This vault is suitable for depositors who want to optimize their fee earnings on Level Finance’s Senior Tranche Liquidity (SLLP), while also benefitting from the price appreciation of the SLLP’s volatile assets.
Essentially, this vault is best if you believe:
→ BTC, ETH and BNB (only on BNB chain) will continue in an upward trend. 💹
→ Level will continue to attract traders for earning fees. 🧲
→ Level perpetual traders will lose more than they gain. 🕗
Overview
Using 3x leverage on deposits, this strategy earns boosted yields from SLLP staking on the Level derivatives protocol. The yields come from minting/burning, swaps, liquidation, and margin trading fees, and they are automatically compounded back into the value of the SLLP vault token.
Additionally, Level token emissions (LVL) are harvested and staked on the Level Finance platform for more SLLP tokens.
Chains
Arbitrum
BNB
Implementation (BNB Example)
User deposits 100 USDT (example asset) to SLLP Long Vault and receives svToken receipt.
Vault borrows 200 USDT from Lending Pool. Total is now 300 USDT.
300 USDT used to mint SLLP, which is then staked for LVL emission rewards.
Vault keeper (bots) harvests and stakes the LVL emissions for more SLLP.
Vault keeper (bots) check position status to rebalance if necessary.
When ready, user withdraws position from the vault, which burns the svToken.
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. In the case of SLLP, there are only rebalances on the debt ratio with a target of 66%.
Protocol Fees
Steadefi charges a 2% management fee annually on the overall value of the vault, as well as a 20% fee on earned yields from the underlying protocol.
These fees are maintained in the treasury for $esSTEADY dividend staking.
Risks
Level traders make consistent and massive gains on the platform
A considerable price drop of the volatile assets: BTC, ETH, and/or BNB (BNB chain only)
Basic smart contract risks
Backtest Results
We conducted backtests from December 2022 - July 2023 to show how the 3x Long Senior LLP Vault would have performed over the lifetime of the tranche assuming a fixed fee APR of 60% and not including LVL emissions.
Uptrending and Sideways Market (Dec 23rd 2022 - July 20th 2023)
Overall PnL: 153%
SLLP Overall change: 6.53%
# of Rebalances: 6
Accumulated SLLP Yield: 641%
The Vault earned over 23x more than SLLP.
Conclusion
Though SLLP experienced only a moderate rise in value over this ~6 month period, the 3x Long Senior Vault grew exponentially thanks to increased leverage through rebalances during dramatic upswings in the market.
