On August 12, Midas.Investments CEO Trevor and Chief Operations Officer Dan joined our YouTube live stream to answer some important questions from the crypto community. The main topic of the live stream was the release of Midas’ CeDeFi strategies, which is a major achievement for our company.
From all the questions asked by the community members, a total of 10 were chosen, and the questioners were each rewarded with $100 worth of Midas tokens.
Question 1: What does the Midas team think about the DeFi market as a whole? Are you foreseeing a new tech/hype coming out?
Trevor: I really think of the DeFi market as the infrastructure for building products and services for various parties, like protocols, users, institutions, and any type of transactional and financial operations. DeFi as the technology has unlimited innovations and we will unpack these innovations one year after another.
The innovations will bring new tokenomics, new opportunities, new investment opportunities, the wealth will be exchanged between protocols and projects, and so on. This is basically the evolution of innovation.
Currently, we see with DeFi that a lot of amazing developers are working to build this new financial infrastructure that the entire world will use in the next 10 to 20 years. This makes me really excited about everything that some genius minds that are working now on DeFi will try to invent.
I am also eager to see how some not honest participants of the market will fork every innovation that the DeFi market will have. Once some innovation starts to drop out like the liquidity pools on Uniswap it immediately gets forked. It applies to a lot of evolution staff where there is the survivorship of the most fit.
We have a lot of amazing innovations, a lot of amazing protocols, and a lot of amazing things, but to survive you need to be the most adopted to the market. Protocols will change, innovations will change, new hypes will come, new tech will come, and we’re sitting here watching as the weather changes.
Question 2: How many CeDeFi strategies are expected to be made available by end of the year?
Trevor: We are aiming a lot, maybe 20. But the main thing here is not the release of strategies, but strategies as the creation of new investment products. We are still playing with the framework of creating investment products since we need to make the due diligence and build it based on the needs of investors.
Based on our vision for the market, we will simply launch a bunch of products one at a time. In the next week, we will start working on new strategies. Based on the feedback that we have received, we will analyze the market and pick the most interesting opportunities. We plan to scale a lot and we will keep it iterational — getting the feedback, adapting, and making a better interface, better explanations, and better everything.
We only launched CeDeFi strategies two days ago, and this is our first take. I think it went really smoothly, but there are a lot of things that we can improve. We are already working on the update on the interface, and statistics of the strategies.
We plan to release more data next week on how the ratios and the Ethereum price are correlated with these investment instruments. We will give formulas, and spreadsheets to play with. We have a lot of amazing stuff prepared and working hard to deliver it.
Anya: How did the community receive new strategies? You have been looking closely at the feedback from the community, so what are your thoughts on that?
Trevor: The most amazing part and genuinely one of the most exciting moments was when our co-founder Ilya messaged me eight minutes after we released the strategies and said we are out of liquidity for the soft long strategy. I said that is really great.
I understand the complexity and I am really proud of our community to be able to dig into this strategy, discuss it, ask questions, dive into the mathematics behind it, and dive into everything and decompose those strategies. And we saw a lot of interest and I am thankful to the community for responding to it that well.
My inner wish was that the community would start playing with these strategies, and this is my dream basically to create a bunch of toys that you can play with your portfolio. I really expect the CeDeFi strategies to become the catalyst for the community discussion. And we may launch some tournaments to see which portfolio will perform best.
Dan: The reaction has been overwhelmingly positive. After the team behind the scenes has been putting in work for so many months on this vision, it’s really good and encouraging to see the community’s reactions, which shows the new vision has legs to grow.
Question 3: How much money can those 3 strategies handle in maximum terms to stay effective (100 million or more?)
Trevor: Each strategy comes with strict thresholds. We have these thresholds for our fixed strategies and we are applying them to the CeDeFi strategies, which is like not taking more than x percent from the top protocol value, from the pool value, and from our fund’s value.
There are really strict constraints because if you have too much liquidity in some of the instruments it makes it really inefficient to exit this strategy in a short period of time. For the strategies listed, we have a threshold of between three and five million for each strategy. It can be increased for DeFi token farming by up to 20 million, but I am not sure if we want to take on this amount of capital.
Question 4: What are the risks associated with these three strategies, respectively, and how does Midas plan to mitigate these risks to achieve the targeted ROIs, together with the risks of using the leveraged DeFi?
Trevor: We have put a lot of work into decomposing all the risks in our wiki. For every CeDeFi strategy, there are systematic of the coins getting some Black Swan event, stablecoins can lose peg, something about Ethereum might change after Proof-of-Stake or other similar risks for underlying assets.
The second layer of the risk is the protocol risk, which means any of the protocols included in these strategies can have some vulnerabilities. We are making our part the full due diligence, we are digging into the audits to see what the auditors have found, and trying to analyze the perspective of how the protocol can get hacked. In addition, Alpha Homora and Convex are top-notch in terms of security.
The third layer is the liquidity risk. For instance, the utilization rate in Alpha Homora can go really high. In this case, we have the right to stop this strategy if it becomes not really effective. We have all the alerts for the real available liquidity, they are in the protocol. For example, for lending protocols, we are monitoring if we are able to exit our position in one click, or if there will be enough liquidity. These are DeFi risks that we are really working with.
Obviously, you have the investment risk which is about the directional ways of this strategy. This means that if you are going to soft long and Ethereum drops in price, the value of the soft long Ethereum will drop too. This is entwined into the strategies and this is the only way to have the directional strategies. You have the upside, you have the downside.
Question 5: How is the yield generation for DEFIYAP different from how the DEFI LP strategy works? I was under the impression that it similarly used LPs. Is the YAP safer than the strategy in the long term?
Dan: The products are different. Obviously, you’ve got different assets within the product but how it’s managed is different. With DEFIYAP you’ve strict underlying assets that are built within the DEFIYAP. Those are held in underlying assets and they root in the strategies that the DEFI team built for those underlying assets.
The DeFi token farming is just a basket of incentivized liquidity pools and it’s incentivized on Convex Finance, which represents a different model from the one that we’re taking on DEFIYAP. They do represent different risk profiles, and they are fundamentally different products.
Question 6: What are the plans to rebalance SLETH and SSETH? There isn’t much documentation on how this rebalancing process will work as the positions drift a bit with ETH price changes.
Trevor: The rebalancing basically occurs each time we add or deduct liquidity. We add liquidity if we are reaching the limits for this lab. Basically on the launch, we added $300,000 to the strategy and added it as the tokens on the platform. Once all of this is bought up we are initiating the add liquidity process and this rebalances the strategy.
There are also other rebalancing mechanics if this strategy goes one way or another. Some strategies need our intervention to mitigate some risk, then we basically will trigger rebalance by adding more funds. We also have the right, at least until we are in the test phase of the CeDeFi strategy, to exit the strategy into stablecoins if we see something goes dramatically wrong.
If a strategy goes wrong, we will make the announcement and explain why we exit it, which would be the last resort. For example, if we see a depegging scenario for one of the stablecoins used in the strategy, we will immediately take out the funds on this similar address and change the strategy.
Anya: Since you have touched on this a little bit, what percentage of these strategies are automated, and what percentage is manually controlled?
Trevor: Currently, it’s done manually, which means that we have a specific department that manages positions. They are not CeDeFi analysts, rather they are doing the hard work by their hands. For most of the protocols, we have optimization. But since DeFi protocols change a lot, it really applies a lot of pressure to the IT department to constantly adapt to protocols.
And yes we have eyes on each of the strategies 24/7. This is what we call alerts, which means that we have the metrics for each of the strategies that we are using, including CeDeFi strategies. If these metrics go wrong, we send the alert and try to solve the issue.
Question 7: What effect will new CeDeFi strategies have on Midas token (buybacks with profit, buybacks with swap fee, or something like that?)
Dan: Obviously these products are very new right now. We haven’t got features that are integrated very closely to Midas token right now. However, discussions have already started, and we are bracing ideas on how to integrate the CeDeFi element of our platform into the Midas token.
One very simple solution could be flowing a percentage of the performance fee to Midas token, and almost treating it as a separate buyback scenario. We’re very very committed to having the Midas token at the center of our ecosystem. We will be linking these CeDeFi products to the token in one or more ways.
Question 8: Will there be a way to earn Midas token interests on these strategies as an option?
Dan: Obviously, the boost has been massively popular among the users. With the strategies as they are currently presented, there is a little bit of an issue to interweave that into the boost program because there are no actual payouts received. It’s how you integrate the two services together.
Whether or not it would be on the boost program is unknown under the current framework. But we always tend to find solutions to these problems. We have always in the last four and a half years. So I would be surprised if in the next few months we don’t find a proper solution, especially if we are looking to drive this towards being at the core of our platform.
Trevor: I think the model that works the best with the CeDeFi strategy and the Midas token can be the incentives on top of the investment strategies. Similar to how DeFi works, you basically attract attention to the most crucial part of your business model with additional tokenized incentives.
We discussed this briefly in the team because we were really focused on the core launch. But I think that one of the next steps will be not only integrating the value that Midas generates from the CeDeFi strategies to Midas token and also vice versa to transfer Midas token to signify strategies and basically creating this feedback loop that really speeds up the growth of the whole system.
Question 9: Would Midas ever change the way the fixed yield staking products are offered into a similar model as the CedeFi products, with on-chain viewable contracts, etc.?
Trevor: We really want to do this. Our step towards this is the release of the investment reports, basically sharing all the strategies that we have and all the way how we manage funds. The main issue with having all the fixed yield on-chain is basically sharing not only these strategies and the risk frameworks but also positioning size and the possible ways that it could play against us in terms of market manipulations.
We are not that big yet but in this case, we are looking forward to audits and verified balances that are higher than the liabilities. I think that with the investment report that will come each month and with this audit being verified that we have more balances than we have in the liabilities before investors, it will create this same effect without basically giving all the addresses that we are using. And we are changing addresses consistently.
Question 10: How much money has been transferred from the Midas token into new strategies? Is there enough negative flow out of Midas token to affect price in the future?
Dan: Since launch, there’s been no negative outflow of Midas tokens to the strategies. I checked around half an hour ago, there had been 1.2 million Midas tokens swapped in and out with a positive delta of $150,000. So, at this current time, there’s no mass movement of funds from Midas token to strategies.
There was a particular trend that I noticed of stables moving to the strategies, which I find interesting in these market conditions. But there has been no migration from Midas token itself – still remaining strong.
Question 11: If everyone wanted to withdraw their assets within a couple of days what would happen to Midas?
Trevor: It is possible to withdraw all the money that investors have. Answering the second question first, yes we would withdraw all the assets and basically, I think 85% of our portfolio is liquid and we will ask the last 10% to wait for a few days for our schedule of unlocking.
What will happen with Midas, I think we will work only on the CeDeFi strategies. If this event happens, basically it will mean that we need to start from scratch but we will start with the CeDeFi strategies as the basis and will basically create a portfolio of various investment strategies. We’ll go for fundraising, we will sell the equity of Midas and start everything.
Dan: Since all the assets are there, users can withdraw all those assets. It would be a heck of a lot of work for the DeFi team to close that down. But it is possible.
Question 12: With the new strategies, have you seen net in-flow assets into the platform, or have the transfers into the new strategies been mostly internal assets?
Trevor: Currently, I feel this is the internal transfer. Users are rebalancing their portfolio and testing and trying these new CeDeFi strategies but the most amazing thing that we got is that we have broken our record for the most active users on the platform at once. On average per day, up to 400 people are online on the Midas platform, this is the first time that we got that.
I really feel that people are really respectively careful about the CeDeFi platforms currently. I have nothing against it obviously, and I treat it with full respect. The current net flow from withdrawals and deposits is increasing slightly.
Dan: The net inflow since we launched the strategies is plus two million. What we’re seeing on swaps is that a lot of the inflow as Trevor said a lot is from users with a user id that is a little bit more from before the launch. There are some funds coming straight from new deposits into strategies but it is mainly from here.
Question 13: Will establishing similar positions in the SLETH and SSETH strategies result in a delta neutral strategy that will ultimately allow an investor to “safety” collect ROIs from fees and incentives?
Trevor: It is not correct to say this is delta neutral. The main thing for soft long is that we have recalculated and recreated the model, and we will share it the next week. Basically, if Ethereum makes plus 50%, the value of soft long Ethereum is 98% of the Ethereum price.
But if Ethereum goes parabolic, which means it goes like five times, then it implies a much higher impermanent loss because Ethereum rises five times and it will have around 70% mimicking the Ethereum price. This is happening because soft long has the leverage on the liquidity pool which means that the amount of ethereum and this strategy in liquidity pools is doubling, mimicking the initial deposit of Ethereum and it then just reduces since the permanent loss occurs during the growth. So it reduces the volatility of the asset but not that much.
For soft short, it does not have the leverage which means that it mimics the dynamic fall of the Ethereum not one to one but like 25% from the Ethereum declining. Basically, soft long and soft short Ethereum will create a position that is really not so volatile but still inclining toward the growth of Ethereum.
It means that if Ethereum starts dropping, this combination of the two assets of those two strategies will decrease. So it’s not a delta neutral strategy but it’s much less volatile than simply riding the waves on Ethereum and so on. Obviously, we have the fees collected, which means that it covers like 30% on top.
The soft long strategy will be performing much more efficiently if Ethereum will be in the range of $1,000 to $3000 during one year. You will earn a lot and will not lose exposure to Ethereum. Sharing some uh thoughts that we are doing in the background, we are working on the limit orders in swaps, so you will be able to apply limit orders to your investment strategies which means that you will be able to sell your investment strategy if it goes like plus 50% towards Ethereum or soft short.
Question 14: How does Midas plan to integrate Cedefi’s Strategy model into the real world and in the crypto space?
Trevor: I really feel that in like 10 years we will have the chance to fight against the biggest financial traditional markets. The DeFi industry will be much more mature and at this phase, DeFi will be much more adopted by institutions, customers, and retail, and it will be much easier to educate our products.
Basically, what can happen is us becoming the best asset management, the best fund in the world. I think it’s possible. It’s really ambitious words and I’m saying them for the first time. But with DeFi being more mature, it creates the competitive edge to beat all other institutional hedge funds and asset management firms in terms of managing assets for users, institutions, clients, retail, and so on. There will be some point in the future when Midas will be the main investment platform for the girls.