Introducing Avalanche ETF Index Fund
Avalanche is the blockchain of the moment. It has cemented its position as the fastest-growing blockchain at the moment and recently pushed Dogecoin out of the top 10 to become the 10th largest cryptocurrency by market capitalization. In entering the top 10, $AVAX saw its circulating market valuation for the first time reach $30.60 billion. This development has seen its price soar by 100% amidst all of the market corrections happening.
Avalanche network raised $230 million to support projects and developers in the DeFi ecosystem. It is on top of these projects we at DAOventures build on. And we enjoy very high returns while mitigating risks associated with investing with some of the best features we use in our Ethereum strategy and other strategies in our folder.
Here are the 4 strategies we have launched on our Dapp.
1. DeXToken-AVAX strategy
Estimated returns: 82.01% as of Oct 2021
With this strategy, half of the investor’s funds are invested in the top 3 decentralized exchange (DEX) tokens on the Avalanche blockchain and the other half in AVAX trade pairs. These top 3 tokens include Trader Joe($JOE), Lydia Finance($LYD) and Pangolin Exchange($PNG). Each of these DEX tokens is paired with AVAX to form an LP token that can be staked into farms and earn rewards.
- JOE 22.5% (AVAX-JOE pair)
- PNG 22.5% (AVAX-PNG pair)
- LYD 5% (AVAX-LYD pair)
- AVAX 50%
The smart contract will sell these rewards to buy more LP tokens and then stake back the LP tokens bought into the farms again to earn more. The process will be rinsed and repeated (also known as auto-compounding) and earn more money for the investor. It is important to note that each pair has its proportion and this is based on the liquidity available for each pool. With our strategy, we rebalance it with new funds for investment and achieve a “buy-low” entry and risk mitigation.
The DEXes will support their native tokens by emphasizing their native pools and giving more weight to rewards distribution. So we can expect a higher returns from the DEXes this way.
2. DeXToken-Stablecoin strategy
Estimated returns: 178.41% as of Oct 2021
This strategy has the same approach as the above-explained strategy but it replaces AVAX with Stablecoins (USDT, USDC & DAI). The thinking behind this strategy is this:
Volatility affects tokens and doesn’t do the same for stablecoins. A pair with a stablecoin means it will experience half the volatility it would ordinarily have with the other tokens.
While the DEXes tokens will have better APRs because of the support they receive from their DEXes, we can still expect better growth on the value of these LP tokens because there are a lot of trading fees that come from DEXToken-Stablecoin pools and the DEXToken-AVAX pools above.
- JOE 40% (USDC-JOE pair)
- PNG 5% (USDT-PNG pair)
- LYD 5% (DAI-LYD pair)
- USDT 5%
- USDC 40%
- DAI 5%
*Stablecoins will be preferably allocated as 50% of the funds.
3. AVAX-Stablecoin strategy
Estimated returns: 63.05% as of Oct 2021
This strategy has the same approaches as the above-listed strategies but it replaces DEXToken with AVAX. Compared to AVAX, DEXToken is more volatile and if you aren’t looking at taking part in any volatility token in Avalanche but believe in the growth of the Avalanche blockchain, this is the perfect strategy for you.
Even though the return is lower than the other strategies above, it is still better than the ETH-Stablecoin pools on Ethereum. And we all know compared to Avalanche performance and growth rate, AVAX is still very undervalued.
- AVAX 50%
- DAI 25% (DAI-AVAX pair)
- USDC 22.5% (USDC-AVAX pair)
- USDT 2.5% (USDT-AVAX pair)
*Stablecoins will be preferably allocated as 50% of the funds.
4. Stablecoin-Stablecoin strategy
Estimated returns: 20.13% as of Oct 2021
The approaches above apply in this strategy too but it only uses stablecoins as pairs. The advantage of investing in pools that are fully stablecoins is that there is no volatility on the stablecoins themselves and no impermanent loss is incurred in the full stablecoin pools.
Since this is a double-stablecoins pool we can expect that the return will be lower than the strategies above. Even at this, we can still achieve 2 digits returns compared to full-stablecoin pools on Ethereum or Polygon.
- USDT 33.33%
- USDC 33.33%
- DAI 33.33%
The actual pairs look like this:
- USDT-USDC pair on Trader Joe
- USDT-DAI pair on Trader Joe
- USDC-DAI pair on Trader Joe
Portfolio Growth
The incentives a user earns from yield farming these pairs would be compounded automatically by DAOventures smart contracts. This would ensure that the portfolio is rebalanced so that the strategy can reset back to its standard allocations as shown above. This will maintain a balanced allocation as a result.
Risks
A standard risk when it comes to providing liquidity on decentralized exchanges is Impermanent loss. To know more about impermanent loss, you can check this article, made by Binance Academy.
Fees
Besides the standard 0.5%-1% deposit fees and 20% profit sharing fees (see here for more details), there is a 10% fee on the yield farmed which is used to pay the gas fees associated with harvesting rewards and depositing LPs.
About DAOventures
DAOventures is a DeFi ETF Index Fund for fund managers and crypto investors. Its mission is to make DeFi simpler, more accessible, and inclusive. DAOventures provides baskets of auto-compounding LPs, upon innovatively designed crypto ETF index funds.
