State of Airdrop Farming: August 2024

Many of the narratives discussed in the July Airdrop Farming Report still stand. However, some observations in the past month warrant your attention.

Narratives we continue to be bullish on:

• Restaking
• Liquid Restaking Protocols (EtherFi, Mantle’s $COOK)
• Solana

Narratives we are cautious on:

• Layer 2s
• Ethereum’s downward trend against BTC and SOL

Let’s explore them one by one.

Layer 2s

A stunning statistic released by a recent Gemini institutional insights report reveals that a new Ethereum Layer 2 is appearing every 19 days, which adds to concerns that liquidity, and the availability of assets to trade, are becoming fragmented.

It also adds more complexity to the Ethereum ecosystem where users have to bridge assets back and forth between chains. Sub-par user experience is always bad for adoption.

Almost all of the major Layer 2 token prices have not been performing YTD, to say the least:

• MATIC: down 58%
• ARB: down 67%
• OP: down 65%

The Layer 2 airdrops have performed even worse, including the highly anticipated zkSync:

• MODE: down 88%
• STRK: down 69% in the last 90 days
• ZK looks to be going down a similar path

Zircuit, another zk-rollup with an active points campaign, just released a snapshot for Season 1 and provided a checker for participants. The distribution has also been disappointing.

We do not hold high expectations for Linea and Scroll, the layer 2s that were discussed in last month’s issue, albeit ones that we are still actively farming. Luckily they have good DeFi integrations with restaking protocols, which enables farmers to farm multiple airdrops such as EtherFi, Eigen Layer, and Mitosis all in one, i.e. hitting Linea and Scroll are bonuses, not our primary targets.

Which brings us to our next observation.

ETH underperformance against BTC and SOL

As we have iterated time and time again, we look at “airdrops” as extra yields on productive assets, i.e. generating extra returns from idle holdings of bluechip digital assets such as ETH and SOL.

While generating returns on them is great, you also want your underlying assets (i.e. ETH and SOL) to perform.

ETH priced against Bitcoin has been on a downward trend since Sep 2022. The ETH/BTC chart has been terrible to look at and even broke critical support recently, likely due to Jump Trading dumping. What’s concerning as well is that the ETF launch has not helped its price action:

At the time of writing, SOLETH broke an all-time high:

While SOL outperforming ETH is not a surprise to us (that is why farming for airdrops on Solana is within our strategy), more concerning is ETH underperforming BTC. Whether this trend will reverse is yet to be seen as we get deeper into this bull run. We have not completely lost faith in ETH as it still has the most yield farming opportunities in all of crypto.

But how do we hedge against this while maintaining exposure to these yields (airdrops)?

New Strategy: BTC/WETH Borrow Position on Morpho Labs

On top of 18M raised back in 2022, Morpho Labs just announced another $50M fundraise led by Ribbit Capital, an early-stage investor in fintech firms including Robinhood, Revolut, and Coinbase. Other participants included top-tier backers a16z, Coinbase Ventures, and Pantera:

https://x.com/MorphoLabs/status/1819010855964479751

Morpho Labs is not just another AAVE copycat; what started as Morpho Optimizer, an optimization layer on top of Aave and Compound that improved interest rates for users, Morpho has evolved into an independent financial infrastructure where projects can build on top of. Their ecosystem now includes familiar names such as InstaApp, Superform, and DeFi Saver

This is evident in the rapid adoption of Morpho Blue, in just 6 months:

• Surpassed 1.7B in TVL, Top 20 in all of DeFi (DeFiLlama)
• Top 5 Protocol on Base (DeFiLlama)
• Top 16 money maker in all of DeFi; 6.3M in Fees last 30D, only closely trailing Compound (Token Terminal)

$MORPHO Airdrop is confirmed; $MORPHO rewards are earned by making deposits into vaults or opening borrow positions. The WBTC-WETH pool is perfect for hedging against ETH continuing to underperform BTC while maintaining yield opportunities on ETH, with $MORPHO Rewards as a bonus (almost like “being paid” to borrow).

We are swapping ⅓ of our ETH positions into WBTC, deposit into Morpho, and borrowing ETH (they allow up to 90% LTV) which can then be deposited back into the below strategies.

Airdrops on ETH we are continuing from July:

1. Mantle x Karak x Eigen Layer

No change from last month, for a guide refer to here:

https://x.com/maxyamp/status/1808535105360777581

2. Mitosis x Linea / Scroll x EtherFi x Eigen Layer

No change from last month, for a guide refer to here:

3. Symbiotic x EtherFi x Mitosis

We are continuing with this strategy

For details on the above 2 strategies, please refer to our previous issue here.

Updates on Solana Strategies:

New: NX Finance

$JLP, the liquidity provider token of Jupiter has been a beast. It consistently outperforms most of the market, including BTC and ETH, as detailed in Thor’s tweet below: https://x.com/ThorHartvigsen/status/1819042008729575606

NX Finance enables you to leverage farm $JLP using Solana LSTs as collateral while qualifying for a multitude of airdrops, a guide here:

Solayer

Major Updates for Solayer:

• New Integration: sSOL-SOL Liquidity Pool on Kamino. sSOL incentives for deposits and earning Kamino S3 points. Should also earn badges for using sSOL in DeFi which could be a multiplier for the Airdrop.
• Epoch 4 is open and they now take $hubSOL as deposits
• Binance Labs announced their investment in Solayer:
  https://x.com/solayer_labs/status/1821204222161121490

You will need an invite code: https://app.solayer.org/invite/77CVAQ

Our Farming Allocation Strategy

At OneClick.Fi, we’re diversifying allocations between multiple protocols in Ethereum and Solana ecosystems in order to maximize the number of airdrops being hit. All while maintaining the protocol risk limited. The current distribution is 70%-30% ETH-SOL and 6 major strategies:

1. Kamino-Solayer: 21%, 2 in 1
2. NX Finance: 9%, 2 in 1
3. Morpho-EtherFi-Symbiotic-Mitosis: 21%, 4 in 1
4. Linea-EtherFi-EigenLayer-Mitosis: 14%, 4 in 1
5. Mantle-mETH-Karak: 21%, 2 in 1
6. Scroll-EtherFi-EigenLayer-Mitosis: 14%, 4 in 1

The current airdrop allocations look like the following:

Summary

At OneClick.Fi, our strategy emphasizes diversification and protocol risk management with distribution between Solana and Ethereum ecosystems. This approach maximizes airdrops across multiple protocols, ensuring a balanced and diversified portfolio. The second half of 2024 promises exciting prospects for airdrop farmers who focus on liquidity, strategic protocol engagement, and diversified allocations.

Disclaimer: This article, including insights on airdrop farming and other DeFi strategies, is for informational purposes only and should not be considered as financial advice, investment recommendations, or an endorsement of any particular investment or strategy. The cryptocurrency and DeFi markets are highly volatile and unpredictable. Past performance is not indicative of future results. One Click Crypto makes no representations or warranties regarding the accuracy, completeness, or timeliness of the information provided. Readers should conduct their own research and consult with independent financial advisors before making any investment decisions. By using this information, you agree that One Click Crypto is not liable for any losses or damages arising from your investment choices.