🔥 Review | Introduction to BUSD/USDT 9X Leveraged Farming Pt.2

Comparison of Returns of 9x Leveraged Position between 2 DeFi Projects

This article will analyze the reward of BUSD/USDT leveraged yield farm, with comparison of the actual case on Rabbit Finance and Project A.

Part 1

On Rabbit Finance, open USDT/BUSD 9x leveraged position on MDEX, open and close position to get yield records in order to test the accuracy of returns shown in the front end and estimate payback period based on the data.

Part 2

The test use 200 USDT as principal to farm USDT-BUSD pool on PancakeSwap, with 9x leverage on Rabbit Finance and 6x leverage on Project A, thus testing the accuracy of returns showed in the front end, yields in the same time period and time needed to recover cost when open position.

Part 3

Summary Trading Hashes as follows:

Part 1

Rabbit Finance open position:

0x43585c41d401a31fd3ca8599a3f7bdbee86e674fb3f90fcdc6cc6feb086946f5

Rabbit Finance close position:

0xf31096fa27759321c0f4b674661051bcb60bd8a5e68d6c1a6ae84685734bc4ea

Part 2

Rabbit Finance open position:

0x2c208fab0ae9b218a647c83255516193e86f639435893b259aabad49ceea7f4b

Rabbit Finance close position:

0xae721bd209b85859ef5a50087bdf3a684b8e8fb69da0aa3ae95feb2490378f7e

Project A open position:

0x41d0cbd18c16b8cdd6d747e9b869e87300ea9a91a62b9e6bfacfa58735e34c32

Project A close position:

0x7363926ce65e367a04a9447c51eede00bcbfd5de8142e223d2ba53d7cdc55a65

Part 1 Test of Yield Accuracy on Rabbit Finance

Open Position

Step 1

Principal: 3477.08113 USDT+11.44091 BUSD=3488.52 USDT

Borrow: 27908.17632 USDT

Step 2

To synthesize LP we need to exchange some of the USDT into BUSD on Ellipsis.

Step 3

To synthesize the assets into LP.

Ellipsis would return the 0.155 USDT to wallet, so farming principal at the time is,

3488.52-0.155=3488.365 USDT

The position value is 31396.54333 USDT

Close Position

1. RABBIT Rewards

RABBIT Earned: 41.57776+1.517+0.178=43.27276(x0.32)=13.8472832 USDT

Principal: 3488.365 USDT

Opening Time: Jun-25-2021 08:43:38

Closing Time: Jun-29-2021 12:34:37

Holding Period: 4 days 3 hours and 51 minutes = 359460 seconds

Actual RABBIT Rewards: 1214.84427473 USDT

Actual RABBIT Rewards APR: 34.8256%

RABBIT Rewards APR Displayed: 34.6%

Conclusion: Accurate

2. Farm Yield

MDX Earned: 9.8218+0.32+0.037=10.1788(x1.58)=16.082504 USDT

Principal: 3488.365 USDT

Opening Time: Jun-25-2021 08:43:38

Closing Time: Jun-29-2021 12:34:37

Holding Period: 4 days 3 hours and 51 minutes = 359460 seconds

Actual MDX Rewards: 1410.943766 USDT

Actual MDX Rewards APR: 40.447%

MDX Rewards Displayed: 41%

Conclusion: Accurate

3. Borrowing Interest and Trading Fee

Borrowing Interest: 23% =802.32 USDT

Amount of Borrowing Interest (359460 seconds): 12.1451657 USDT

Trading Fee: 0.04%*31396.54333USDT=12.5584 USDT

4. Position Value at Closing

Actual Position Value at Closing:3463.01 USDT

Theoretical Position Value at Closing:

3488.365-12.1451657-12.5584 =3463.661434 USDT

Conclusion: Accurate

5. Summary

Finally Yields:

13.8472832 + 16.082504 - 12.1451657 - 12.5584 = 5.2262215 USDT

Payback Period: 3 - 4 Days

Part 2 Comparison of yields on Rabbit Finance & Project A

Rabbit Finance Open Position

Step 1

Principal: 200 USDT

Borrow: 1600 USDT

Step 2

To synthesize LP we need to exchange some of the USDT borrowed into BUSD on Ellipsis.

Step 3

To synthesize the assets into LP.

Ellipsis would return the 0.8 USDT to wallet, so farming principal at the time is

200 - 0.8 = 199.2 USDT

The position value is 1799.2 USDT

Rabbit Finance Close Position

1.RABBIT Rewards

RABBIT Earned: 0.32259(x0.5643)=0.182037537 USDT

Principal: 199.2 USDT

Opening Time:Jul-03-2021 08:36:28 AM +UTC

Closing Time: Jul-05-2021 02:51:32 AM +UTC

Holding Period: 151204 seconds

Actual RABBIT Rewards: 37.5418639 USDT Actual RABBIT Rewards APR:18.8463%

RABBIT Rewards APR Displayed: 18.13%Conclusion: Accurate

2.Farm Yield and Trading Fee Return

Principal: 199.2 USDT

Opening Time: Jul-03-2021 08:36:28 AM +UTC

Closing Time: Jul-05-2021 02:51:32 AM +UTC

Holding Period: 152100 seconds

Actual Cake + Trading Fee Return (152100 seconds):

198.6724-199.2+0.64+0.2558=0.36 USDT

Estimated Returns (152100 seconds) =50.06%*199.2/60/60/24/365*152100=0.48 USDT

Note: Trading Fee Return of PancakeSwap are calculated from the 7-day average price which fluctuates greatly, made it impossible to completely match the actual yields. The same case occurred on Project A. So let's focus on farming efficiency and payback period.

3. Borrowing Interest and Trading Fee

Borrowing Interest: 53 USDT

Borrowing Interest Per Day: 0.14522 USDT

Amount of Borrowing Interest (152100 seconds): 0.02554884 USDT

Trading Fee: 0.04%*1600 USDT=0.64 USDT

4.Position Value at Closing

Actual Position Value at Closing: 198.67 USDT

Theoretical Position Value at Closing: 198.6642 USDT

Conclusion: Accurate

Project A Open Position

Step 1

Principal: 200 USDT

Borrow: 1000 USDT

Position Value at openning is 1199.8778 USDT

Step 2

Actual farming position value is 1199.8778 USDT

Project A Close Position

1. Project A Reward

Project A Earned:0.5798(0.66)=0.382668 USDT

Principal: 200USDT

Opening Time:Jul-03-2021 08:36:28 AM +UTC

Closing Time: Jul-05-2021 02:51:32 AM +UTC

Holding Period: 151204 seconds

Actual Project A Rewards: 79.8115USDT

Actual Project A Rewards APR:39.9%

Project A Rewards APR Displayed: 38.33%

Conclusion: Accurate

2. Farm Yield and Trading Fee Return

Principal: 200USDT

Opening Time: Jul-03-2021 08:36:28 AM +UTC

Closing Time: Jul-05-2021 02:51:32 AM +UTC

Holding Period: 151204 seconds

Actual Cake + Trading Fee Return (151204 seconds):

196.97455 USDT - 200 USDT+2.5 USDT+0.7 USDT=0.17455 USDT

Estimated Returns(151204 seconds) = 42.82%*200/60/60/24/365*151204 = 0.41USDT

Note: Trading Fee Return from PancakeSwap is taken from the 7-day average price which fluctuates greatly, making it impossible to completely match the actual yields on Project A.

3. Borrowing Interest and Trading Fee

Annual Borrowing Interest:45.92 USDT

Borrowing Interest(151204 seconds) : 0.7 USDT

Trading Fee: 2.5 USDT

4. Position Value at Closing

Actual Position Value at Closing:196.97 USDT

Theoretical Position Value at Closing: 200-0.7+2.5+0.17455=196.97 USDT

Conclusion: Accurate

Part 3 Conclusion

  1. The efficiency of leveraged yield farming increased by 17% with 9x leverage on Rabbit Finance compared to 6x leverage on Project A.

  2. The borrowing interest reduced by 63.84% with 9x leverage on Rabbit Finance compare to 6x leverage on Project A. (There will be more cost saving if using 6x leverage on Rabbit Finance)

  3. The rewards displayed are accurate both on Rabbit Finance and Project A, the relative total APR of Rabbit Finance goes 409.26% higher than Project A.

Part 4 Clarifications

APR and APY

Farming rewards are displayed in APR and APY on Rabbit Finance. APR here means annualized rate of return, and APY means annualized reinvestment rate of return.

For example, if the APR of a Liquidity Pool is 50%, then the APY calculation is (50%/365+1)^365=1.648=164.8%

Therefore, if you can withdraw the rewards every day and reinvest manually, then your return rate can refer to the value displayed under APY. If you just place the asset in Rabbit Finance, you can just refer to APR.

About Trading Fee Reward from PancakeSwap

Regarding the inaccurate display of PancakeSwap's transaction returns, the reason is that APR of PancakeSwap, Rabbit Finance and Project A are both calculated with an average return rate of past 7 days while Trading Fee Return fluctuate wildly every day, so the data cannot be detailed to daily base. At the same time, due to the contract strategy, the income of CAKE cannot be reflected intuitively like MDX, so farmers who mind this please consider trading pairs on MDEX.

Explanation of Equity Value Displayed

1st place "My position" Page

2nd place "Close Position and Quit" Page

Explanation of Equity Value Displayed

The Equity Value (redeemable principal) is displayed in 2 places.

In the 1st place Equity Value is calculated as your principal minus the Trading Fee when you invest, and all the values are acquired from PancakeSwap or MDEX. The Equity Value shown in the 2nd pic it shows your actual redeemable amount, and the error has been reduced to 0.04% after update (excluding the influence of exchange rate), the exchange cost of opening and closing position have been already subtracted, and all the data (stablecoin pairs) are acquired from Ellipsis.