Tag: Yield-Farming

Virginia Pension Fund Enters Crypto Lending Space to Enhance Returns

by Blockchain News

Fairfax County Retirements Systems, a $6.8 billion Virginia pension fund, seeks to expand its scope by entering the crypto lending market to boost its returns, according to Financial Times. 

This quest became a reality after the board of trustees gave the pension fund the greenlight to start investments in yield farming, whereby investors lend out their digital assets to crypto projects. In return, they attain a fixed stream of income. 

Katherine Molnar, the chief investment officer of the Fairfax County Police Officers Retirement System, pointed out:

“Some of the yields that you’re able to achieve in a yield farming strategy are really attractive because some of the people have stepped back from that space.”

It seems the Fairfax County Retirements Systems intends to fill the void left by various leading crypto lenders, with some filing for bankruptcy and others facing an uncertain future. 

For instance, cryptocurrency hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy last month. The hedge fund’s woes were ignited by the collapse of LUNA-UST, given that it had a significant amount of exposure, Blockchain.News reported. Other embattled crypto lenders include Voyager and Celsius Network. 

Fairfax County Retirements Systems is committed to entering this sector because it has already placed $35 million each at VanEck’s new finance income fund and Parataxis Capital’s digital yield fund. This move will be instrumental in providing investors with income through short-term lending arrangements with crypto assets.

Andrew Spellar, investment chief for Fairfax County Employees, noted:

“We started in venture capital and private equity. But once we got more comfortable in the space, we started to think a bit broader about how we might be able to use strategies in digital assets in other parts of the portfolio.”

Meanwhile, different crypto sectors continue attracting more players. For instance, Philcoin, a philanthropic blockchain movement, recently launched a staking mechanism enabling users to donate part of their earnings to charity. 

Image source: Shutterstock

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Anchor protocol’s reserves head toward depletion due to lack of borrowing demand

by Cointelegraph

Anchor, the flagship savings protocol of the Terra Luna (LUNA) ecosystem, has seen its reserves decline by 35.7% in the past seven days according to Terra.Engineer. Since the beginning of December, the amount of Terra USD Stablecoin (UST) held in the “terra1tmnqgvg567ypvsvk6rwsga3srp7e3lg6u0elp8” smart contract has declined by over 50%, with only $35.7 million remaining.

As a savings protocol, users deposit their UST assets via their wallets and earn up to 20% yields as their principal is lent out to borrowers, who pay interest on the loan amount. Borrowers must deposit collateral to ensure the lender can get their money back in the event of a default. In addition, Anchor stakes the collateral it receives to generate rewards for depositors.

Whenever there is a deficiency between the income generated through borrowers’ interest, collateral staking, and the yield expenses paid out to depositors, Anchor must tap into the aforementioned UST reserves to make up for the difference. Last July, its creator Terraform Labs injected 70 million UST into the reserve protocol, and its value was relatively stable. But in the past 60 days, the total deposit amount has increased from $2.3 billion to $6.1 billion, while the total borrowed amount only increased from $1.2 billion to $1.5 billion.

In bear markets, investors typically flock out of volatile assets in search of stable ones, such as high-yield savings protocols. However, the growing discrepancy between Anchor’s deposits and borrowings has placed severe pressure on its reserves. If the trend were to continue, the reserve would run out in the coming months, and Terraform Labs would need to inject another round of UST for liquidity or sharply lower Anchor’s promised interest rate.