DEXTF Newsletter #14
Opyn + UMA + DEXTF: New Structured Floor Token launch | Treasury buyback of 744 $UMA + 2.57 XTF2YYYBOX | What are Structured Products?
Hey Everyone,
Welcome to this week's edition of the DEXTF Newsletter!
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DEXTF updates
A new batch of Structured Floor Tokens in partnership with Opyn and UMA Protocol is launched:
In less than 24 hours, the $10,000 worth of SFTs is sold out!
Here is this week’s fund breakdown (XTF2UUUAAA) launched on DEXTF. Note the “XTF2” which means that it’s a v2 fund token!
For those that want to dig into what’s DEXTF, this is a good start:
Also, DEXTF is hiring! If you think this is you, reach out to us. DMs are open.
Portfolio Metrics
[As of 29th Jul 2021].
Please refer to the DEXTF website for the latest APRs:
DEXTF/ETH is offering a 70% APR
XTF/DEXTF is offering a 87% APR
You can also earn $DEXTF by providing liquidity on Uniswap (29.6K tokens daily) or investing in any of the XTF funds (12K tokens daily)
Current TVL is US$ 2.45M* (refer to DeFi Pulse)
*calculation includes TVL v1 + TVL v2
You can invest by buying on Uniswap or on the DEXTF app
Here’s a quick guide on how to buy
Protocol Revenue
DEXTF has earned cumulatively US$ 57,6K in revenue since the Treasury started its asset allocation strategies. This has resulted in an additional buyback of 744 $UMA and 2,57 XTF2YYYBOX which were executed this past week.
To date, the cumulative amount of assets bought back by the Treasury are:
163984 $DEXTF
3394 B-UMA-USDC
744 $UMA
2.57 XTF2YYYBOX
Concept of the Week
⚖️ What are Structured Products?
A structured product is a collection of financial assets of different nature packaged into a tradable product with a price. Assets such as equities, bonds, currencies, commodities, real estate can provide a unique payoff scheme that can suit investors need of:
capital protection
enhanced gains with reduced downside risk
Why do we need them?
As the wording suggests, these products are structured by financial institutions today to provide investors with exposure to more exotic assets that may be more difficult to access without this arrangement.
In TradFi, the issuers' ability to pay is the leading risk, which suggests that structured products are debt obligations of the issuer. These products often play with the opaqueness of the conditions.
One way to understand structured products is to think of them as a packaged risk management tool. Note that investors can build their payoff strategy by combining options, but that requires a higher level of sophistication involving a bit more math behind.
Another key difference with options is that certain types of structured products are more for degens, where you could lose your principal.
Structured Tokens: a game-changer for DeFi
Structured products can support investment strategies under all kinds of market configurations.
Market configuration means the expectation that an investor has of the market in the short or long term.
In DeFi, the issuer creditworthiness risk is eliminated, although smart contract risks are still a concern (audits do mitigate these risks). As this space launches new financial primitives, new products can be built with ease using protocols such as DEXTF.
DEXTF is not only a portfolio builder but also a product builder.
Take Bitcoin. Today, each Bitcoin generates 4 MT of CO2. You can offset this externality using 4 MCO2, which are tokenized carbon credits issued by Moss.
So operationally, you would pair BTC + 4MCO2 = GBTC (Green Bitcoin).
Some examples of structured products in TradFi
For the curious, here is a list of the bestseller structured products in TradFi:
Capital Protection Note with Participation: yield + buy call option. The yield pays for the call. Hence no capital outlay for the investors unless they pay the note for a price higher than the protection level (e.g., $100 is the face value and $105 is the purchase price; then $5 is the loss if the note expires worthless). This is suitable when the investor does not know in which direction the market is going to move. The payoff is often 100% the underlying when positive and limited downside when the market is plummeting.
Reverse Convertible: yield (paid regularly = coupon) + sell put option. In this case, investors expect that the underlying asset performs well or ranges above the strike price. On the flip side, investors give up the upside while accepting the risk to receive the underlying asset in place of the principal, which of course, will have depreciated relative to the initial investment. The payoff comes from the high-interest regular payments over the lifespan of the product. Investors also benefit from the protection given by the strike price, which is usually 30% lower than the current market price.
Barrier Reverse Convertible: similar to Reverse Convertible but with additional downside protection known as "barrier". The barrier is a price level below which the investors will start to experience losses and above which the capital is protected. The investors would have the same expectations as with the reverse convertible.
Outperformance Certificate: as the name suggests, investors can outperform the same stock by purchasing this "certificate." No outperformance comes without leverage, which in this case kicks in when the stock price is above the strike price. The participation rate would increase from 100% (no leverage) up to usually 200%. This product is suitable for investors that expect a price increase and are ok not to receive dividends.
Semper Fortis
DEXTF Team