Thesis
This vault is suitable for depositors who want to earn yield in AVAX, from fees in the AVAX-USDC TraderJoeV1 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 JOE rewards, while having greater exposure to the price of AVAX.
Implementation
- Depositor deposits AVAX (or WAVAX) to the vault and receives svTokens
3L-AVAXUSDC-TJ
- 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 TraderJoeV1, receiving AVAX-USDC JLP tokens
- Vault stakes AVAX-USDC JLP tokens in TraderJoeV1 farm, earning JOE
- Keepers auto-compound JOE tokens for more AVAX-USDC JLP 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-TJand 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
