The thing called financial engineering and its friends are decades old already. Afaik, it has begun in 1970-s, blossomed in 1990-s and is still draining money from the investors' pockets quite successfully. Synthetic options made of futures, baskets of junk bonds sliced into pieces, structured notes made of those futures and bonds, and I don't know what else. Financial engineering is now among the majors at the unies and one can make a PhD on the topic.
In short, financial engineering is rather simple. You take some shit, add some of another shit, spice it with some higher math, put a bit of sugar on top, and call it a candy. Then you calculate "average returns", grade it A+ for "diversification", slice it, dice it, and serve it to your grateful investors, for a moderate fee. Later, when another oil crisis, or real estate crisis, or subprime loans crisis, or whatever comes -- the happy investors will learn that shit is a shit is a shit is a shit and not a rose, even if it looks like a candy. But at that time you will be in the money already.
Well, whatever, nevermind.
Recently I came across an idea that was so simple and obvious, that I hadn't even thought of it until I got a hint from some smart cryptoguy's blog. I would call it a Synthetic High Interest Thing. Probably it's already known quite widely, but I'd like to proudly share my findings anyway.
There're quite a few shitcoins around, that have fairly decent (high double- or even triple-digits APY) interest returns from staking, DeFi-ing, CeFi-ing or the like. One of the problems with them is that such coins can rather seriously go down. I mean, you buy a coin at $1, stake it at 100% APY, and in a month the coin's price is $0.1 and you have a loss overall (implied that you peg yourself to USD). So we can do a simple thing -- we stake our coin somewhere at 100% APY and hedge our holdings with shorting a coin/USDT perpetual futures. And that's all, guys! In its essence it's a (variable) interest-bearing stablecoin of sorts, pegged to another stablecoin (USDT) pegged to USD.
No matter how simple it might look, it still requires some understanding of how the stuff works and has some caveats along the way. So instead of writing a primer in trading and CryptoFinEng-ing, I put here what I actually did recently.
From my Prospectors activity I've recently got yet another 1 EOS valued then at 2.50-something USDT. I've put it into some DeFi-ish thing called Coral.Finance which promises as much as 15% APY paid in its own CRL tokens (which itself is 5 EOS at Newdex today). At the same time I shorted 1 EOSUSDT futures at Binance Futures at the same 2.50-something price.
Now if price of EOS (against USDT) goes up -- I have a profit from my 1 EOS at Coral and a loss from my short position in futures. If the price goes down -- I have a loss at Coral and a profit from the short. If I take my EOS out of Coral, sell it for USDT and cover my short at the same time -- I will have the same 2.50-something USDT I started with (theoretically, not counting various caveats along the way). Plus I will have my interest in CRL tokens which I can sell for EOS, and then for USDT -- will the outcome then be 15% APY in USDT or 150% or 0% depends on the tokens' prices at that moment. Plus perpetual futures have an interesting thing called "swap rate" (in some situations there're small incentives for holding a position) and if I'm lucky I will get a bit just for holding my short (but if I'm not lucky, I will have to pay that "swap rate"). But in any case I will get my 2.50-something USDT back (theoretically, of course, because e.g. if EOS will go down to $0.0 or Coral will do a scam exit -- I will lose everything and maybe even more).
Of course, this way of getting a 15% APY looks rather odd -- e.g. you can simply put your USDT at Celsius at ~15% APY (at the time of writing). But remember it's only an example, a proof of concept, I went with EOS only because I already had a EOS, tried Coral.finance before, and had low commissions with EOS. With a shitcoin generating 500% APY it looks much better.
As far as I can see, the field of financial engineering in cryptosphere still remains largely untouched (only "yield farming" as a first approximation) -- still there's quite a lot of opportunities for the smart, good at math guys with trading skills and an instinct of a speculator (or a "financial engineer", if you wish) inside.
Standart "disclaimer" blablabla goes here.
