3x Long AVAX-USDC Pangolin

Thesis

This vault is suitable for depositors who want to earn yield in AVAX, from fees in the AVAX-USDC Pangolin swap pool, while believing that the price of AVAX will trend upwards with a high frequency of swapping transactions.

Essentially, if you believe that AVAX price will trend upwards, or you simply want to accumulate more AVAX regardless of its price, this vault will be the best match for you.

Overview

Using 3x leverage on deposits, this strategy earns boosted yield from AVAX-USDC swap fees as well as auto-compounding PNG rewards, while having greater exposure to the price of AVAX.

Implementation

Depositor deposits AVAX (or WAVAX) to the vault and receives svTokens 3L-AVAXUSDC-PNG

Vault optimally swaps AVAX for equal value of USDC and AVAX (50/50 ratio)

Vault borrows AVAX and USDC such that:

Total value of assets are now 3x the value initially deposited

AVAX borrowed is less than the total amount of AVAX to be deposited as liquidity

Vault optimally swaps all AVAX and USDC for equal value of USDC and AVAX (50/50 ratio) again

Vault adds equal value of AVAX and USDC to the AVAX-USDC swap pool in Pangolin, receiving AVAX-USDC PLP tokens

Vault stakes AVAX-USDC PLP tokens in Pangolin farm, earning PNG

Keepers auto-compound PNG tokens for more AVAX-USDC PLP periodically

Keepers check vault’s position status to determine if a rebalance is needed

Depositor withdraws their position from the vault by burning svTokens 3L-AVAXUSDC-PNG and receives AVAX

🎓

Rebalance: a “reset” of the vault’s assets such that the debt ratio stays within a healthy range and the delta exposure is true to the intended strategy

Risks

Yield generated from swap fees and reward emissions is not enough to cover borrow interests for leverage

AVAX price decreases, resulting in an overall loss in USD based value due to the greater long exposure to AVAX price changes

Higher fees incurred due to higher price slippage incurred during rebalancing

Backtest Results

Key Takeaways AVAX price: -74%

Vault USD Value: -74%

Last 30 days: +67.5%