DeFi Enclave's Chronicles #10
Alpha, Funding Rate Arbitrage Strategy, Algebra and much more.
In this episode:
Voyager's Observations - personal reflections and insights on DeFi and Beyond
Voyager's Vault - Detailed Report on My Investment Moves
DeFi Survivor's Bookshelf - Handpicked must-read threads and articles
DeFi Projects Radar - detailed survey of projects news and developments
Alpha/Airdrops Whispers - unexplored DeFi territory, proceed at your own risk
Voyager's Observations
Bitcoin ETF
The Bitcoin ETF was finally approved, an event that occurred quite ordinarily and without significant volatility. Many influencers had predicted an immediate 10% or 20% increase following its approval due to an instant influx of those wanting to buy BTC. However, few have considered that the ETF could also be shorted and hedged, suggesting that the influx is likely to be gradual and will coincide with the overall market improvement, the timing of which is uncertain due to looming geopolitical risks.
Next, we are expecting the approval of an ETF for ETH. After that, it seems that ETFs for a basket of various top tokens will start to emerge. These will be formed on Coinbase, which in this scheme will act something like a custodian, holding the collateral for the ETF funds. Therefore, betting on the growth of Coinbase here seems obvious.
Airdrop season
It seems that 2024 will be the most fruitful year in terms of airdrops in the history of the crypto industry. Every day another project announces either an airdrop or directly states the launch of various campaigns, the results of which will determine the distribution of the airdrop. What used to be a lottery has now turned into a full-time job.
I am increasingly concerned about the question, "What if my wallet is compromised tomorrow?" I am not a sybil, and I have only one EVM wallet for airdrops and a couple of other ecosystems. I understand that the main value of these wallets is their history, reputation, and, as a result, potential airdrops, not the assets currently in them.
Voyager's Vault
Once a month at the beginning, I make a snapshot of my portfolio with detailed proportions and P/L.
You can check November Report in DeFi Enclave's Chronicles #9
Today, I will share some updates regarding the changes in my portfolio over the past week.
I started buying RDP and locking them on Radpie. In my recent post, I wrote about how I messed up in evaluating a project and now have to start from scratch to accumulate a token that has already significantly increased in value. I'm buying with the money from selling PLX.
I tried the projects in the Injective ecosystem from a functional perspective. I was thinking of putting some money there for farming to buy INJ with the profits, as I can't bring myself to buy the token on the market at its current price. But I was appalled at how poorly everything is there. The projects seem hastily put together, with ugly designs. I traded on Helix - a top perpetual market, and half of the site just doesn't work if you actively use it. In short, there's nothing to do there, everything is too rudimentary in its development. Kujira & Kava are much nicer in this regard and more advanced.
DeFi Survivor's Bookshelf
Top 12 Crypto Narratives To Trend 2024 - link
What Is A zkEVM ? - link
Proof of alpha #1 by
- linkCRV is a ticking bomb by @DeFi_Made_Here - link
Restaking: A new Primitive by
- linkBrace yourself for the Rise of Restake Finance (ReFi) by
- linkThe Risks of Restaking: A House of Cards ? by
- linkInjective Deep Dive - DeFi Protocols, Airdrops and Catalysts by
- linkThe Castle Chronicle Volume 51 - link
Decentralized Perpetual Exchanges Investment Thesis - link
Cosmos 2024: What You Need to Know by
- linkSUI: What You Need to Know by
- linkpxETH Liquidity Farming Guide - link
Insider Playing #4 - part I by
- linkInsider Playing #4 - part II by
- linkInsider Playing #4 - part III by
- link
DeFi Projects Radar
Algebra - Weekly Digest #110 - link
Base - 2024 Mission, Strategy and Roadmap - link
Cakepie - Bribery Market is Live! - link
Centrifuge - Q4 2023 Recap - link
Curve - What'up on Curve ? #166 - link
Frax Finance - This Week in Frax - January 11, 2024 - link
Frax Finance - FraxCheck #60 - link
Injective - The Volan Mainnet Upgrade - link
Kava Chain - Tokenomics 2.0 - link
LI.FI - 2023 Recap - link
Mantle - Year in Review - link
Mantle - A Guide to Mantle Tokens: $MNT, $mETH, $mUSD & More - link
NuLink - Monthly Report 2023.12 - link
Orbiter Finance - 2023–2024: Highlights, Hope, and Heralding Success! - link
PancakeSwap - December Recap - link
Panoptic - Introduction to Synthetic Perpetual Futures - link
Prisma - Digest #10 - link
Radiant - RFP-28: Introducing Radiant v3 - link
Swell - 3 Things You Need to Know About rswETH - link
Synonym Finance - Exploring The Synonym Ecosystem - link
TaskOn - December 2023 Monthly Report - link
Thetanuts Finance - Kicking Off Phase II of the v3 Incentivized Alpha - link
Redacted - Year in Review - link
ZetaChain - Preparing for ZetaChain 1.0 - link
ZkLink - Introducing zkLink’s Latest Whitepaper - link
Alpha/Airdrops Whispers
Lumoz/ZkFair
Since I have a Lumoz node (formerly Opside), I received a decent airdrop from ZkFair. The token has also appreciated well, so I decided to stake it for 4 years. This way, I will now receive a portion of the commissions from the ZkFair chain itself, plus future airdrops from projects launching on this chain. I spent around $150 on the node, which has already paid off, and this seems to be just the beginning. I won't count these tokens as part of my portfolio for now; it's just an experiment.
Algebra
I stumbled upon a vote on the Sushi forum about reintroducing their farms to Algebra's Integral project, and it seems that this decision will ultimately be adopted. The market does not yet understand how significant this is for Algebra in terms of increasing TVL, fees, and consequently buybacks. Besides, this will be a huge boost to the project's reputation and increase interest from other major projects.
Algebra might currently be one of the most undervalued projects in the entire crypto industry.
Funding Rate Arbitrage
One of my sources of income is funding fees arbitrage. This is when you earn on funding fees by opening opposite positions on the same asset on different perp DEXs. This way, I get about 25-80% on BTC. This is more active investing with risks, but I really like the risk/reward benefit.
Below is my small research on the suitability of various perp DEXs for arbitrage.
When we want to earn through such arbitrage, the most important parameters of the DEX for us are:
Incentives - we want to maximize fee rebates, rewards for volumes, airdrops from the DEX.
Fees - of course, fees should be minimal and not kill all our profits.
Funding rates - we need to find the best rates for short and long positions, and the difference should be as profitable as possible and last as long as possible.
User interface - important but not the main part, transactions will not be frequent, so you can suffer through an inconvenient interface for the sake of profit.
Let's take a BTC position for example. I don't chase triple-digit returns on highly volatile positions. I want to sleep at night and not rebalance too often.
Hyperliquid
Overall rating -⭐️⭐️⭐️⭐️
Incentives ⭐️⭐️ - the DEX does not give any rewards except for points for a potential airdrop, the value of which is impossible to assess.
Fees - ⭐️⭐️⭐️⭐️⭐️
User interface -⭐️⭐️⭐️⭐️⭐️
Funding Rates -⭐️⭐️⭐️ - average income, sometimes the rate drops, and here you can even hold a profitable long. In general, all the hype around this DEX is because of its interesting vaults. The DEX itself is nice but not the most interesting.
HMX
Overall rating -⭐️⭐️⭐️⭐️
Incentives ⭐️⭐️⭐️⭐️ - the DEX gives rewards for almost everything - fee rebates, holding a position for a long time. The only catch is that all rewards are in the form of the esHMX token, which must be either vested for a year or staked, hoping that the price of the token will not fall but will continue to give you income.
Fees - ⭐️⭐️⭐️⭐️⭐️
User interface -⭐️⭐️⭐️⭐️⭐️
Funding Rates -⭐️⭐️⭐️⭐️ - very stable above-average income on short. If you believe in the potential of the HMX token, this is the best DEX for you.
Drift
Overall rating -⭐️⭐️⭐️⭐️
Incentives -⭐️⭐️⭐️ - the system of earning tickets, which increase your chance of winning part of the prize pool, doesn't look attractive. If you're not generating millions in volume, the chances of winning are very slim.
Fees - ⭐️⭐️⭐️⭐️⭐️
User interface -⭐️⭐️⭐️⭐️⭐️
Funding Rates -⭐️⭐️⭐️⭐️ - average and quite stable rate on short. An additional advantage is that your stablecoins also earn interest from lending.
Vertex
Overall rating -⭐️⭐️⭐️⭐️⭐️
Incentives -⭐️⭐️⭐️⭐️ - rewards in the form of VRTX + ARB incentives currently look quite attractive. The VRTX token can be immediately sold or accumulated in staking if you believe in the token.
Fees - ⭐️⭐️⭐️⭐️⭐️
User interface -⭐️⭐️⭐️⭐️⭐️
Funding Rates -⭐️⭐️⭐️⭐️⭐️ - the most stable and profitable rate for long. Since Vertex has its own money market, you also get a good rate on your stablecoins. I don't know what will happen after the ARB incentives end, but right now, it's the best DEX for opening a long position without losing too much in funding fees.
Currently, I am using a combination of Vertex (Long) + HMX (Short). If you want to add diversification and extra hassle in managing positions but also get additional rewards, you can add Drift (betting on their lottery) & Hyperliquid (betting on an airdrop) to this combination.
The other Perp DEXs are not very suitable for arbitrage due to their high commissions, poor interface, unattractive conditions, or insufficient liquidity level (studied the top 55 perpetual DEXs on Defillama).
Mantle Journey
The Mantle Journey, on which I spent about $1000 on fees, is coming to an end. I have no idea whether it will pay off, as Mantle has not provided any Leaderboard with approximate rewards. I should also receive some from Izumi, as they promise to share any airdrops they receive, depending on the number of points you scored on their platform.
I continue to make a significant bet on participating in the following projects:
Ether.fi - Have Robot NFT(wtf ?) on Ether.fan and some eETH on Pendle for points
Dolomite - Lend/Borrow/Galxe OATs
Nostra - Lend/Borrow
Izumi (Mantle + Manta) - LP/Swaps - The project promises to share all airdrops it receives, with the nearest being for Mantle Journey. Other relevant ones include ZkSync, Scroll, and other chains.
Gravita - The rewards for the project look promising.
Cega - Cool project for options traders.
Velvet Capital - I have been participating in the project for a while now and even successfully managing an investment portfolio there. Feel free to join.
IntentX - Making a big bet on this project, I continue to accumulate points.
Manta - I don't expect a big drop, as I've been ignoring the project's activities for too long.
Swell - But I have high hopes for Swell, even though I also passed it by for quite a while, along with EigenLayer. Finally, Swell will soon launch rswETH, and they will enter L2.
Butter - I am using this project for simultaneously accumulating points and participating in Mantle Journey, plus earning a small amount of MNT.
I'd be glad to hear any advice on what to add or change in the comments here or on my X (Twitter).
