Introducing DAOventures Flagship Product: The DAO Citadel Vault
Introduction
DAOventures introduces a highly experimental portfolio strategy to take advantage of rising crypto asset prices, and liquidity mining rewards. Named the Citadel vault, this strategy is a market weighted index, but with a modern twist.
The Meme: Citadel
Crypto Twitter often references an imaginary promised land in the not so distant future known as the Citadel. The meme is based on a Reddit post written by a time traveller, supposedly from the year 2025, who had gone back in time to the year 2013 to inform bitcoiners what the utopia of the future looks like. If you have bitcoin, you can enter the Citadel. If you don’t, no entry for you. This strategy aims to be your passport into the Citadel!
Traditional Market Weighted Index Strategies
A regular market weighted approach is the 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.
Investing Methodology
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, stablecoins, 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
However, 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 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 both WBTC and ETH
- Trading fees as a DEX liquidity provider
- Yield farming incentives like SUSHI
Allocations
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
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 Onsen
- Liquidity: DPI-ETH
- Incentive: SUSHI
10% as DAI-ETH
- Exposure: Cash and Ethereum (5% DAI, 5% ETH)
- Platform: SushiSwap LP staked on Pickle
- Liquidity: DAI-ETH
- Incentive: PICKLE
Growth
Incentives earned from yield farming these pairs would be sold 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.
The portfolio will be rebalanced quarterly to reset the strategy back to its standard allocations and weights laid out above, so that you will always maintain an ideal allocation to bitcoin!
Risks
Providing liquidity to DEX pools comes with the risk of impermanent loss, where your holdings in an outperforming asset within a pair decreases if there is a pronounced divergence over time between the values of both components. This strategy comes with significant risk of impermanent loss!
Because it is still an early stage innovation, DeFi smart contract vulnerabilities may lead to investors losing all their capital.
About DAOventures
DAOventures is a DeFi robo-advisor and automated money management platform. Imagine “Robinhood for DeFi”. It is our mission to make DeFi simpler, accessible & inclusive. We believe in creating a simpler, more accessible, and more open world that is permissionless, inclusive, and guided by our DNA of continuous learning, integrity, and transparency.
