As reference, both options bring the cumulative allocation for the 3 larger cap holdings to ~70% (down from the current 80%).
I would personally consider the OPTION B as a good compromise for rebalancing, since redistributing the upside from runners without excessively affecting their momentum, while reallocating gains to smaller caps as an indexed product should be doing.
NOTE: From simulations performed, the 15 days Adjusted Market Cap (OPTION B) basically reflects an allocation based on a “Blended Market Cap” resulting by weighting in the 30d Market Cap and a lower range Market Cap (I did consider the 7days). Props to @fairshare for suggesting this perspective.
I’d propose to move this to vote, in order to expedite the rebalancing and avoiding further skewness induced by $AXS.
Shall some consensus be found around one of the proposed options, rebalancing could be ideally taking place as early as on this week, in conjunction with a required maintenance to be performed on the $PLAY index in order to reflect the migration of both $PUNK-BASIC & $MASK assets to the vault v2 recently introduced by NFTX.
PLAY started as a product to provide Gaming and NFTs exposure for investors. It did that pretty well and I understand there is now a desire to further narrow down the product and establish a policy for rebalancing, I’m not surprise to see different takes about that and I think it’s an issue with definitions.
Coming to a better definition of the product will in my opinion make it easy to define the rebalancing policy.
Is PLAY really an index?
I never liked the word index to describe Pies (even if I used it), I think it’s an incorrect term to describe tokenised portfolios which are Pies. Index investing have their tokens weighted based on their market capitalization, while we used that as a starting point to decide the initial allocations for Pies, as a community there is a clear desire to implement more criterias for weights and rebalancing than simple market capitalization making products like PLAY more similar to a smart-beta strategy.
The community input adds an element of active investing to passive investing.
Smart beta is also rules-based but the strategy can consider things like momentum, volatility and quality of an asset. I find super important to crack this point first, as it naturally guides the decision on rebalancing, for instance @kitblake makes a good observation about the state of the market and while I don’t believe trying to time it is advisable, factoring momentum into the rebalancing strategy is a good idea if properly measured.
What do you rather have?
Option A: Simple market-cap based weights, fixed rebalancing schedule (every N months), better suited to representing the market, requires little to no community input.
Option B: Rules-based approach taking in consideration multiple factors, dynamic rebalancing approach (when value X overn N%), aims of of lowering the costs (no uncessary rebalance) and generate alpha, requires community input.
Yeah, naming… We probably shouldn’t refer to these tokenized portfolios as indexes. Actually the word ‘Pie’ works really well. It captures the combinatory but selective aspect.
Of course it would be possible to setup a Pie that’s a straight index, e.g. composed of the Top 10 coins on CoinMarketCap. The criteria would be crystal clear and the ‘Pie-index’ wouldn’t need any management or community input. It would just run and adjust whenever there was a change in the Top 10.
But for typical Pies I appreciate hearing from the community (and especially in this forum). When @ChrisSavadge posted his constructive critique it really made me ruminate. Others responded with various ideas for criteria and I thought we could work out a list.
This could be taken to a logical extreme and the criteria could be coded. So IF the rules are quantifiable THEN we could put them in a smart contract. This would work fine for a Pie-index like the Top Ten. But for $PLAY I think it falls squarely into the “really bad idea” category.
As @alexintosh stated, there are other factors in play that we’d be wise to consider. Some of these are intangible, like buzz, sentiment, or bullish patterns in a chart. For these non-quantifiable factors I depend on the community. Personally I don’t have the knowledge or experience to invest in this subsector. But with the wisdom of the group it’s possible. It becomes a managed risk.
On a personal side. I don’t really see the point of having tokens with less than 1% allocation. I would even say 5% should be a minimum. Having 9 tokens with less than 2% allocation, looks more a lot of work in terms of rebalancing than a real advantage for the Index (Pie)
Then between A and B i don’t see a huge difference. So …
Definitely agree on $ILV while not familiar with $YGG: mind sharing some additional inputs?
Both seem to meet the liquidity requirements (side note: $YGG it’s included within the reach of Wintermute, same as PieDAO).
I’d be happy to propose a minimum 1% allocation for smaller Caps. More than that would possibly introduce liquidity bottlenecks fore some assets.
An additional inclusion IMO worth considering would be Blackpool Finance (BPT) BlackPool Finance - Metrics.
It would indirectly bring additional exposure to more NFTs (SORARE, etc), and PieVault would allow to stake the BPT for additional yield
I didn’t really follow the project, so it won’t be data driven. but they just did a MISO on Sushiswap and they raised $12.5 in about 2 minutes. There is a real hype around this project so it could be a nice addition.
yep could be a nice idea. Could add even more diversity
Yep would make more sense. IMO even less than 5% is not very useful, and it doesn’t really mean something. It’s more for a marketing purpose than a real interest to hold this token.
Following up on the clear preference emerged from this poll, I’ve been putting together a proposal of Prospectus for PLAY (inspired by the great work made by @saganaki for $SCALE), aimed at clarifying all aspects connected to:
eligibility criteria for inclusion in $PLAY (or asset removal)
methodology for asset allocation, including multiple criteria emerged from the community along the thread above
rules and procedure for rebalancing
You can check it out here
Please let me have any feedback!
Next envisioned steps:
Snapshot vote for acceptance/rejection of this prospectus (ETA: 20/08 → 22/08)
If 1) accepted, Snapshot vote on the inclusion of new underlying assets, if any (or removal of existing assets) based on newly established criteria (ETA: 23/08 → 25/08)
If 1) accepted, new $PLAY allocation based on newly established criteria + rebalancing (ETA: as early as 26/08 or 27/08, to be confirmed)
“Project connected to the development of the Metaverse ecosystem on Ethereum”. I agree with this criteria. What would this mean for the NFTX assets currently in PLAY that are collectibles and not metaverse related?
“Minimum allocation of 2% for each underlying asset” I agree with this as a minimum, should we also define a minimum starting allocation? (ie. “<2% will be rebalanced, newly added assets and newly rebalanced assets will have an allocation of 5% or more”)
“Max cumulative allocation of 60% for the top 3 large cap” An alternative would be defining “large cap” in terms market cap and using that to determine what holdings are part of the 60% rather than “top 3”
In my proposal “Metaverse” was intended at large, so somehow also including in it the clusters of Blockchain Gaming / NFT, as mentioned in the paper.
I’m a great fan of @jnova’s proposal for PFP pie, but for now I would personally be in favour of maintaining the current NFTs allocation in PLAY, postponing to a 2nd moment a proposal to exclude them, or possibly swap them for a $PFP allocation in $PLAY
2% was currently intended as minimum starting allocation for newly added/rebalanced assets.
Allocation <2% wasn’t really considered as a trigger for rebalancing in the proposed methodology, being a quite common dilution for underperforming assets. Only deviations in largest holdings were currently proposed to trigger rebalancing, but happy to discuss!
Definitely an option! I feel like in the majority of situations the “top 3” allocation would anyhow coincide with the largest three cumulative holdings sorted by market cap, even with this new adjusted methodology. @Cass Which one would you feel as the most appropriate?
I’ve been putting together this asset tracker to more conveniently monitor how each of the PLAY underlying assets (actual + potential) reflect the inclusion criteria proposed.
New potential additions like Illuvium ($ILV), Audius ($AUDIO), Gala Games ($GALA) were already positively assessed, potentially paving the way to a subsequent community vote for their inclusion.
On the other end assets like $ATRI wouldn’t match the proposed criteria.
I left my comments on the document but I also wanted to report those here.
Keep the scope broad, change “Project connected to the development of the Metaverse ecosystem on Ethereum” to “Project connected to either NFTs / Metaverse / Gaming ecosystem with an ERC20 token on the Ethereum Network”.
Basically, imo it does not matter if the project game or NFT lives on their own chain or rollup (see AXS) as long as their ERC20 is on Ethereum. It should also fix @Cass comment.
Better definition of Fractionability, do you want decimals? how many?
The slippage requirement seems more related to the Oven than to the product and it should be removed from the methodology, CEXs liquidity is valid liquidity.
Minimum Allocation Max cumulative allocation.
Glad we finally agreed on a rebalancing policy!
Thank you @gabo for formalizing it and for all the long conversations we had about the subject.
Shall we agree on it, I suggest budgeting time to build automated tools to monitor the trigger for rebalancing and have a dashboard/api for it. /cc @Adrian.A@Totohm_Shanti