Assumption: All scenarios assume you hold your portfolio for exactly 1 year from today. This means you earn the full APR for each strategy and experience the full price impact for ETH-denominated positions.
Scenario A
Bull Market
ETH Price Change
+50%
$2,000 → $3,000
Market Context
- Strong institutional adoption
- Ethereum L2s drive usage growth
- Crypto-friendly regulation passed
- DeFi TVL reaches new ATH
Impact on Strategies
| Strategy | Impact |
|---|---|
| ETH Staking | Big winner: 4% APR + 50% price gain |
| ETH/USDC LP | Good: 30% APR - 2.02% IL + price exposure |
| USDC Lending | Stable: 8% APR only |
| Hold USDC | Missed gains: 0% return |
| Yield Farm | Risky: 100% APR if protocol survives |
Key Calculation
Impermanent Loss for LP: -2.02%
Best performer: Pure ETH staking captures full upside
Worst performer: Holding USDC (zero gains)
Scenario B
Sideways Market
ETH Price Change
0%
$2,000 → $2,000
Market Context
- Consolidation after previous cycle
- Mixed regulatory signals
- Steady but unexciting adoption
- Trading volume stabilizes
Impact on Strategies
| Strategy | Impact |
|---|---|
| ETH/USDC LP | Winner: 30% APR + 0% IL |
| USDC Lending | Predictable: 8% APR |
| ETH Staking | Modest: 4% APR only |
| Hold USDC | No return: 0% |
| Yield Farm | Risky: 100% APR if protocol survives |
Key Calculation
Impermanent Loss for LP: 0.00%
Best performer: ETH/USDC LP maximizes yield with no IL
Insight: Stable prices favor high-yield strategies over price speculation
Scenario C
Bear Market
ETH Price Change
-50%
$2,000 → $1,000
Market Context
- Macro headwinds (recession fears)
- DeFi protocol exploits erode trust
- Regulatory crackdowns in major markets
- Risk-off sentiment dominates
Impact on Strategies
| Strategy | Impact |
|---|---|
| USDC Lending | Winner: 8% APR + no price exposure |
| Hold USDC | Safe haven: 0% but preserved capital |
| ETH Staking | Heavy loss: 4% APR - 50% price drop |
| ETH/USDC LP | Loss: 30% APR - 5.72% IL - price drop |
| Yield Farm | Likely rugged or token worthless |
Key Calculation
Impermanent Loss for LP: -5.72%
Best performer: USDC Lending (stable yield)
Worst performer: Pure ETH exposure (staking or new farm)
How to Use These Scenarios
- For each scenario, calculate your portfolio's total value after 1 year
- Apply APR to each allocation
- Apply IL to LP positions (if applicable)
- Apply price changes to ETH-denominated positions
- Sum up all positions to get total portfolio value
- Calculate overall return: (Final - Initial) / Initial × 100
- Compare across scenarios to identify which benefits your strategy most
Strategy-Specific Notes
1. ETH/USDC Liquidity Pool (30% APR)
- Scenario A (+50%): Earn 30% APR, lose 2.02% to IL, gain ~25% from price exposure (50/50 split)
- Scenario B (0%): Earn 30% APR, zero IL, zero price impact
- Scenario C (-50%): Earn 30% APR, lose 5.72% to IL, lose ~25% from price exposure
2. USDC Lending (8% APR)
- All scenarios: Constant 8% APR. No price risk, no IL. Safe and predictable.
3. ETH Staking (4% APR)
- Scenario A (+50%): Earn 4% APR + 50% price gain = ~54% total return
- Scenario B (0%): Earn 4% APR only
- Scenario C (-50%): Earn 4% APR - 50% price loss = ~-46% total return
4. New Protocol Yield Farm (100% APR)
- Scenario A: If protocol survives: 100% APR. If rug pull: -100% (total loss)
- Scenario B: Same risk profile
- Scenario C: Higher rug pull risk in bear market. Assume 50% chance of total loss.
5. Hold USDC (0% APR)
- All scenarios: Zero return, but zero risk. Opportunity cost in bull market.
Assignment Task
Calculate your portfolio's returns for ALL THREE scenarios:
- Use the return_calculator.html worksheet
- Show calculations for each strategy allocation
- Include IL calculations for LP positions
- Identify which scenario favors your portfolio and why
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