The great NFT x DeFi experiment: Part 2

Welcome back to the second part of the great NFT x DeFi experiment.

If you missed the first part, you may want to start here.

So, I had my ETH and FalconSwap tokens pooled in Uniswap, and things were looking good. I had made a plan and now the key was to just stay in the pool and avoid silly fees moving things back and forward. Right? Almost…

I suddenly had a weird feeling. Why had nobody else done a layer two solution to Uniswap? FalconSwap had not launched the product yet, what if it was a scam? I decided to dig a lot deeper, upset that I had jumped in based on greed and compromised on my own most important principle.

The result of my subsequent research was not 100% conclusive, but there were some real warning signs. I won’t go through them all here, but this video does a good job of highlighting some of the red flags I also found. I had definitely been too fast on the trigger finger. Capital preservation always goes ahead of making money, so I got the hell out.

To anyone still in FalconSwap I’d recommend extreme caution!

Luckily I was able to get out with a minimum of loss from where we were.

I managed to get 2.41 ETH and 2,188 FSW out of the pool and then sell the FSW for 2.56 ETH as it rose a bit right after. We also still had 0.07 in cash left over, so all in all the status was now:

2.41 + 2.56 + 0.07 = 5.04 ETH (- 0.06 and 0.04 in fees) = 4.94 ETH

I now still needed to earn another 0.38 ETH to reach break even, but at least I had not suffered a catastrophic loss, so I still felt quite lucky (and a bit stupid for taking such a silly risk and getting infected with FSW fomo).

So, I decided to just sit out for a bit. The market was getting a bit crazy with ETH and Tx fees both rising fast, and I still had 88 days to go. Time to reflect.

I still wanted to find another pool eventually, but I wasn’t going to rush it. Maybe it was time to see if I could find another good trading candidate?

sBREE and DXD

I decided to still just follow sBREE as the research on that was solid and main net was about to launch next week. I had also been introduced to DXdao in the meantime, a project that has actually been around for a while and seemed super interesting. After spending a bunch of my time researching that I had taken a pretty sizeable position privately, so I added it to my list of candidates too. The DXD token is tied to ETH with a bond curve, so it seemed like an ideal candidate to try to swing trade on Uniswap to increase my ETH stack.

Over the next 24 hours, gas fees were mental, but I managed to do 2 trades.

• 4 ETH to 64.47 sBree (0.05 Tx Fee)
• 64.47 sBree to 4.15 ETH (0.05 Tx Fee)
• 2.5 ETH = 2.76 DXD (0.05 Tx Fee)
• 2.76 DXD = 2.81 ETH (0.06 Tx Fee)

Now I was back to 5.29 ETH in total. Only 0.02 to go until break even.

Having patience really served me well in a crazy market were ETH kept rising fast, creating quite big swings in alts. Transaction fees ate almost 50% of my profit though, so I decided on a strategy next of buying exclusively 4 ETH pots of DXD when it fell way (-10/15%) below the curve value and then just patiently wait for it to hit the curve again.

It was time to wait patiently for a good entry or two… and they came over the next 24 hours. Here’s the two trades below:

• 4 ETH = 4.43 DXD (0.06 Tx Fee)
• 4.43 DXD = 4.29 ETH (0.06 Tx Fee)
• 4 ETH = 4.27 DXD (0.06 Tx Fee)
• 4.27 DXD = 4.27 ETH (0.06 Tx Fee)

Quick status at the end of day 3 was:

• Starting point: -5.31 ETH
• Current: 5.61 ETH
• Total: 0.3 ETH in profit… with 86 days to go still!

I was in a great place, no reason to do something rushed now. So of course I did exactly the opposite of that…

I rushed into an sBree purchase… bad move as the price dropped right afterwards, but it did give me a good excuse to Uniswap pool (when the price drops you can match your token with less ETH and when it rises, you get less token and more ETH as Uniswap maintains 50/50 at all times).

I bought 27.74 sBREE for 2.5 ETH and then added it to the pool. By the time I added it I only needed 2.24 ETH to match my sBree. Add 0.09 fees.

Pool stats were: 27.74 sBree + 2.24 ETH = 0.25% of pool + 0.78 ETH in cash

The pool then progressed pretty well for a few days… but I realised the pool would become unstable soon due to the upcoming swap from sBree to Bree, so I decided to pull out. Despite all my preachings about staying stable to benefit from a pool, I had now jumped in and out of two pools in less than 1 week. Time to do better on that front next time I decided to pool.

Luckily, prices did change upwards as hoped, so it saved my ass:

I pulled 24.25 sBREE + 2.62 ETH out the pool (-0.06 fees) = 2.56 ETH

Sold 24.25 sBree for 2.60 ETH (0.04 fees) = 2.56 ETH

New Status: 5.12 ETH + 0.78 ETH left in cash = 5.9 ETH total

By now ETH had become really crazy. In hindsight I should have simply cashed out some to USDC or DAI, but I didn’t. We started dropping hard and once again we got a stark warning that crypto is a risk on asset, not a hedge against the wider world and markets. Not yet anyway…

But in ETH terms I was in the green. Time to consider strategy for next week.

To be continued…

Disclaimer

This article is for educational and informational purposes only and should not be considered financial advice. Conduct your own research and due diligence before making any investment or financial decisions, such as when considering novel products including NFT loans.