DAO Citadel
DAO Citadel is a crypto ETF investment strategy. ETF strategies are known to make investor’s money over the long run beating the index.
What is Traditional Market Weighted Index Strategy?
A regular market-weighted approach is a basis for many ETF or index funds. Cash is allocated based on the market capitalizations of index components. For example, the larger a company’s equity market cap, the bigger its representation in a stock market index.
How does the Investing Methodology work?
In this case, BTC, with a dominance of slightly under 50%, would comprise almost half our index value. The remaining assets would be distributed among ETH, stable coins, and other alts, loosely based around their market caps, with some liberties taken to overweight some components.
This portfolio is established with the following weights:
Bitcoin - 45%
Ethereum - 35%
Ethereum-based Alts - 15%
Stablecoins - 5%
The Twist: What are we doing differently?
Instead of taking only a long position on these cryptocurrencies, our strategy pairs up positions to enjoy compounded yield farming rewards. For example, instead of holding outright positions in spot BTC and ETH, what we do instead is to provide WBTC and ETH liquidity, as a pair, to a platform like SushiSwap.
This has the benefit of generating different income streams:
Price appreciation on the crypto assets held
Trading fees as a DEX liquidity provider
Yield farming incentives (SUSHI, CRV, PICKLE)
How are we allocating our portfolio?
This vault strategy pairs up our positions as follows:
30% as ERC20 BTC Exposure: Bitcoin (15% WBTC, 15% HBTC) Platform: Curve Liquidity Pair: WBTC-HBTC Incentive: CRV
30% as WBTC-ETH Exposure: Bitcoin and Ethereum (15% WBTC, 15% ETH) Platform: SushiSwap LP staked on Pickle Liquidity: WBTC-ETH Incentive: PICKLE & SUSHI
30% as DPI-ETH Exposure: Ethereum-based DeFi alts in the form of the DeFi Pulse Index, and Ethereum (15% DPI, 15% ETH) Platform: SushiSwap Liquidity: DPI-ETH Incentive: SUSHI
10% as DAI-ETH Exposure: DAI and Ethereum (5% DAI, 5% ETH) Platform: SushiSwap LP staked on Pickle Liquidity: DAI-ETH Incentive: PICKLE & SUSHI
How do we grow our portfolio?
Incentives earned from yield farming these pairs would be sold at least once a day and used to buy back more LPs so that investors grow their portfolio value over time. This automatic compounding is done by our smart contracts.
Do you rebalance the portfolio?
The portfolio will be rebalanced at least twice daily to reset the strategy back to its standard allocations and weights laid out above so that you will always maintain an ideal allocation!
What are the risks associated?
Providing liquidity to DEX pools comes with the risk of impermanent loss, where your holdings in an outperforming asset within a pair decrease if there is a pronounced divergence over time between the values of both components. This strategy comes with a significant risk of impermanent loss! Also, as it is still an early-stage innovation, DeFi smart contract vulnerabilities may lead to investors losing all their capital.
What would be the estimated APY from the ETF strategy?
APY is extremely volatile as it is dependent on a lot of variables especially the performance of the underlying assets, however investing in this strategy will definitely give you a better APY than just holding spot positions. The APY shown in the graph is largely driven by the performance of the underlying assets.
The yield farming is expected to provide an additional ~10%-15% APY compared to holding spot positions.
What are the fees for DAO Citadel Vault?
Besides the standard 0.5%-1% deposit fees and 20% profit sharing fees (see here for more details), there is 10% fee on the yield farmed which is used pay the gas fees associated with harvesting rewards and depositing LPs.
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