Stacking DAO: The Best Way to Long STX

Did you know that holding stSTX would have returned 435% over a 124% return from Bitcoin since 2021?

And this doesn’t even factors in returns if stSTX was deposited in DeFi.

Let’s explore how utilizing STX, the native token of the leading Bitcoin Layer 2 Stacks, could have led users to achieve remarkable returns.

STX and Bitcoin performance

Investing in any new network has a high degree of risk. Would it have been better to simply buy and hold Bitcoin?

In January 2021, when Stacks mainnet launched, Bitcoin was trading at a price of $29,000 and last cycle’s bull was just getting started.

If an enterprising investor bought then and held until now, she’d be sitting on a gain of 124% at current prices.

Not a bad return over 3.5 years.

However, if she had simply bought and held STX instead, her return would be 318%. Stacks meaningfully outperformed Bitcoin over that timeframe.

Bitcoin and Stacks Correlation

In order to confirm that Stacks is a high-beta play on Bitcoin, we would expect to see high correlation between the price movements of Bitcoin and Stacks.

This is exactly what we see, with a high correlation often ranging between 0.6 and 1.

And what if we factor in stacking rewards? (Stacking can be easily done by minting and holding stSTX on Stacking DAO.)

Auto-Stacking STX Returns

Assuming a stacking yield of 9% APY and automatically converting the rewards from BTC to STX, the investor’s return would be 435% over that period.

Historically, stacking STX and reinvesting the rewards into STX would have juiced an investor’s returns by 117% compared to just holding STX.

Thus, the punchline is that holding stSTX is the best way to express a bullish view on Stacks.

DeFi Impact on Returns

Now, what if the investor had deployed stSTX into various DeFi strategies?

This is where things get really interesting.

As one example, Hermetica boasts a 16.2% APY for its options trading vault strategy. stSTX holders simply deposit stSTX into the vault to access the strategy.

Assuming this strategy was live since 2021 and generated that yield consistently, an investor’s return would have been an eye-popping 760%.

As you can see in the above example, auto-compounding returns make a big difference.

Furthermore, deploying stSTX across Stacks DeFi dApps helps generate additional yields and potential token rewards from future airdrops.

All of these yields are accretive!

Volatility is the price investor must pay for additional returns

Although the returns of holding stSTX would have vastly outperformed Bitcoin, this comes with added risk in the form of volatility. The annualized volatility over the examined timeframe is 0.63 for BTC and 1.44 for STX. STX also had a greater maximum drawdown of 93% compared to Bitcoin’s 77%.

It is important to note, this analysis is purely hypothetical and past performance is no guarantee of future returns. Stacking DAO did not exist during the early period of the Stacks mainnet launch in early 2021.

That being said, the Stacks DeFi ecosystem has come a long way in recent months, and new yield opportunities are constantly emerging. Mint and deploy stSTX to access the best strategies that Stacks DeFi has to offer!

Stacking DAO Details:

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