DEFI+S: discuss adding holdings and rebalancing

pie frens!

DeFi+S currently has 6 holdings.

:heavy_plus_sign::pie: I’d like to talk about adding 3-6 holdings to DeFi+S

At the end of this post you’ll find a sheet (“Small/Mid Cap Basket”) listing 42 candidate tokens that we can consider. I selected them by using the following criteria:

  1. DeFi related
  2. Market cap between $75MM and $1000MM
  3. Have been interacted with by at least 100 wallets that have interacted with pies. I spot checked the few dozen eligible tokens that were in fewer (0-99) wallets to make sure that i didn’t miss anything.

:dart: Aims

My feeling is that given DeFi+S’s importance as a component of DeFi++ and BCP, it should be a broader index

  • Track the small/midcap market more closely
  • Reduce volatility
  • Make DeFi+S a more attractive standalone investment
  • Add yield bearing strategies and turn +S into a PieVault

Current state of the pie (1 month return 0.3%)

Holdings: UMA, Ren, Loopring, Balancer, pNetwork, and Enzyme (MLN)

:custard: Tiramisu

https://plain-shape-1942.on.fleek.co/?json=https://api.npoint.io/0bda3e99e4e1d638bd3b


:chart_with_upwards_trend: Small/Mid Cap Basket (1 month return 3.5%)

:custard: Tiramisu: (messy) output for the entire list of candidates

https://plain-shape-1942.on.fleek.co/?json=https://api.npoint.io/49beb763bf62528bf02f

Just the correlations:

:pencil: Sheet

This sheet contains the 42 candidates. I added some Coingecko data & computed the correlation between each token and DeFi+S using Tiramisu and added that as well.

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How are you thinking about the weights of the new assets? It’s been a while but I remember portfolio optimization methods (not sure if you did min-var or max-sharpe) was pretty dependent on the covar matrix and esp if some assets are pretty illiquid, looking different time intervals or daily vs weekly returns could have a big diff. I have to imagine all the assets in here are pretty correlated except maybe like MIR. I’m thinking about just selecting 5 most liquid assets in each category type and then just market cap weighting it but not sure if you guys prefer a more systemic approach towards portfolio construction.

Interested in making Defi+S a PieVault as well. Small cap is always attractive for high growth opportunity.

I am interested in adding ALCX.

And potentially INDEX though I think there is a case that one could be included in a pie focused on investment diversification DAO governance tokens. Meta-meta-governance potential.

Will let others chime in on what they may be interested in adding to Defi+S and how to handle allocations.

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Index and FLX maybe?

I really want to see some insurance products as well added to a pie.

I’d like to see Nexus Mutual or another insurance product too.

I’d also like 1inch.

I’d be very interested in adding ALCX, RSR, and BADGER. All three have staking rewards (or will in the case of RSR). ALCX is a novel project that I think everyone can agree is a good idea, RSR is a novel approach to an existing idea that is probably the risky suggestion here, and badger is the only dao focused 100% on yield for the currently largest crypto asset.

I also like Mirror Protocol because I like the project, I like including Terra, and I like that it is (right now) the least correlated with everything else.

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Mirror is extremely interesting. The synthetic asset liquidity mining with stable coin is a really cool way to cash flow an asset that is uncorrelated to crypto.

I like Mirror exposure if possible.

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Thank you @Cass for posting this, I had plans to draft up a proposal to rebalance this etf or create a new one a while ago but I was too busy.

I think the obvious thing to do is to green-light any and all coins that currently offer staking, this includes:

1inch, (DEX aggregator)
alpha, (leveraged yield farming, price action has been strong lately)
alchemix, (magic money printer?)
badger, (bringing btc to DeFi
hegic, (idk it has staking tho I think)
farm (yield farming made simple)

I’m a big fan of all of these projects based on what they provide to the crypto ecosystem alone and the benefits of tailoring our etf toward staking strategies are plain to see: sweet sweet underlying yield!

Secondarily I would love to see $RUNE, $MATIC and $RGT

$RUNE because it is used by nodes in the THORchain project. As THORchain is a cross-chain project with BSC, ETH, and Bitcoin, $RUNE naturally inherits some of the value of the things it’s paired with.

$MATIC is currently the most used commit chain / L2 ethereum scaling solution that I’m aware of. The ecosystem there is flourishing and transactions are .0001 cent each. Also, the price action is crazy strong!

$RGT because daddy Tetranode likes it. :man_shrugging: haters mad

As for tokens without easy yield opportunities offered that have already been mentioned, I would love to see more structured arguments put forth that answer “why” we should include it. There are many projects out there but it is unreasonable to expect a user of piedao to be up to date on all of them, so make a pitch! And in the words of @pepexbt ‘99% of projects are vapor built by peanut brains trying to profit off crypto.’ That quote is especially relevant when speaking in regard to smaller market caps, so do your research before expecting support!

P.S. <3

I took forum and discord feedback, removed the items that are already in a pie, removed some things that would not make sense (RAI), removed things that are in the INFRA pie proposal (notably 1inch) and used a teeny bit of editorial license :wink:

Came up with the following shortlist:

Alchemix
Alpha Finance
Augur
Badger DAO
district0x
Gnosis
Harvest Finance
Hegic
Index Cooperative
Keep Network
Kleros
Mirror Protocol
Nexus Mutual
Perpetual Protocol
Request
Reserve Rights Token
Tornado Cash
Vesper Finance

Strategies

I haven’t researched which strategies are available for each token but here are some that I know offer staking: Alchemix, Alpha, Hegic, district0x.

Correlations

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I’d definitely support ALCX, INDEX, TORN, NXM, HEGIC and BADGER.

I went ahead and looked up strategies for the above. I’m not sure if we should use them to strongly influence position, but they are worth having on hand.

Token Strat APY
Alchemix Stake Via Alchemix 129.15%
Alpha Finance Stake via Alpha 7.31%
Augur
Badger DAO bBadger via Badger Dao 9.28%
district0x Staking does not yeild rewards
Gnosis
Harvest Finance Stake via Harvest 42.11%
Hegic Stake via zlot.finance as hegic requires lot size of 888k 23.24%
Index Cooperative
Keep Network
Kleros Staking via Kleros 8.53%
Mirror Protocol
Nexus Mutual Staking to provide insurance to badger DAO is the max 2% APY 2%
Perpetual Protocol Staking via perp 107%
Request Staking not live yet
Reserve Rights Token Staking not live yet
Tornado Cash
Vesper Finance Stake vis vesper 56.24%
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so do we do a March Madness style bracket now :wink:

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@Cass – I love the idea of a bracket, that would be great fun. Obviously we may need to take some liberties with the eventual outcome but it would result in some informative discussions.

In full support of these tokens and their APYs!

I’ve thought about the small cap pie since May and i thought I’d share what I personally would like in case anyone has comments:

  • DEFI+X: Small cap/emerging/degen pie which is actively managed and has a threshold for market cap. An investment vehicle for people who want exposure to riskier emerging tokens but don’t want to constantly watch the market.

  • DEFI+S: More mature mid cap pie that is part of DeFi++. More passive/criteria based management. When an asset in the DEFI+X small cap pie reaches the mid cap or maturity threshold, it should be removed and considered for addition to DEFI+S.

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Cass, wonderful, I trust the vagueries of percentages and drifting for the big players but would really appreciate some management at the small end. And, not by my own effort :sweat_smile:

Your proposed DEFI+X may be somewhere we are more willing to loosen our token age and audit parameters.

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I really like that concept, of offering a degen pie that is very upfront about us scaling back our usual diligence to feed the apes

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Really like your thinking here! :ok_hand:

Would be great to propose an incentive through KPI options for the team in charge of developing + actively managing DEFI+X.
@Cass would’t you be a great lead for that? :blush:

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