Hedging Strategies
Algoo Strategies offers hedging strategies that help mitigate risk and protect against market volatility, providing a reliable safeguard for your investments.
STABLECOIN ALGO-SWITCHING (SAS)
This hybrid strategy involves switching between different algorithms to trade the stablecoin-based liquidity pool on various decentralized exchanges (DEXs). The strategy aims to generate profits by leveraging the different strengths of each algorithm to identify trading opportunities in the market. The idea behind this strategy is that different algorithms may perform better in different market conditions, so by utilizing multiple algorithms, we can increase the advantage on the stablecoin position
Full description
The strategy starts by monitoring stablecoin liquidity pools, accross five different DeFi protocols: Beefy Finance, 4belt, AutoFarm, PolyQuity and Multichain
Crossover algorithms is used to identify potential trend reversals. It looks at moving averages of different time periods (e.g., 50-day and 200-day) and generates signals when the shorter-term moving average crosses above or below the longer-term moving average.
When a trend reversal signal is generated by the Crossover algorithm, the strategy switches to the Moving Average algorithm. This algorithm calculates the average price of the stable coin liquidity pool over a specific time period and generates signals based on the price's relation to the moving average. For example, if the price crosses above the moving average, it may signal a bullish trend.
If the Moving Average algorithm doesn't generate any signals or the market conditions change, the strategy can switch to the Ichimoku Cloud algorithm. This algorithm uses multiple indicators, including the Conversion Line, Base Line, Leading Span A, and Leading Span B, to identify potential support and resistance levels and generate trading signals.
In situations where the market is showing overbought or oversold conditions, the strategy can switch to the RSI algorithm. The RSI calculates the relative strength of price movements over a specific time period and generates signals when the market is overbought (above 70) or oversold (below 30).
Based on the signals generated by the selected algorithm, the strategy executes trades on the liquidity pool using appropriate trading strategies such as market-making, liquidity provision, or arbitrage.
The strategy continually monitors market conditions and switches between algorithms to adapt to changing trends and optimize trading performance.
Protocols Leveraged by the strategy
Beefy Finance: The algorithm allocates a portion of stablecoin funds into the MAI+USDC liquidity pool in Beefy Finance, which involves providing liquidity for the MAI+USDC pair. By doing so, it earns trading fees from the pool and also receives yield farming rewards provided by the protocol.
Belt Finance: The algorithm identifies attractive opportunities in the USDC liquidity pools on the 4belt protocol. It assesses factors such as the pool's APY (Annual Percentage Yield), liquidity depth, and associated risks. It allocates a portion of stablecoin funds to the selected pools to earn yield and potentially benefit from other incentive mechanisms like token rewards.
AutoFarm: The algorithm evaluates the USDC liquidity pools available on AutoFarm based on factors such as APY, total value locked (TVL), and historical performance. It strategically allocates stablecoin funds to these pools to maximize yield generation through farming and reward mechanisms.
Multichain: The algorithm monitors and analyzes the USDT liquidity pools offered on the Multichain platform. It considers parameters such as APY, liquidity depth, and any unique features or incentives provided by the pools. It selects and allocates a portion of stablecoin funds to these pools to participate in yield farming and earn rewards.
PolyQuity: The algorithm monitors and analyzes the USDC pools available on the PolyQuity platform. It assesses parameters such as APY, liquidity depth, and any unique features or incentives provided by the pools. It strategically allocates stablecoin funds to these pools to generate yield through farming and reward mechanisms.
Estimated returns and source of yield
The target ROI for this strategy is 32%
Source of yield:
Trading fees: When the strategy executes trades on each individual protocols it may earn trading fees. These fees are a percentage of the transaction value and are collected by the liquidity providers on the platforms. By actively trading and providing liquidity, the strategy can generate yield through these fees.
Yield farming: The strategy may utilize yield farming opportunities on platforms like AutoFarm. By providing liquidity in yield farming pools, the strategy can earn additional yield in the form of farming rewards or governance tokens.
Arbitrage opportunities: If the strategy identifies price discrepancies or arbitrage opportunities between the different platforms, it can execute trades to capture these price differences and generate profit. These arbitrage trades can contribute to the overall yield of the strategy.
Liquidity provision rewards: Some platforms offer rewards for providing liquidity in specific pools. By actively participating in liquidity provision on Beefy Finance, 4belt, AutoFarm, PolyQuity and Multichain the strategy can earn additional rewards in the form of tokens or fees.
Underlying coins and protocols
Coins: MAI, USDC
Protocols: Arbitrum
Strategy pros
Adaptive hedging: The strategy can adapt its hedging approach based on market conditions and indicators. The algorithms used, such as Crossover, Moving Average, Ichimoku Cloud, and Relative Strength Index (RSI), can provide signals for adjusting the hedge position. This adaptability allows the strategy to respond to changing market dynamics and optimize its hedging effectiveness.
Backtesting and optimization: The strategy can be backtested using historical data to evaluate its hedging performance and optimize its parameters. This allows for fine-tuning of the hedging approach based on past market behavior and can help in identifying the most effective hedge positions. Backtesting also provides insights into the strategy's risk-reward profile and helps in setting appropriate risk management parameters.
Adaptive decision-making: The strategy employs algorithms such as Crossover, Moving Average, Ichimoku Cloud, and Relative Strength Index (RSI) to dynamically adjust trading decisions based on market conditions and indicators. This adaptability allows the strategy to react quickly to changing market trends and potentially identify profitable trading opportunities.
Strategy cons
Algorithm performance: The effectiveness of the algorithms used in the strategy depends on market conditions and the accuracy of their signals. There is no guarantee that the selected algorithms will consistently generate profitable trades or accurately predict market movements. Market conditions can change rapidly, rendering certain algorithms less effective or even counterproductive. The Algoo team regularly monitors and adjusts the algorithm's parameters to keep it adaptable to evolving market dynamics.
Investment tips on how to blend this strategy into your portfolio
Utilize this strategy in your portfolio if you are bullish on stablecoin. Holding this strategy, is equivalent to holding the stablecoin assets and LP traded within this strategy, while hedging against risk.
Implement a market-neutral strategy alongside the stablecoin algo switching strategy. Market-neutral strategies aim to generate returns that are independent of overall market movements. By combining a market-neutral strategy with the algo switching strategy, you can mitigate the impact of market volatility and achieve a more balanced and diversified portfolio.
Combine the stablecoin algo switching strategy with other yield farming strategies that involve different assets. For example, you can allocate a portion of your portfolio to yield farming strategies that involve non-stablecoin assets like the "Ethereum Delta/Asset Neutral Yield", or the "Bitcoin Delta/Asset Neutral Yield". This helps diversify your exposure across different asset classes and potentially enhance your overall yield generation.
Fees
Performance fee: 15% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 15% of the profit. If there is no profit, then the user does not pay performance fee.
Swap fee: Swap fee: 0.5% (into and out of this strategy).
Strategy address: https://debank.com/profile/0xadc19b0c0667794e43f988b6195a45fd76a1ef05
Maximum capacity: $5,000,000
ETH/MATIC MARTINGALE LP (EMM)
The ETH/MATIC Martingale LP strategy aims to capitalize on price discrepancies and market imbalances between Ethereum (ETH) and Polygon (MATIC) tokens. By providing liquidity in the ETH/MATIC pool on Uniswap and utilizing a martingale approach, the strategy aims to rebalance the position based on price movements. It buys more of the undervalued asset and sells a portion of the overvalued asset, aiming to accumulate more of the undervalued asset during market fluctuations and generate profits from liquidity provision fees.
This strategy is developed and designed with the traditional martingale strategy's core idea, which is a strategy of laddering-buy, selling all at once. And it will use more funds to buy on each dip to significantly reduce the average holding cost of the ETH/MATIC pair.
Full description
The ETH/MATIC martingale LP strategy follows 8 basic steps to execute trades;
Initial Position: The strategy starts by providing an equal amount of ETH and MATIC to the ETH/MATIC liquidity pool on Uniswap, creating a balanced liquidity position.
Price Monitoring: The algorithm continuously monitors the price of ETH and MATIC tokens on the Uniswap exchange.
Trade Execution: When the price of either ETH or MATIC deviates from a predefined threshold, indicating a potential market imbalance, the algorithm triggers a trade.
Martingale Approach: If the price of ETH increases, the algorithm sells a portion of the ETH in the pool and buys more MATIC to rebalance the position. Conversely, if the price of MATIC increases, the algorithm sells a portion of the MATIC and buys more ETH. ETH and MATIC are well-suited for this algorithm due to their liquidity, market demand, and ability to participate in the growing Ethereum and Polygon ecosystems.
Profit Generation: By utilizing the martingale approach, the strategy aims to accumulate more of the undervalued asset during market movements, potentially generating profits from price discrepancies and liquidity provision fees.
Risk Management: The Algoo strategies team incorporates risk management measures to limit losses and protect the liquidity provided. The team regularly sets maximum exposure limits, implementing stop-loss orders, and regularly adjusting the martingale position sizing to mitigate risk.
Rebalancing and Reinvesting: Periodically, the strategy rebalances the liquidity pool by adding or removing tokens to maintain the desired asset ratio. It may also reinvest profits back into the pool to compound earnings.
Monitoring and Optimization: The algorithm continuously monitors the performance of the strategy, making adjustments as needed. It analyzes market conditions, liquidity pool dynamics, and trade execution efficiency to optimize the strategy's profitability.
Estimated returns and source of yield
The target ROI for this strategy is 40%
Source of yield:
Token Price Appreciation: If the price of either ETH or MATIC increases while providing liquidity, the value of the tokens held in the pool will also increase, resulting in capital gains for the liquidity providers.
Market Volatility: The algorithm benefits from market volatility as it executes trades based on price movements. The strategy aims to profit from both upward and downward price fluctuations, allowing for potential gains in any market condition.
Liquidity Provider (LP) Fees: Liquidity providers earn a portion of the trading fees generated by the Uniswap protocol. These fees are distributed proportionally to LPs based on their share of the total liquidity provided.
Underlying coins and protocols
Coins: ETH, MATIC
Protocols: Uniswap V3
Strategy pros
Potential Risk Mitigation: The ETH/MATIC martingale LP strategy includes increasing the size of buy orders after each loss, aiming to recover previous losses and generate profits. While this strategy carries risks, it incorporates a risk management aspect by adjusting position sizes based on previous trading outcomes.
Scalability: The ETH/MATIC martingale LP algorithm is scalable and can accommodate different trading volumes, allowing for potential growth and increased trading opportunities as the algorithm adapts to market conditions.
Arbitrage Profit Potential: The algorithm aims to capitalize on price discrepancies and market volatility, offering the potential for generating profits in both upward and downward price movements. By employing a martingale strategy, the algorithm aims to recover losses and accumulate profits over time.
Strategy cons
Increased Risk of Large Drawdowns: The ETH/MATIC martingale yield strategy involves increasing the position size after each loss, with the aim of recovering previous losses. However, if the market continues to move against the algorithm, it can lead to a series of consecutive losing trades and result in significant drawdowns. This can potentially deplete the trading capital and make it difficult to recover losses.
Slippage and Transaction Costs: When executing trades on Uniswap, there may be slippage and transaction costs associated with larger trades or during periods of high network congestion. These costs can reduce overall profitability and impact the effectiveness of the strategy.
Dependency on Ethereum and Polygon Networks: The strategy's success is tied to the performance and stability of the Ethereum and Polygon networks. Any network congestion, scalability issues, or changes in network dynamics could affect the strategy's execution and profitability.
Investment tips on how to blend this strategy into your portfolio
Utilize this strategy in your portfolio if you’re bullish on DeFi adoption.
Balance this strategy with exposure to ETH, BTC and stablecoins, which will give you a diversified portfolio covering a large portion of the market.
Allocate 5-15% of your portfolio to this strategy. This ensures that even if the ETH/MATIC martingale strategy faces losses or challenges, it won't have a significant impact on your overall portfolio. By allocating a smaller portion, you maintain diversification and reduce the potential risk associated with a single strategy.
Combine this strategy with the stablecoin yield aggregator strategy to build a portfolio with high ROI potential while also having a stablecoin position to balance it out.
Periodically review the performance of this strategy and make necessary adjustments to your portfolio based on market conditions and the strategy's effectiveness. You can track the strategies's on-chain performance through this link
Fees
Performance fee: 20% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy returns each week.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 20% of the profit. If there is no profit, then the user does not pay performance fee.
Strategy address: https://debank.com/profile/0xf85a993317e776f04986a22330b1295c84d88e56
Maximum capacity: $17,000,000
ETHEREUM GRID ALGO (EGA)
This strategy aims to capitalize on the price volatility of Ethereum (ETH). It involves placing a grid of buy and sell orders at specific price levels, creating a trading grid. As the price of Ethereum fluctuates within the grid, the strategy automatically executes buy orders at lower price levels and sell orders at higher price levels, generating profits from the price differentials.
Full description
The algorithm starts by deploying its funds into a smart contract on the Ethereum network.
The algorithm then divides its funds into multiple equally sized positions on a grid, with each position at a certain price level. For example, the algorithm may create positions at $3,200, $3,400, $3,600, and so on, up to $4,000.
Once the positions are set up, the algorithm monitors the price of Ethereum on the Arbitum network.
If the price of Ethereum drops and reaches the first grid position at $3,200, the algorithm will automatically purchase Ethereum at that price level on Aave.
If the price of Ethereum continues to drop and reaches the second grid position at $3,400, the algorithm will purchase more Ethereum at that price level on Aave.
The algorithm will continue to purchase more Ethereum at each grid position as the price drops, up to the maximum number of positions set by the user.
If the price of Ethereum increases and reaches one of the grid positions where the algorithm has purchased Ethereum, the algorithm will automatically sell a portion of its Ethereum holdings to realize profits.
The algorithm will continue to sell portions of its Ethereum holdings at each grid position as the price increases, up to the maximum number of positions set by the user.
The algorithm will repeat this process as the price of Ethereum fluctuates, constantly buying and selling at different grid positions.
Additionally, the algorithm utilizes other strategies, such as stop-loss orders and limit orders, to further optimize its trades.
The algorithm will also monitor the liquidity on Aave and other exchanges to ensure that it can execute trades efficiently without experiencing significant slippage.
Estimated returns and source of yield
The target ROI for this strategy is 25%
Source of yield:
Price appreciation: As the algorithm buys Ethereum at lower price levels and sells at higher price levels, it generates yield from the difference between the purchase and sale prices.
Liquidity provision rewards: If the algorithm provides liquidity on decentralized exchanges like Aave, Stargate, FRAX and Lido finance. It may earn yield in the form of transaction fees and liquidity mining rewards.
Arbitrage opportunities: If there are price disparities between different exchanges or liquidity pools, the algorithm can potentially profit from executing arbitrage trades, taking advantage of these price differences.
Yield farming: The algorithm may participate in yield farming programs where it locks its Ethereum or other tokens in specific DeFi protocols to earn additional rewards, such as governance tokens or platform-specific tokens.
Underlying coins and protocols
Coins: ETH, ARB, UNI, STG
Protocols: Arbitum, Aave, Stargate,
Strategy pros
Risk mitigation: The ETH grid algo strategy allows for the placement of buy and sell orders at multiple price levels, effectively hedging against potential price fluctuations. By capturing price movements within a specific range, the algorithm helps to reduce the overall risk exposure.
Adaptive grid: This algorithm utilizes adaptive grid strategies, where the grid parameters are adjusted dynamically based on market conditions. This adaptability allows the algorithm to optimize its trading approach and respond to changing market dynamics.
ERC 20 Exposure to the upside following price increases of the Ethereum based tokens.
Strategy cons
Liquidity Risks: Liquidity issues can have an impact on the ETH grid strategy's success. In low-liquidity markets, it may be difficult to execute trades at required levels, resulting in higher slippage and potentially compromising the strategy's profitability.
Lack of Profitability in Trending Markets: The ETH grid strategy is designed for range-bound or sideways markets, where the price oscillates within a defined range. In trending markets, the grid strategy may generate fewer profitable opportunities as it requires frequent reversals within the grid range.
Investment tips on how to blend this strategy into your portfolio
Utilize this strategy in your portfolio if you’re looking to double your holdings on Ethereum for a long timeframe, This strategy will produce significant return overtime and act as a hedge toward the volatility in the Ethereum ecosystem.
Utilize this strategy if you are looking to capitalize on yield farming opportunities within ETH, The Ethereum Grid strategy is combined with yield farming on decentralized finance (DeFi) protocols. Investors on this strategy can provide liquidity to Ethereum-based liquidity pools while also implementing the grid strategy to capture potential price movements. This allows for potential yield generation in addition to capital appreciation.
Combine this strategy with the “Soft short ETH” strategy to provide a short position on ETH while balancing the risk with the ETH grid strategy
Diversify your portfolio across multiple ERC-20 assets. Allocate a portion of your portfolio to Ethereum, but also consider other cryptocurrencies and stablecoins. This strategy helps spread the risk across different assets and can enhance diversification benefits.
Fees
Performance fee: 15% of weekly profit (only if the strategy has generated profit); fees are deducted directly from the strategy shares each week.
If the user exits the investment strategy before the settlement day, then we calculate the difference between the current price and the price of the last settlement period and take 15% of the profit. If there is no profit, then the user does not pay performance fee.
Swap fee: Swap fee: 0.5% (into and out of this strategy).
Strategy address: https://debank.com/profile/0x71f0112de8554dede7d6101bebd71e6ffb5d3f90
Maximum capacity: $10,000,000
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