If we are in a prolonged bear market, shortfarming ETHUSDC is an interesting option.
The major pro is that your exposure is Uniswap and Aave and if you're directionally right, you get a boost.
The set up is simple, the risks should be obvious (IL and being directionally wrong are the most lethal).
Example:
► Collateralize $100K USDC (+4% Net APR)
► Borrow $40K ETH (-1% Net APR)
► Sell $20K ETH
At this point, you're short $20K ETH.
LP ETH/USDC for ~40% APR in a reasonable range.
The net APR for this strategy (without ETH price movement) is
4% - 1% + 0.4(40%) = 19% Net APR
And if ETH goes down, then your ROI increases because you are short on half your loan.
HOWEVER, if ETH goes up, your LP sells ETH into USDC, and you're screwed unless you wait for it to come back down and it does indeed do so.
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