On July 18, Midas.Investments CEO Trevor joined our Reddit to answer the questions from the crypto community. More than 50 questions have been asked by our active community, but we have chosen only the most interesting ones:
Question 1: How was total AUM affected by the crypto winter? Does a lower AUM affect your current investment strategy?
Trevor: In the last 4 months, we have developed a lot of amazing stuff inside that allows us to digest much more assets. I am glad that the intense asset inflow stopped since it gave us some breathing time to prepare for the next phase. At this time we have hired 5 new developers in the investment department, more researchers, etc.
In the next 3 months, we will finish two more liquid strategies, hire more investment guys and finish our DeFi infrastructure.
I am also happy that crypto winter started since it gives us plenty of room to accumulate cash-flow tokens, like CVX and CRV, at discount prices during the next 10 months, which will generate enough yield to cover the whole Midas for the next three years.
Question 2: Please explain how the Midas worst-case scenario would be managed? If the recession, through no fault of Midas, made it impossible to continue the project, how would funds be managed, etc.
Trevor: This is a highly unlikely scenario since we have strategies covering every type of market condition. During the upside trend, we are benefiting from algorithmic strategies. During the downside trend (recession) we are accumulating more crypto since when you are shorting, you are earning more crypto through algo tools. During the flat market, our DeFi LP positions thrive due to a lack of impermanent loss.
If there will be an event, where we have to close our business due to outside factors (extreme regulations, for example), we will withdraw the funds from strategies, add them to withdrawal wallets and notify the users to withdraw.
If our business model will not work, we will pivot to the market needs (like we did 5 times already) and fundraise to accelerate the new model, if needed.
Question 3: Could you give us an update on Midas’ audit and/or application for license?
Trevor: We have received the license for asset management in Switzerland, but it is not applicable to our current activities with Midas. It creates a lot of restrictions and adds huge costs to manage. So, Swiss asset management is something like side-business that we are willing to explore in a year or two. So, we had to start with a new licensing process. Dubai license will be received as soon as UAE starts providing licenses. We are monitoring the situation every week to see changes in licensing. Meanwhile, we are bootstrapping other company structures and hoping to get Dubai asset management in the next few months, but it depends on UAE government.
After this, we will hire https://www.armaninollp.com as the auditor to make a report on assets/liabilities. ETA is Autumn.
Question 4: Would there be any scenario where users would not be able to withdraw their funds without warning?
Trevor: We have never locked withdrawals and were perfect at executing withdrawals in every extreme market condition.
We deeply analyze liquidity for every investment strategy to understand the constraints. Analyzing real-time order book liquidity for algorithmic tools, analyzing protocol’s TVL and token’s available liquidity. We have alerts on the most crucial metrics of protocol, like liquidity decrease.
It helped us to dodge UST and stables depegging in May, stETH depeg, and other events during this cycle.
By this message, I am trying to reveal how we are doing stuff because the simple answer like “hey, we will not do this” will not work
Trevor: Yes, Midas will have an app. We have hired a lot of developers (for platform, operational and investment departments), which will now help us to release new stuff much faster.
I understand the urgent need for an app, and we will start getting apple developer’s license in the next two months.
The platform back-end can be easily converted to an app, so there are no problems with that.
Question 6: What’s the difference between Midas platform and the likes of Celsius, 3AC and what are the similarities between Midas platforms and exchanges like Binance, Kucoin?
Trevor: We are not lenders. Lenders like Celcius are earning the margin between the rates they give and the rates they lend to other parties. We are not the exchange. Exchange is profiting from volumes, market-making and selling their products.
We are the asset management that builds its own strategies on top of DeFi and the derivative market. So, we need to keep our year performance higher than our rates without exposing the portfolio to liquidity and directional risks. A lot of our inner investment work is dedicated specifically to risk management. It allows us to balance the upside and liquidity management. It is not that hard task with our current AUM and development.
Question 7: How you can offer such high APRs sustainably?
Trevor: We are investing a lot of resources into building software systems in DeFi and algorithmic tools. So, we are always ahead in DeFi and benefiting from crypto chaos from the portfolio of algorithmic instruments.
In the near future, we are thinking to adjust rates and fully reveal the yield behind those rates to become the first platform with a fully transparent yield, but a lot of discussions is made about how to do that.
Question 8: How do you generate a 10% yield on an asset like BTC?
Trevor: The main source of yield for BTC is the market-neutral funding rate strategy + no time in market algo (trades only for two minutes) + no leverage directional long and short algo. It generates 30% – 100% APR on the strategies, but due to our risk metrics, we are not exposing more than 10% to algo, based on market liquidity.
The other part of BTC portfolio is used as the collateral for stable strategies with algorithmic 24/7 monitored health-factor more than 2.0 with liquid DeFi stable strategies.