- Alya Kremb is co-founder and chief operating officer of the $10 million crypto hedge fund Diffuse.
- Kremb breaks down the firm’s two DeFi yield farming strategies that generate attractive returns.
- She shares a yield farm that offers a prelaunch APR of 90,000%, and how to minimize risks.
Even with bitcoin and ethereum notching new all-time highs, the opportunities in crypto are so plentiful that digital asset hedge fund Diffuse is constantly incubating new strategies and launching about one fund per quarter.
Founded in 2019 by emerging-tech veteran Ayla Kremb and high-frequency trader Kenny Estes, Diffuse, which started out as an alternative asset manager, only got into crypto in October last year.
“Neither of us was super bullish on crypto specifically. But after the DeFi summer, we saw that there’s a real opportunity to replace a lot of the functions that are currently executed in the financial world by using technology in a different way,” Kremb told Insider in an interview.
The duo grew fascinated by decentralized finance, which refers to financial services such as trading, borrowing, and lending that are automated by software instead of executed by middlemen.
Kremb and Estes started incubating two DeFi-oriented trading strategies on their own balance sheet. They tested them out until January this year before launching them as funds and raising external capital. Starting in June, the firm raised $10 million in just 90 days for the two DeFi strategies and an index product tracking the top 30 cryptocurrencies ranked by market cap, according to Kremb.
The two DeFi trading strategies are able to notch attractive returns and draw in external investors at such a rapid speed because they operate in the highly complex and risky world of DeFi yield farming.
At its core, DeFi yield farming is a way to lock up cryptocurrencies and get rewards in the form of tokens for doing so. These reward tokens can then be deposited in other
liquidity
pools to earn even more rewards there.
Yield farming became all the rage when Compound (COMP), a DeFi lending protocol that allows users to earn double-digit interest on their crypto deposits, started to attract a large number of users to its platform last June. From there, other DeFi platforms such as Aave (AAVE) boomed during what the industry calls the “DeFi summer.”
2 DeFi yield farming strategies
Diffuse offers two types of yielding farming strategies.
For investors who are bullish on crypto and want to maximize their returns with DeFi, the firm takes so-called blue-chip tokens including bitcoin (BTC), ethereum (ETH), and polygon (MATIC), and stake them in different pools.
To differentiate from competitors, the firm only stakes tokens in emerging pools, which are either in the pre-launch phase or just hours…
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