Amplified cbETH Yields On cbBTC Lend - Aave

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Description

The vault collateralizes cbBTC on Aave to earn amplified interest differentials on borrowed ETH.

By collateralizing the cbBTC deposit, the vault is able to borrow ETH with a 20% liquidation buffer while earning a minor cbBTC supply interest.

Borrowed ETH is swapped for cbETH to create a 3.5x leveraged cbETH:ETH position on Aave that earns amplified interest differentials between cbETH liquid staking yields and ETH borrow costs.

+ cbBTC supply interest

+ cbETH liquid staking yields

- ETH borrow interest

Strategy

  1. Lend $cbBTC - Aave

  2. Borrow $ETH

    1. 60.83% deposit for 20% buffer against LTV

  3. Flash loan 2.5x the borrowed $ETH amount

    1. 5% buffer from LTV

  4. Swap all $ETH → $cbETH

  5. Lend all $cbETH - Aave

  6. Borrow $ETH to cover flash loan

Exit Strategy

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Visit our Exit Strategy explainer to see how Factor Studio strategies can maximize returns while ensuring truly permissionless withdrawals.

Protocol Parameters

Strategy Performance Conditions

  • cbETH continuously increases in value vs WETH.

  • WETH borrow cost is less than cbETH liquid staking yields across Aave

  • cbBTC supply interest is greater than the interest differentials between cbETH yield and WETH borrow.

Calculation Template

https://docs.google.com/spreadsheets/d/11fCowOqo8Q5hebFpyqdZg7F3_f6dz4z3mc-YUGRLXU8/edit?usp=sharing

Estimated Returns

https://docs.google.com/spreadsheets/d/1F24QvyHyp58FnN6ZCtfW51fzOza0apK5pRvkJaBLFB4/edit?usp=sharing

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