Exploring the potential of yield leverage with Impermax

3 min readApr 1, 2021

What if Impermax had been available in 2020?

Let’s have some fun looking at the potential of Impermax by using some hypotheticals. Impermax went live in March 2021, but what if it had been available at the start of DeFi summer 2020 when volumes on Uniswap began to explode upwards?

Looking at historical yield data

We will be using some historical data from APY.vision. Impermax is not affiliated with them in any way, but they provide LP token tracking services that are recommended for examining this kind of data. Please note that the below calculations are for illustrative and educational purposes only and should not be misconstrued as financial advice or predictions.

What if you had been able to use Impermax to leverage USDC-USDT stablecoin yields?

First, let’s cover a low risk pair: good old fiat-backed stablecoins. Off-chain asset-backed stablecoins such as USDC and USDT have historically traded closer to their peg of $1 than on-chain asset-backed stablecoins such as DAI. We will analyze the USDC-USDT LP token pair and create a hypothetical scenario where one could have assumed 5x leverage using Impermax from the start. We are also using the assumption that the rate of change of TVL on Impermax would match that of Uniswap, and that therefore the utilization rate on USDC and USDT borrows did not reach the interest rate kink point.

Token Pair: USDC-USDT

Pool Age: 315 days
APY (including IL) since Inception: 13.59%
Hypothetical Deposit Size: $1,000
Hypothetical Leverage: 5x
USDC/USDT borrow rate: 3%/5%

Calculations:

Fees Generated (less IL): $5,000 * 0.1359 * 315/365 = $586.42
Interest Accrued:
USDC: $2,000 * 0.03 * 315/365 = $51.78
USDT: $2,000 * 0.05 * 315/365 = $86.30
Net Fees Generated: $586.42 — $51.78 — $86.3 = $430.34
Net Return Since Inception: $430.34 / $1,000 = 43.03%
Net APY: 43.03% * 365/315 = 49.86%
Impermax Net APY Multiplier = 49.86%/13.59% = 3.67x

USDC-USDT bottom line results

With only 5x leverage, Impermax would have allowed you to earn about 50% yield instead of 16% yield on the USDC-USDT pair. (Up to 20x leverage is possible.)

What if you had been able to use Impermax to leverage DENT-WETH yields?

Now let’s look at a crazier example. This pair has been getting quite a bit of press lately due to a surprising resurgence in price. That’s right, it’s the star of the 2017 moon-and-crash: Dentacoin! The DENT-WETH liquidity pool has actually been around for 288 days, and therefore it does give us quite a bit of data to work with. The only caveat is that we will have to assume the DENT borrow rate due to the fact that it is not yet present on Impermax. DENT has been relatively obscure up until recently, so will be given an arbitrary borrow rate of 20%. The WETH borrow rate will be equated to the ETH/DUCK pair on Impermax, for the purpose of calculating an interest rate.

Token Pair: DENT-WETH

Pool Age: 288 days
APY (including IL) since Inception: 265.22%
Hypothetical Deposit Size: $1,000
Hypothetical Leverage: 5x
DENT/WETH borrow rate: 20%/14%

Calculations:

Fees Generated (less IL): $5,000 * 2.6522 * 288/365 = $10,463.47
Interest Accrued:
DENT: $2,000 * 0.2 * 288/365 = $315.62
WETH: $2,000 * 0.14 * 288/365 = $220.93
Net Fees Generated: $10,463.47 — $315.62 — $220.93 = $9926.92
Net Return Since Inception: $9926.92 / $1,000 = 892.7%
Net APY: 892.69% * 365/288 = 1131.4%
Impermax Net APY Multiplier: 1131.4%/265.22% = 4.27x

DENT-WETH bottom line results

With 5x leverage, Impermax would have allowed you to earn about 1,131% yield instead of 265% yield on the DENT-WETH pair.

What yields will you leverage?

As Impermax adds the ability to instantly support any Uniswap pair through the app UI, it will provide the ability for anyone to respond to surges in any pair’s apy by potentially massively multiplying returns. A year from now, which pairs will you be looking back on?