Steadefi is a new protocol and its strategy vaults have not been audited at the time of this writing. Some strategies are currently undergoing testing. We also highly recommend you read the full whitepaper to familiarize yourself with the entire project and associated risks and risk management strategies.
Steadefi is setting out to overcome several problem areas involved with yield farming and leveraged strategies including impermanent loss, liquidation, unpredictable returns and APYs, and excessive position management. To do this, Steadefi has plans to implement auto-rebalancing of positions to reduce impermanent loss, real yields that are far more predictable, auto-compounding of earned yields, and giving users access to historical data to help them with their overall “market view.”
There are two main ways to make money on Steadefi: lending pools and strategy vaults. Users deposit funds into a lending pool which are then borrowed by other users taking out 3x leveraged positions in strategy vaults. The lenders earn borrow fees and vault users earn based on the value and type of their position (whether it’s short, long, or neutral). Steadefi also uses several hedging strategies to help with risk management.
Steadefi currently offers seven strategy vaults, all with tokens that are readily accessible and used often ($USDC, Avax, and now $GLP). Let’s look at the inner workings of the newest strategy vault that uses $GLP which is the liquidity token for the popular leveraged trading site called GMX.
New $GLP Strategy Vault
At the time of this writing, the 3X Long GLP GMX strategy vault is in alpha testing.
$GLP “consists of an index of assets used for swaps and leverage trading,” including $Avax, $BTC, and $USDC. It functions as the liquidity token for GMX.
According to the thesis for the new $GLP strategy:
“This vault is suitable for depositors who want to auto-compound the AVAX yield from the GLP on GMX, while also benefitting from the price appreciation of the GLP’s volatile assets.
Essentially, this vault is best if you believe:
→ BTC, ETH, and AVAX will continue in an upward trend.
→ GMX will continue to attract traders for earning fees.
→ GMX perp traders will continue to lose more than they gain.
The yields earned in the vault come from minting/burning, swaps, liquidation, and margin trading fees, and they are automatically compounded back into more GLP.”
The docs also give a great overview of how a leveraged trade works and discuss the risks and results from backtesting as well as drawing some of their own conclusions about the strategy.
It’s great to see so many new DeFi protocols building right now. Some of the problems of the previous iteration of DeFi are being tackled by this new round of builders, and this will benefit all DeFi investors in the long run. Additionally, as trading bots and artificial intelligence becomes more popular, we can expect to see this technology increasingly used in DeFi. Steadefi is brand new but once testing is done and its contracts have been audited, it might be one to keep your eye on. Cheers!
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