Thesis
This vault is suitable for depositors who want to earn yield in USDC, from fees in the AVAX-USDC TraderJoeV1 swap pool, while believing that the price of AVAX will trend sideways with low volatility.
Essentially, if you believe that the price of AVAX will remain in low volatility for a long period of time, 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 reducing losses due to small price swings of AVAX.
Implementation
- Depositor deposits USDC to the vault and receives svTokens
3N-AVAXUSDC-TJ
- Vault optimally swaps USDC 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 equal to 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
3N-AVAXUSDC-TJand receives USDC
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
- Volatility of AVAX price increases, resulting in increased costs incurred due to more rebalances executed
- Higher fees incurred due to higher price slippage incurred during rebalancing
Backtest Results
