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CeDeFi Strategies

Financial Disclaimer:
The information provided here does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat the purpose of the description below as such. Midas.Investments does not recommend that any cryptocurrency should be bought, sold, or held by you. Crypto currencies are an unregulated instrument and investing in them may incur an unlimited loss. Conduct your own due diligence and/or consult your financial advisor before making any investment decisions.

1.5x Long on ETH (LETH)

DeFi strategy with 1.5x leverage on ETH that also generates up to 6% APR by providing liquidity in correlated liquidity pools. Users benefit from leveraged ETH exposure, as well as some yield on top of that.
Expected APR: 5-6% (estimated yield farming rewards, excluding ETH performance)
Overall risk: Medium

Full Description

"1.5x Long on ETH" is a directional instrument with linear payoff replicating ETH price movements with 1.5x leverage. The strategy obtains 1.5x leverage by swapping deposited USDC to ETH, supplying ETH on AAVE, borrowing USDC at 1.7 health factor and swapping USDC back to ETH. The strategy earns yield by supplying borrowed ETH on Aura. Half of borrowed ETH is swapped to rETH and deposited in a Balancer rETH-ETH pool on Aura.
Depending on the market situation, pool composition may change slightly. Midas team will be notifying the community of any updates to the allocations within the strategy. Earned rewards are reinvested for higher efficiency. The strategy is rebalanced regularly to preserve 1.5x leverage. Note that rebalancing will affect the strategy’s performance relative to ETH in the long-run.

Estimated returns and sources of yield

The goal of "1.5x Long on ETH" is to generate yield on top of a long ETH position. Rewards come from two sources:
(1) Earned trading fees. These are rewards from organic trading activity in utilized pools and are generally dependent on the market volatility
(2) Protocol incentives. These are distributed by protocols to attract more liquidity.

Underlying coins and protocols

Coins and tokens: ETH (and its derivatives like wETH, rETH and sETH), USDC
Protocols: AAVE, Balancer, Aura

Strategy pros

  • Capital efficiency: users can achieve desired ETH exposure with less of their assets tied up in a position than if they held spot ETH.
  • Amplified ETH volatility: by using this strategy, investors will be able to benefit from 1.5x leveraged ETH price appreciation.
  • Predictable payoff: unlike in a previous version of Soft Long, ETH is deposited in a highly-correlated liquidity pool, therefore minimizing impermanent loss and making the payoff curve very close to linear.

Strategy cons

  • Underperforming in bearish markets: Since this strategy uses 1.5x leverage, investors will incur more significant losses than if they held spot ETH.
  • Limited scalability: if the strategy sees overwhelming demand, it is likely that the yields in liquidity pools get diluted.
  • Risk of liquidation: while Midas team will be monitoring the position to maintain a safe health factor, it is still possible for a position to get liquidated either during extreme market conditions or due to a price manipulation (which is highly unlikely) or an exploit.

Investment tips on how to blend this strategy into your portfolio

  • Utilize the strategy during bullish markets. If you want to make a directional bet on ETH price, consider using this strategy to earn yield on your deposit.
  • Combine with Midas’s 0.5x Short on ETH strategy to hedge your exposure or create a delta neutral strategy for ETH.
  • Combine this strategy with Midas fixed yield products to increase the risk and reward ratio of your portfolio.

Risks and ways to hedge against presented risks

A hack or an exploit of one of the underlying protocols would negatively affect the strategy performance. Midas will be making sure to do due diligence on each protocol up to our highest standards. Necessary alerts and metrics are set up to monitor the protocols 24/7. Nonetheless, investors are strongly advised to do their own research of the underlying protocols.
Leveraged exposure to ETH. Since the strategy tracks ETH performance at 1.5x leverage, investors should be aware that SLETH will perform poorly during a continuous bear market.

Fees

Performance fee: 15% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week. Note that 5% (of the 10%) will be used toward a MIDAS token buyback.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 15% of the profit. If there is no profit, then the user does not pay performance fee.
Swap fee: Swap fee: 0.5% (into and out of this strategy).
Maximum capacity: $5,000,000

0.5x Short on ETH (SETH)

DeFi strategy with 0.5x leverage on ETH short that also generates up to 3% farming APR by providing liquidity on Convex. Users benefit from an on-chain short instrument which also provides some yield, similar to a perpetual futures contract with a consistently favorable funding rate.
Expected APR: 2-3% (yield farming rewards, excluding ETH performance)
Overall risk: Medium

Full description

0.5x Short on ETH is a directional instrument with linear payoff replicating ETH price movements with 0.5x leverage. The strategy obtains 0.5x leverage by depositing users’ USDC on AAVE, then borrowing ETH at 1.7 Health Factor and selling it for USDC. Strategy liquidity is deposited into a correlated FRAX-USDC liquidity pool on Convex to earn yield.
Depending on the market situation, pool composition may change slightly in favor of a more optimal pool in terms of a risk-reward ratio. The investment team at Midas is in charge of monitoring relevant pools and will be notifying the community of any updates to the allocations within the strategy. Earned rewards are reinvested for higher efficiency. The strategy is rebalanced regularly to prevent liquidations and preserve 0.5x leverage.

Estimated returns and source of yield

The goal of "0.5x Short on ETH" is to generate yield on top of a short ETH position. Rewards come from two sources:
(1) Earned trading fees. These are rewards from organic trading activity in utilized pools and are generally dependent on the market volatility
(2) Protocol incentives. These are distributed by protocols to attract more liquidity.

Underlying coins and protocols

Coins and tokens: ETH, WETH, USDC, FRAX
Protocols: AAVE, Convex, Curve
Please note that the list of protocols and tokens is subject to change. Midas team will be posting updates for this strategy allocations in community Discord.

Strategy pros

  • Muted downside ETH exposure: by using this strategy, investors will be able to benefit from ETH price depreciation at a lower rate than if they were selling their ETH.
  • Predictable payoff: unlike in previous version of Soft Short, which had a confusing payoff due to impermanent loss, the updated version only supplies liquidity to highly correlated pools, minimizing impermanent loss and making the payoff curve close to linear.
  • No negative funding payments: by depositing funds into DeFi protocols, Midas ensures that the strategy earns competitive yield, while having muted exposure to ETH price action. Unlike most short instruments on CEXs and DEXs, Soft Short does not charge any funding fees. Instead, users benefit from a straightforward short strategy with additional yield on top.
  • No risk of liquidation: The Midas team monitors the health factor of AAVE borrowing position and will rebalance the strategy to maintain a safe health factor.
  • Highly scalable: the protocols and pools used in strategy are highly liquid, so that the strategy is able to scale to meet potential demand

Strategy cons

  • Poor performance in a bullish market: Since the straregy gives exposure to ETH downside, sustained upward price movements will cause the strategy to incur losses.

Investment tips on how to blend this strategy into your portfolio

  • Utilize the strategy during bearish or choppy markets. If you are unsure about the market’s direction but still want to retain some short ETH exposure, consider using Soft Short to earn yield on your deposit.
  • Combine with Midas’s "1.5x Long on ETH" strategy to create a delta-neutral strategy for ETH.
  • Combine this strategy with Midas fixed yield products to increase the risk and reward ratio of your portfolio.

Risks and ways to hedge against presented risks

A hack or an exploit of one of the underlying protocols would negatively affect the strategy performance. Midas will be making sure to do due diligence on each protocol up to our highest standards. Necessary alerts and metrics are set up to monitor the protocols 24/7. Nonetheless, investors are strongly advised to do their own research of underlying protocols.
De-peg of one of the underlying assets. As with the risk of an exploit, Midas is doing due diligence on all of the underlying assets. However, investors can open short positions or purchase de-peg coverage in a third-party protocol to hedge against potential downside.
Exposure to ETH. The strategy will perform poorly during a continuous bull market.

Fees

Performance fee: 15% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week. Note that 5% (of the 10%) will be used toward a MIDAS token buyback.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 20% of the profit. If there is no profit, then the user does not pay performance fee.
Swap fee: 0.5% (into and out of this strategy).
Maximum capacity: $5,000,000

“Soft Long” on ETH

DeFi strategy which generates yield (target 45% ROI) through ETH-USDC liquidity pool and price appreciation of ETH (a +10% price increase in ETH results in +7.9% strategy growth) as borrowed USDC is converted to ETH, which is why this strategy is referred to as a “soft long.”

Full Description

Similar to YAPs, an investment in this strategy will be composed of “shares”. Half of the USDC pool is converted to ETH and then provided as supply tokens to Alpha Homora (a DeFi protocol that leverages liquidity pools). These supply tokens are used as collateral for creating a 2x leveraged position on a basket of ETH-USDC liquidity pool. The price dynamics of ETH are reflected in the strategy: on average, a 10% increase in the price of ETH results in a 7.9% growth of a strategy's price due to the conversion of USDC to ETH, making its price less volatile while capturing 45% ROI from fees and rewards. This strategy is an excellent way to diversify a portfolio during choppy, bearish markets while maintaining exposure for the start of a potential rally in the crypto markets.

Estimated returns and sources of yield

[Fees from ETH-USDC liquidity pool (~13% ROI) + trading fees from Uniswap (~10% ROI)] * 2 (Alpha Homora leverage) - borrow APR for leverage (0.8%) = approximately 45% ROI.

Underlying coins and protocols

Coins and tokens: ETH, USDC
Protocols: Alpha Homora as LP leverage, Iron Bank as the lending service under the hood of Alpha Homora.

Strategy pros

  • Efficiency. High yields combined with a long position on ETH lead to high efficiency during flat and bullish markets.
  • Liquid. Enter and exit the strategy at any time (with low fees).
  • Transparency. Track strategy performance via on-chain analytics and understand where yields are deriving (link).

Strategy cons

  • Limited Availability. Investors always have the ability to exit their position in this strategy, however, the availability of this position/strategy is calculated based on the liquidity within the strategy. In order to increase liquidity (and open up availability to additional investments), Midas must add more balances to the strategy, which we plan to do regularly. Please reach out to support if you’re looking to gain exposure into this strategy.
  • DeFi Protocol Risk. Midas builds strategies on top of fully audited protocols that have proven their sustainability, however, protocol vulnerabilities still exist. While Midas monitors all positions 24/7, systematic DeFi risk is shared with investors.
  • Market Downtrend. A decline in the price of ETH will contribute toward price depreciation in the strategy.

Investment tips on how to blend this strategy into your portfolio

  • Utilize this strategy during flat markets to capture an attractive 40% ROI while maintaining exposure to ETH.
  • Combine it with Midas’ “Soft Short” strategy in different proportions to balance between longing, shorting or neutral market position.
  • Combine it with Midas’ fixed yield products (holding BTC or ETH) to reduce the risks presented by market volatility, while increasing portfolio yield.
  • Enter this position with stablecoins during market dips to accumulate a medium-risk and high-yield vehicle and rebalance it to stables or BTC/ETH on each market rise.

Risks and ways to hedge against presented risks

Liquidation possibilities (Low Risk). The position may be liquidated if ETH’s price decreases by 57% from position entrance due to leverage for liquidity pools with USDC as collateral. The position entry is updated weekly based on strategy demand, therefore, liquidation risk is low. Position health may be tracked on-chain via this link.
Liquidity pools' impermanent loss (Medium Risk). The strategy is based on market-making of ETH-USDS liquidity pool, which are subject to impermanent loss. In this strategy, impermanent loss halved given the presence of USDC collateral. However, if the value of the ETH position were to drop two times in price in a short time span without retracement, simply holding ETH would give you 20% more in USD value. This is the “other side” of 40% ROI that the strategy targets. You can hedge this strategy by going long on ETH in addition to investing in this strategy. This, however, may give investors an overexposure to ETH.
Systematic DeFi risks (Medium Risk). Midas uses real-time alerts to track all of the main metrics of the position's health, such as protocol liquidity, liquidation prices, and lending utilization rates. If one of our alerts is triggered, it may signal potential hacks, protocol vulnerabilities (liquidity issues), or bad health of the position. Midas has the ability to exit any of the strategies into stablecoins at any time should any of those events occur. Midas’ infrastructure and expertise give our investment team the ability to proactively protect investors from these risks.

Fees

Performance fee: 15% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week. The user retains the same number of SLETH tokens, but the price of each token is less by the success reward.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 15% of the profit. If there is no profit, then the user does not pay performance fee.
Performance fee = [Current price - last price] * 0.15
Swap fee:
  • From Stables to Strategy — 0% platform fee + ~0.2% market spread
  • From ETH to Strategy — 0.3% platform fee + ~0.2% market spread
  • From BTC to Strategy — 0.3% platform fee + ~0.2% market spread
  • From MIDAS to Strategy — 1.1% platform fee + ~0.2-0.8% market spread
  • From all others to Strategy — 0.2% platform fee + ~0.2-0.8% market spread
Note that 2% (of the 15%) shall be used toward a MIDAS token buyback.

“Soft Short” on ETH

DeFi strategy which generates yield (target 25% ROI) through ETH-USDC liquidity pool and price depreciation of ETH (a -10% decline in the price of ETH price leads to +4% strategy growth) due to ETH being borrowed while half of the position is converted to USDC.

Full description

Similar to YAPs, an investment into this strategy will be composed of “shares”. The strategy is denominated in USDC. USDC is deposited on AAVE to borrow ETH, and half of this ETH is sold for stables. The ETH and stables are then provided as supply tokens to Alpha Homora. The supply tokens are used as collateral for creating a 1x leveraged position on the basket of ETH-USDC liquidity pool. The position turns into a “short” based on the difference between the borrowing of ETH and having a ETH-USDC liquidity pool. Therefore, investors are short ETH while simultaneously profiting from LP rewards on Alpha Homora. The price dynamics of ETH are reflected in the strategy; on average, a 10% decline in the price of ETH leads to a 4% increase in the strategy's price, making its price less volatile (versus strictly holding ETH) while also capturing up to 25% ROI through fees and rewards. This strategy is a great way to hedge your crypto and altcoin portfolio from a potential drawdown in the market, while profiting from yields on Alpha Homora.

Estimated returns and source of yield

[Fees from ETH-USDC liquidity pool (±13% ROI) + trading fees from Uniswap (±10% ROI)] * 1 (Alpha Homora leverage) = 25% ROI

Underlying coins and protocols

Coins and tokens: ETH, USDC
Protocols: Alpha Homora as LP leverage, Iron Bank as the lending service under the hood of Alpha Homora, AAVE as the lending protocol

Strategy pros

  • Efficiency. Medium yields combined with short on ETH leads to high efficiency during flat and bearish markets. Liquid. Enter and exit the strategy at any time (with low fees).
  • Liquid. Enter and exit the strategy at any time (with low fees).
  • Transparency. Track strategy performance via on-chain analytics and understand where yields are deriving (link below).

Strategy cons

  • Market Uptrend. An increase in ETH’s price will result in a decline in the strategy's price.
  • DeFi Protocol Risk. Midas builds strategies on top of fully audited protocols that have proven their sustainability, however, protocol vulnerabilities still exist. While Midas monitors all positions 24/7, systematic DeFi risk is shared with investors.
  • Limited Availability. Investors always have the ability to exit their position in this strategy, however, availability of this position/strategy is calculated based on the liquidity within the strategy. In order to increase liquidity (and open up availability to additional investments), Midas must add more balances to the strategy, which we plan to do regularly. Please reach out to support if you’re looking to gain exposure into this strategy.

Investment tips on how to blend this strategy into your portfolio

  • Utilize this strategy during bearish markets to take advantage of ETH price declines.
  • This strategy may be helpful if you have a sizable position in ETH and altcoins and want to balance portfolio risk.
  • Combine this strategy with the “Soft Long” strategy to create a market neutral strategy with a slight exposure on ETH, and earn a targeted 35% ROI on the portfolio.
  • Enter this position on major upward swings in the price of ETH during bearish markets to earn extra yield following ETH retracements.

Risks and ways to hedge against presented risks

Price appreciation of ETH (High Risk). Sharp increases to the price of ETH will lead to a decline in the strategy’s performance (and price). Combining this strategy with a long position on ETH may partially offset strategy losses.
Liquidity pools' impermanent loss (Medium Risk). The strategy is based on market-making of ETH-USD liquidity pools, which are subject to impermanent loss. In this case, impermanent loss is generating money if ETH goes down and decreases if ETH goes up due to borrowing of ETH.
Systematic DeFi risks (Medium Risk). Midas uses real-time alerts to track all of the main metrics of the position's health, such as protocol liquidity, liquidation prices, and lending utilization rates. If one of our alerts is triggered, it may signal potential hacks, protocol vulnerabilities (liquidity issues), or bad health of the position. Midas has the ability to exit any of the strategies into stablecoins at any time should any of those events occur. Midas’ infrastructure and expertise gives our investment team the ability to proactively protect investors from these risks.

Fees

Performance fee: 20% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week. The user retains the same number of SSETH tokens, but their price is less by the success reward.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 20% of the profit. If there is no profit, then the user does not pay performance fee.
Performance fee = [Current price - last price] * 0.2
Swap fee:
  • From Stables to Strategy — 0% platform fee + ~0.2% market spread
  • From ETH to Strategy — 0.3% platform fee + ~0.2% market spread
  • From BTC to Strategy — 0.3% platform fee + ~0.2% market spread
  • From MIDAS to Strategy — 1.1% platform fee + ~0.2-0.8% market spread
  • From all others to Strategy — 0.2% platform fee + ~0.2-0.8% market spread
Note that 2% (of the 20%) shall be used toward a MIDAS token buyback.

DeFi Token Farming

A basket of incentivised liquidity pools representing the most profitable cash-flow models in protocols with DeFi tokens on Convex Finance which may generate up to 35% ROI while investors also benefit from price appreciation of the underlying tokens.

Full description

This strategy taps into top-tier liquidity pools in all of DeFi with the most valuable tokens, based on Midas’ investment research. Each token in this strategy aims to address pain points of DeFi and includes tokenomics revolving around the protocol's cash flow. The protocols included in the strategy solve cornerstone problems of DeFi: liquidity and stablecoins. Including this strategy in your portfolio is similar to maintaining a long position on the entire DeFi ecosystem. Each liquidity pool includes incentivised rewards from Convex, which represent the primary source of the strategy’s yield. Liquidity pools are balanced based on available liquidity and market cap.

Liquidity pools and our rationale for selecting each one

CRV + cvxCRV. Curve is one of the largest automated market maker (“AMM”) protocols with a sophisticated mechanic of locking CRV to receive extra fees from their most used pools. CRV is used as a governance token to allocate CRV emissions for other project pools, required for protocol health. cvxCRV is tokenized, locked CRV from Convex Finance which is used by Convex to offer liquidity to dozens of DeFi protocols. The CRV + cvxCRV liquidity pool is incentivised by Curve and Convex to create liquidity between CRV native token and tokenized, locked CRV with an approximate APR of 25%. This pool is absent of impermanent loss risk and is long on CRV token, which boasts an exciting roadmap of a native stablecoin release in addition to cash flow tokenomics.
CRV + ETH. This pool provides liquidity for ETH and CRV tokens and is incentivised by Curve and Convex, reaching an APR up to 30%. This pool grows in price with the appreciation of ETH and CRV prices.
CVX + ETH. The pool provides liquidity for ETH and CVX tokens. CVX is a governance token of Convex Finance which is used to manage liquidity of Curve pools. CVX is a valuable token for protocols and stablecoins which seeks to bootstrap liquidity on Curve. Some of the major driving forces of CVX are bribes from other protocols. This pool is incentivised by Curve and Convex, reaching an APR up to 40%. This pool grows in price with an appreciation of ETH and CVX prices.
FXS + cvxFXS. This pool provides liquidity for FXS tokens and tokenized, locked FXS on Convex Finance. FXS, the world’s first fractional-algorithmic stablecoin, is the governance token of FRAX protocol; FRAX is an overcollateralized DeFi stablecoin with a flawless performance in terms of peg and and is entrenched with dozens of DeFi protocols. Owning FXS means owning part of the DeFi ecosystem they are building. FRAX DAO holds a major stack of locked CVX and CRV, arranges buybacks, and has fee generation mechanisms that capture the power from their ecosystem into the strength of their governance token. The pool is incentivised by CRV and CVX, with an APR up to 30%. This pool is not subject to impermanent loss.
Silo + FRAX. This pool provides liquidity for Silo token and FRAX stablecoin. Silo is a governance token for its upcoming isolated lending protocol, which aims to create a new level of security for lending markets, positioning it as the “Uniswap for lending.” The market cap of Silo is very low ($7M as of this publishing), and Midas included this pool to share the potential major upside of their innovative approach to lending. The pool is incentivised by CRV and CVX, yielding an APR up to 60%. Midas’ investment team will rebalance these pools based on several dynamic metrics, including available liquidity, price impact, and rewards. Midas constantly evaluates opportunities in DeFi and plans to add more pools to this strategy based on community demand.

Estimated returns and source of yield

The target ROI for this strategy is 40%, but it may vary based on liquidity in the pools and incentivisation of the protocols.
Source of yield: fees, CRV and CVX governance tokens. Rewards are reinvested into the strategy and reflected in the price increase.

Underlying coins and protocols

Coins: CRV, CVX, ETH, FXS, Silo
Protocols: Convex Finance, Curve

Strategy pros

  • One Strategy. A single strategy from which to receive an attractive ROI from the most valuable DeFi projects in the current ecosystem.
  • Rebalancing. Midas rebalances this strategy based on continuous monitoring, adapting it based on various market conditions.
  • Exposure to the upside following price increases of the DeFi tokens.

Strategy cons

  • Highly correlated assets. Macro crypto performance will strongly influence the performance of the strategy.
  • DeFi Protocol Risk. Midas builds strategies on top of fully audited protocols that have proven their sustainability, however, protocol vulnerabilities still exist. While Midas monitors all positions 24/7, systematic DeFi risk is shared with investors.
  • Limited Availability. Investors always have the ability to exit their position in this strategy, however, availability of this position/strategy is calculated based on the liquidity within the strategy. In order to increase liquidity (and open up availability to additional investments), Midas must add more balances to the strategy, which we plan to do regularly. Please reach out to support if you’re looking to gain exposure into this strategy.

Investment tips on how to blend this strategy into your portfolio

  • Utilize this strategy in your portfolio if you’re bullish on DeFi adoption.
  • Balance this strategy with exposure to ETH, BTC and stablecoins, which will give you a diversified portfolio covering a large portion of the market.
  • Combine this strategy with the “Soft Long” strategy to build a portfolio with high ROI potential while also having a stablecoin position to balance it out.
  • Combine the strategy with the “Soft Short” strategy or ETH shorts to protect from crypto volatility.

Risks and ways to hedge against presented risks

Assets are highly correlated to the macro movement of crypto (High Risk). This strategy is a full “long” on crypto and DeFi. Midas asserts that this is a great long-term bet, but it can be highly volatile. You can hedge this risk with the “Soft Short” strategy or net shorts on crypto.
Impermanent loss (Medium Risk). The CRV-ETH, CVX-ETH and Silo-FRAX pools are subject to impermanent loss risk, which means that if one of the tokens performs disproportionately compared to the other, an investor would’ve been better off (profitability wise) by simply holding those tokens. The formula for impermanent loss is a square root between the price change of two assets, which means that for every 100% of price change between two assets, the LP will underperform 10%. CRV and CVX are highly correlated with ETH, therefore, Midas’ investment team does not expect a major impact of impermanent loss.
Systematic DeFi risks (Medium Risk). All pools hosted on Convex Finance have passed an audit ordered by Coinbase and have never been subject to a hack. Midas considers Convex Finance’s security as one of the best in the market. Nevertheless, Midas uses real-time alerts to track all of the main metrics of the position's health, such as protocol liquidity, liquidation prices, and lending utilization rates. If one of our alerts is triggered, it may signal potential hacks, protocol vulnerabilities (liquidity issues), or bad health of the position. Midas has the ability to exit any of the strategies into stablecoins at any time should any of those events occur. Midas’ infrastructure and expertise gives our investment team the ability to proactively protect investors from these risks.Fees

Fees

Performance fee: 20% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week. The user retains the same number of DFTF tokens, but their price is less by the success reward.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 20% of the profit. If there is no profit, then the user does not pay performance fee.
Performance fee = [Current price - last price] * 0.2
Swap Fee
  • From Stables to Strategy — 0% platform fee + ~0.2% market spread
  • From ETH to Strategy — 0.3% platform fee + ~0.2% market spread
  • From BTC to Strategy — 0.3% platform fee + ~0.2% market spread
  • From MIDAS to Strategy — 1.4% platform fee + ~0.2-0.8% market spread
  • From all others to Strategy — 0.2% platform fee + ~0.2-0.8% market spread
Note that 2% (of the 20%) shall be used toward a MIDAS token buyback.
Disclaimer: While Midas assumes no responsibility for malicious events impacting protocols or inefficiency of the strategy itself, it is our goal to make investing in these strategies as safe, effective and easy to use as possible. However, investment responsibility ultimately falls to the individual, and it is advised that investors do their own research before engaging in these strategies.

“GLP” - Index Liquidity Provision on GMX

DeFi strategy that generates 20-30% APR (in ETH) by providing blue-chip liquidity for leveraged traders on GMX, a decentralized perpetual exchange. Users supply liquidity into an index called GLP and earn fees generated from traders’ liquidations, swaps as well as gain from trader losses.

Full description

GLP is an investment product very similar to our YAPs. Ninety-eight percent (98%) of the GLP index is composed of BTC, ETH, and stablecoins (FRAX, USDC, DAI, USDT). Historically, stablecoins have accounted for around 40-45% of the index while BTC and ETH have rounded out the remaining 50-55% of the index (in roughly equal proportions). Therefore, by buying GLP shares for stables, users will effectively enter a soft long position on ETH (~0.25x) and BTC (~0.25x). On top of this, investors will be eligible for ETH-denominated yield derived from activities performed by traders on GMX (more on these in the next section).
This strategy is an excellent, reasonably low-risk way to receive exposure to ETH and BTC along with a significant and sustainable ETH yield (~30%). GLP will be a particularly high performer during choppy markets when traders are most likely to lose money. Moreover, during periods of high volatility, the GLP TVL could grow due to traders’ negative PnL which results in an unbound upside potential.

Estimated returns and sources of yield

GLP’s source of yield is %100 sustainable. Rewards come from two sources:
  1. 1.
    Fees paid by traders (~20% of the yield comes from this source) for: swapping assets using GLP liquidity, opening and closing their leveraged positions on GMX, liquidations on GMX.
  2. 2.
    Traders’ losses: When traders lose money by misjudging the market, their net losses are GLP’s net profits. GLP is effectively the counterparty for traders; this yield source accounts for around 85% of the GLP yield.
Target ROI: ~27%

Underlying tokens and protocols:

Tokens: GLP (index token), ETH (reward token)
Protocols: GMX

Strategy pros

High and fully sustainable yield: 100% of the 30+% annual yield received by GLP holders is denominated in ETH.
Exposure to ETH and BTC growth: GLP is a soft long for both these tokens when users enter GLP with USDC and soft-short when users enter the position with BTC or ETH. In other words, due to the index composition (50% USDC), when one enters the index for BTC or ETH, one will automatically obtain exposure (unwanted or not) to USDC (hence the name “soft short”). Similarly, due to the index composition (25% ETH, 25% BTC), when investors enter GLP via USDC (or any other stable), they receive a 25% exposure to ETH and a 25% exposure to BTC.
Reasonably low risk: historical trader performance on GMX indicates that traders incur losses, which results in gains for GLP holders. For example, over the past year, GLP’s net earnings due to traders’ net losses have amounted to $36M. Unlimited capacity: GLP pool on Arbitrum is around $279M in TVL.

Strategy cons

Exposure to other assets: GLP is not the same as a single-sided liquidity provision due to its index nature. When depositing their token of choice, investors will inevitably gain exposure to other tokens in the index. If one of the tokens in the index loses its value, all else held equal, GLP will lose value too.
Liquidity provisioning in GLP is not delta neutral: trader profits will incur net losses on the GLP index resulting in the potential loss of funds for investors.

Tips on how to integrate GLP into your portfolio

  • Utilize the strategy during volatile markets to best capture ROI. Volatile markets tend to produce situations where traders lose their money by entering directional positions. Remember that traders’ losses result in GLP profits.
  • Combine with Midas’s soft short strategy (SSETH) to create a delta-neutral strategy for ETH.
  • Combine this strategy with Midas fixed yield products to increase the risk and reward ratio of your portfolio.

Risks and ways to hedge against presented risks

Long bull or bear market trends (low-risk): this will result in net losses for GLP (due to a higher probability of trader profits). The best way to hedge this risk is by entering directional positions (e.g., soft-long or soft-short on the Midas platform). The key thing to remember is that this risk is very low, as traders, on average, tend to yield losses in any market conditions.
Exposure to BTC and ETH (medium-risk): for investors swapping into GLP with stablecoins . This is only a risk for users looking to short these two assets or remain delta-neutral. To hedge this risk, we suggest users use our soft-short strategy (SSETH). This will hedge the risk for ETH. Unfortunately, for BTC, users will have to short it on an external platform to mitigate this risk.
Shorting BTC and ETH risk - for investors purchasing GLP with BTC or ETH (medium-risk). To hedge this risk, an investor could open a long position by buying spot BTC and/or ETH and staking them on Midas’ platform.

Fees

Performance fee: 10% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week.
Swap fee:
  • From Stables to Strategy — 0% platform fee + ~0.2% market spread
  • From ETH to Strategy — 0.3% platform fee + ~0.2% market spread
  • From BTC to Strategy — 0.3% platform fee + ~0.2% market spread
  • From MIDAS to Strategy — 0.3% platform fee + ~0.2-0.8% market spread
  • From all others to Strategy — 0.3% platform fee + ~0.2-0.8% market spread
Note that 2% (of the 10%) will be used toward a MIDAS token buyback.
Maximum capacity: $10,000,000