Smart Chain (BSC) there are now very prosperous strategies to maximize profits and, in the words of Alpaca, “supercharge” yields. Leveraged yield farming is risky but can result in massive gains when executed properly. By providing a growing list of strategies for users, Alpaca hopes to minimize liquidations amongst its users.


Leverage farming is a very volatile strategy for investors that is vulnerable to large price swings when coins are paired separately in price. As assets pegged to fiat, stablecoins are great tokens to pair for liquidity pools for leverage farming. Stablecoins are proving to be crypto assets that do not fall victim to price swings. Leverage farming with stablecoins is a clever way to maintain assets that will stay buffered against the ups and downs of crypto.

Simple Steps For Easy Investing

Stablecoins are at a much lower risk to market volatility than most other crypto assets. Alpaca Finance has provided two easy steps to help start boosting the yields of your stablecoins. In their blog post on Medium from July 6th, users can learn how to borrow stablecoins to amplify price positions. Here’s a quick rundown on the steps required before users can begin farming stable yields.

Start the Process

The first step of the process requires that users head to the Lend page in Alpaca’s app. The goal here is to understand which stablecoin has the lowest utilization rate at the time of investment. The utilization rate of an asset is important because it will command a lower borrowing interest rate. 


Deposit Necessary Collateral

Once users know which stablecoins they wish to borrow based on the utilization rate, they must go to the Farm page of Alpaca Finance to deposit collateral. Users will want to pick the asset with the lower utilization rate to be the principal collateral. Finally, users have the choice to pick their leverage exponential, between two and six. The higher the leverage, the more borrowing required and the potential for higher yields.

Picking the Right Pool

Let’s imagine you want to invest in the USDT-BUSD pool on Alpaca. If the USDT utilization rate is lower, then users will want to use BUSD as the base capital investment. It is possible to invest a mixture of funds, however, investing all the principle in one asset will save on swap fees. Larger investments are vulnerable to higher swap fees.

Swaps are not always a one-to-one exchange. Users should be aware that prices fluctuate slightly with each peg and users should make sure their initial investment does not borrow at a rate lower than .99 or less. The borrow rate is also subject to swings during the duration of investment as well. This happens due to variables including actions on the assets home protocol. 

Once invested, users can sleep soundly knowing their positions are not so vulnerable to liquidations or market volatility. 


Example of Leveraged Yields

Let’s summarize with an example. Imagine you have an initial sum of 100 BUSD and want to invest in the USDT-BUSD liquidity pool. You can take this 100 BUSD to the Farm page on Alpaca finance, and invest all 100 BUSD while borrowing based on your chosen leverage.

At 2x leverage, 100 BUSD investment will create a farming position of 100 BUSD + 100 USDT. The initial 100 BUSD is turned into double the value. The user borrows 100 USDT. 

At 6x leverage, the initial 100 BUSD becomes a farming position of 300 BUSD + 300 USDT. The user will borrow a total of 500 BUSD. Alpaca will do the hard work and swap 200 BUSD for 200 USDT to create a 50:50 LP farming token. The initial 100 BUSD is turned into 6x the value.

Concluding Thoughts

Alpaca Finance appears to be a protocol that separates the men from the boys in terms of maximizing yields. Leveraged yield farming is an easy way to fall victim to liquidation without understanding the reasoning behind the losses incurred. However, with growing strategies like Delta Neutrals and farming with stablecoins, Alpaca Finance is providing strategies that can help savvy investors maximize gains and mitigate risks. 

Source :

Leave a Reply

Your email address will not be published. Required fields are marked *