DEXTF Newsletter #22
Rebalancing | Conversation with industry leaders | DEXTF-9 proposal | Fund Breakdown | Notion Wiki | The Power of Rebalancing
Hey Everyone,
Welcome to this week's edition of the DEXTF Newsletter!
You can follow the community conversations on Discord, Telegram, Twitter, and Reddit!
DEXTF updates
The much-awaited Rebalancing front end is now live!
A representative from our team spoke with a number of industry leaders
DEXTF-9 proposal is now live!
🚨DEXTF-9 proposal is now live! governance.dextf.com/#/proposal/QmY… DEXTF-8 was split into smaller components as suggested by the community. We take feedback very seriously and strive to build an inclusive product that benefits everyone. This proposal reduces $DEXTF emissions 1/We announced winners of the anniversary special NFT giveaway
Here is this week’s fund breakdown (XTF2000EXC) launched on DEXTF
Note the “XTF2” which means that it’s a v2 fund token!
DEXTF’s Notion wiki is live!
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
DEXTF has a cumulative treasury revenue of US$269,300 since the Treasury started.
Over the course of this week, the treasury accumulated these Assets:
40 $XTF2WWWAAC
20 $XTF2XXXXTF
5.15 ETH
Concept of the Week
⚖️ The Power of Rebalancing
This week DEXTF has pushed out a massive product development update: the rebalancing module.
What is it, and how does that help in managing your assets?
As a crypto investor, you'd probably begun with bitcoin and spread your capital around to catch the DeFi and subsequently the NFT craze. Even as a newcomer to the space, rebalancing is an easy concept to understand.
Most of you do not realize this, but when you're DYOR to form a portfolio, you're implicitly putting some weights on the underlying components. Because specific bets convince you more than others, naturally, you decide to wager more on, say asset A versus B and C.
Now, let's assume that the market played out in your favor and asset A has risen by 500%, while asset B rose by 20% and asset C by -5%.
Moreover, we assume that prices for asset A = asset B = asset C = 1$ when you first formed your portfolio.
With a starting capital of 10,000 $, you're going to split it up as follows, given the investment rationale mentioned above:
You bet 6,000$ on asset A (60%)
1,000$ on asset B (10%)
3,000$ on asset C (30%)
Following the market shift, you'd be finding yourself with:
Asset A value = 30,000$ (60% —> 88.1%)
Asset B value = 1,200$ (10% —> 3.52%)
Asset C value = 2,850$ (30% —> 8.37%)
Of course, the portfolio weights would still sum up to 100%, however, the weights of the components have changed dramatically, and this new state could be exactly what you're comfortable with.
However, if you did your research, you probably have developed a thesis (an opinion on the potential of each asset you've invested in), which would only play out over a longer time horizon.
So here is when rebalancing would come in useful. When it comes to crypto, rebalancing can't get easier than what DEXTF has to offer.
Here is a guide on how to go about it: Rebalancing Guide (Fund Managers)
A TLDR take is:
Fund Manager activates the rebalancing module
Chooses the weights of the assets
Proposes the rebalancing to the public
The trading phase starts, in which the rebalancing takes place thanks to the market makers (any investor can participate)
Things to note before proposing the rebalancing is the level of slippage.
The slippage is the difference between the expected price and the execution price.
Positive slippage = expected price - execution price > 0
Negative slippage = expected price - execution price < 0
To better understand this, let's think about when you're interested in trading low-caps with low liquidity on Uniswap. You'll find out that, the price might change by more than 10% to execute your trade. That could be for a few reasons, such as:
Low liquidity, therefore higher slippage
Sandwich attacks, in which case you're transaction is sandwiched between a bot trade that profited by front-running you
In the context of rebalancing:
Positive slippage = outflow asset value - inflow asset value < 0
Negative slippage = outflow asset value - inflow asset value > 0
If a fund manager sets a positive slippage, then it means that he does not want to make a loss by giving up more valuable assets in exchange for less valuable assets. Indeed, this could be a counterintuitive proposal because why would any trader/investor/market maker decide to execute this rebalancing proposal?
A rebalancing proposal is active for trading until it's complete. During this time, markets could change and "fill" the positive slippage rebalancing proposal the fund manager set.
Therefore, a positive slippage rebalancing proposal is effectively a limit order that may be filled when markets favor the fund manager's rationale.
Of course, the opposite is true, in which case, a negative slippage means that the fund manager believes the outflowing assets will be even less valuable and the inflowing assets more valuable in the future.
An interesting rebalancing proposal would be to give up a big chunk of Asset A, which rose by 500% in exchange for more asset B and asset C.
Asset A could retrace, while assets B and C would finally perform. As a fund manager (and investor that minted ta XTF2), the rebalancing would give you the ability to multiply your gains for assets B and C using the profits from asset A.
This is the power of rebalancing.
Semper Fortis
DEXTF Team