Delta Neutral ETH With rETH & USDC Yields
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By combining 2 opposing Long and Short positions, this strategy earns yields while maintaining its value throughout short term market volatility. A fall in ETH’s price is covered by a short ETH position and vice versa.
Half of the USDC deposited is used to create a 2.67x USDC/ETH Short position with a 20% liquidation buffer. This earns 1.33x USDC lending interest (on initial deposit amount) with a 0.83x ETH borrow position. If ETH price drops relative to USDC, the debt owed decreases and vice versa.
To offset the risks of increasing debt on the USDC/ETH short position, the remaining USDC deposited is used to create a 1.67x rETH/ETH Long position. The dollar amount of the rETH lent on this rETH/ETH Long position equals the ETH debt on the USDC/ETH Short position. As rETH liquid staking yields is consistently greater than ETH borrow interest, this also earns a 0.83x rETH interest carry. This rETH/ETH Long position is maintained by incurring a 0.33x ETH debt.
+ USDC Supply Interest
+ rETH Liquid Staking Yields
+ rETH Supply Interest
- ETH Borrow Interest
Create 2.67x USDC/ETH Short
Flash loan 1.67x of 50% $USDC balance
Lend 50% initial $USDC + flash loaned $USDC amount
Borrow $ETH to cover flash loan
Swap $ETH → $USDC
Create a 1.67x rETH/ETH Long
Flash loan 0.67x of 50% $USDC balance in rETH
Swap initial 50% USDC → rETH
Lend all rETH
Borrow ETH to cover flash loan
Swap ETH → rETH
USDC supply interest and rETH liquid staking yields are greater than WETH borrow costs.
rETH price continuously increases relative to WETH.
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USDC Supply Interest
rETH Supply Interest
WETH Borrow Interest
USDC Max LTV
rETH Max LTV
rETH Liquid Staking Yields