After much anticipation and social media buzz, Alpaca Finance officially debuted its Automated Vaults function in March 2022. With a high Annual Percentage Yield, the new feature offers to run intricate tactics for users to optimize their yield (APY).
The leveraged yield farming platform is one of the existing platforms that is intending to launch new products while also working to create new ways for Herd to generate high yields while minimizing risk.
The Market-Neutral method will be used in the first Automated Vaults product, which will provide high APYs while lowering risk in all market circumstances. Alpaca Finance announced on March 24 that it had created the 8x Market-Neutral Vault, which offers consumers a high APY of up to 86 percent.
Now, a new type of Automated Vault has been created after significant community feedback and discussion: the Savings Vault. According to them, each Savings Vault will provide 1x Long exposure on a popular crypto asset (e.g. BTC, ETH, BNB), as well as long-term, significant dividends to customers!
What should users expect in the new Savings Vault?
Investing in a BNB Savings Vault is comparable to staking in a BNB loan vault or owning BNB, except that customers will earn significantly greater APYs.
The capital invested will generate passive income through automated yield farming (DEX market-making), with tremendous leverage that only Alpaca can provide (3x-8x), and, most importantly, no risk of liquidation.
The official post stated; “Similar to the Market-Neutral Strategy, the Savings Strategy opens two leveraged yield farming positions, one long and one short. However, where the two strategies differ is that the Savings Strategy balances the relative sizes of the long and short positions such that your aggregate exposure on the crypto asset remains at 1x long instead of market-neutral.”
With this New Automated Vault Strategy, users can deposit assets like BNB, ETH, or BTC into a matching Savings Vault, keep the 1x long exposure on the asset, and earn significantly higher rates on those tokens than is typically possible through single-asset lending or staking in DeFi or CeFi.
Furthermore, users can earn passive income by investing in automated market making on top of decentralized exchanges, with high leverage but little chance of liquidation due to the Vaults’ automated risk management.
Alpaca Finance compared Savings Vault investing to single-asset lending or staking crypto tokens in terms of risk, but with significantly higher APYs and no lockup.