Kamino LP Corner #3

BbyA...nMtW

21 Jun 2024

181

If you're unfamiliar with Kamino Finance see my explainer post here https://www.bulbapp.io/p/34c42de2-547e-47a8-b72d-9b8b61c6fde2/use-cases-for-kamino-finance?s_id=2936eabf-734f-4bf5-9069-4a3ef2173b8c

My process is pretty simple:

Look the analytics on Kamino for each LP
Look at the token prices on CoinGecko / CMC

Remember always: An LP IS a trade. It's a different type of trade as you're buying position on yield curve and you're collecting transaction fees, but it's still a trade so the normal assessments as goes price applies.

Generally we're looking over a 3 week time period in the LP. Each period we'll close out our positions entirely and start afresh with new ones. Obviously if you're doing this yourself you'd want to keep some positions much longer than that but we're looking to make this educational and as accessible as possible so we're coming from a start fresh approach each time.

Let's dive into the analysis!

How did we do from last time?

NOTE: It appears the MYRO-SOL vault isn't displaying PnL correctly. I've raised with the Kamino team. We're down roughly the same USD amount as the other vaults.

Our performance has been influenced heavily by the overall market pullback. When everything is down it's going to be tough going to see any positive returns.

That said we've had not so great performance from our LPs. If you remember last time out we'd selected for high yield (>99%) returns however in the meantime we've seen those returns significantly decrease.

Whilst the returns are still not bad, they're still much better than lending rates, we need good returns to offset the fact these are volatile positions we're taking out.

Time like these also highlighted the increased benefit extra rewards (like we had for TNSR-jitoSOL) can have for your overall return over and above the raw APR.

The candidates

Let's dive into the data to see who is going to repair our balance sheet in this next 3 weeks.

Kamino Vaults

This time out we're taking a different approach. We are going to take more trade focused outlook to select our LPs and use the yields to select candidates from with that group.

Kamino and Jupiter are two of the biggest and most influential protocols on Solana today. Along with $SOL it's been a pretty average few weeks/months for $JUP and $KMNO.

We're going to take the position that we think $SOL, $JUP and $KMNO are all well priced at the moment so are a good buy. Now instead of just buying and holding we're going to instead hold our positions in LPs and, hopefully, see both upside from price action AND from increased trading (aka fees) in the coming weeks.

$KNMO vaults

KNMO-jitoSOL

https://app.kamino.finance/liquidity/55rDNNKjU2SxZGZHAiEVts2bPk6SQPehuf3MsDKVqZCG

KMNO-BLZE

https://app.kamino.finance/liquidity/CFUMjdPcQ1XvFudoCoer8iT2WADPUCyru4LX7uxUFbPU

$JUP vaults

Token prices

A large part of your PnL will be movement in token prices. That becomes less and less over time as compounded fees add up but in the short to medium term price will significantly affect your position.
Everything below has taken a hammering but the memecoins have been the hardest hit.

To LP or not to LP

We're going with the following LPs

KMNO-jitoSOL is both the highest yield and the largest LP. Being the largest LP means it's yield has less headroom (in theory) to be affected by increased deposits as opposed to a much smaller LP.

We've opted to take a higher risk strategy with JUP by taking out 3 memecoin positions. The largest is in WEN, which is a well established token in the ecosystem at this stage. We have smaller positions in USEDCAR and CHONKY but both have proven to be pretty resilient (so far...) among the plethora of flaming out memecoins.