Thesis
This vault is suitable for depositors who want to auto-compound the AVAX/ETH yield from the GLP on GMX, while also benefitting from the price appreciation of the GLP’s volatile assets.
Essentially, this vault is best if you believe:
→ BTC, ETH, and the other volatile assets will continue in an upward trend. 💹
→ GMX will continue to attract traders for earning fees. 🧲
→ GMX perp traders will continue to lose more than they gain. 🕗
Overview
Using 3x leverage on deposits, this strategy earns boosted yields from GLP staking on the GMX derivatives protocol. The yields come from minting/burning, swaps, liquidation, and margin trading fees, and they are automatically compounded back into more GLP.
Chains
- Arbitrum
- Avalanche
Implementation
- User deposits 100 USDC (example asset) to GLP Long Vault and receives svToken receipt.
- Vault borrows 200 USDC from Lending Pool. Total now 300 USDC.
- 300 USDC used to mint GLP, which is automatically staked.
- Vault keeper (bots) autocompounds the AVAX or ETH yield for more GLP.
- Vault keeper (bots) continually check position status in order to rebalance if necessary.
- When ready, user withdraws position from the vault in USDC, which burns the svToken.
Due to variable fees on the GMX platform, there may be some slippage on deposit and withdraw. Users can always check the current fee % here: https://app.gmx.io/#/buy
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 GLP, 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 $esSDY dividend staking.
Risks
- GMX traders make consistent and massive gains on the platform
- A considerable price drop of the volatile assets (ETH, BTC, and/or AVAX)
- An exploit, price manipulation, or code issue occurs with the GMX protocol
Basic market exposure for GLP:
$100 of GLP = $30 BTC, $9 ETH, $6 AVAX, $55 USDC
Market exposure for our 3x Long Vault:
$100 3x Long GLP deposit = $90 BTC, $27 ETH, $18 AVAX, $165 USDC (1.32x total market exposure)
These figures are based on current GLP weights (3/7/2023) and are subject to change.
Backtest Results
We conducted backtests from June 2022 to Jan 2023. This specific timeframe aligns more with the direction of the vault: a long view toward the basket of assets in the GLP.
In this backtest, we’ve tried to show the performance and expectations on an uptrend, downtrend and a combo of both.
Please click the text below to see the backtest results:
#1: Combo of both uptrending and downtrending markets (2022/06/18-2023/02/01)
#2: Downtrending market (2022/08/15-2023/01/01)
#3: Uptrending Market (2023/01/01-2023/02/01)
Conclusions
During a downtrending market, our vault will rebalance to reduce leverage to reduce loss.
During an uptrending market, our vault will rebalance to increase leverage and profits.
In all scenarios, the vault will continue earning and compounding to accumulate more yield to GLP.