Convex MIM is currently earning 8.29% APY and has consistently had APYs in this range.
MIM itself has largely held its peg, shored up its collateral backing, and has a Chainlink oracle. However, it also has ~$8M in bad debt from the UST collapse. While it would be a great asset to leverage with, it does come with risks. My intuition would be to support it with more conservative risk parameters (e.g. 80-85% LTV), but curious what the rest of the community thinks.
Thank you for putting this up.
It’s important to consider the potential risks and benefits before making any decisions regarding leveraging assets such as Convex MIM.
While a higher APY can be attractive, it’s crucial to consider the associated risks. A conservative approach to risk parameters, such as an 80-85% LTV, should help mitigate some risks. However, it’s also important to consider the opinions of the wider community before making any final decisions.
I’ve always liked MIM even after its name got tarnished a bit from the proximity to Sifu and Daniele. The UST collapse didn’t help, but the team there has been very proactive. I don’t use abracadabra much anymore because their front-end doesn’t like my location, but I’m in favor of adding the Convex MIM as collateral.
MIM has withstood the test of time regarding the safety of their protocol. There is one concern that one may have – liquidation may be a bit tricky in time of stress, due to how their Curve pool is configured.
Their A factor of 2000 makes the MIM pool a linear swap, with extreme convexity at the edges. In the event of a serious depeg, such as the one we had during the last USDC drama, this feature may cause bad debt.
As such, I would limit the total number of LPs that are available to use as collateral, to avoid it from becoming a systemic risk on the MIM pool.
I’m throwing an idea here, but we could even use some of the fees gathered to buy insurance from Y2K!