https://hacks.substack.com Accelerating by Design, Dropout Now Entrepreneur, Mental Health Advocate!
What this means is that dYdX’s fledgling perpetuals (and later: futures contracts) will be able to execute faster, cheaper, and with more leverage than before.
In practicality, check out this code I wrote to consume some of their dydx-python package:
Insert a private key, and you’ll see output akin to:
Edit some of that code slightly, and you’ll see:
What this means is that as dYdX adds more perpetuals and matching futures contracts to their lineup, we can allocate our equity in baskets matching how much % out of total % opportunity the funding rates allow us — while matching that against the futures premiums, and weighing which to enter and which to avoid as it might not be profitable. We can also enter into futures contracts to hedge against these positions, which will allow us to have a delta-neutral set of positions that are exposed only to funding rates and/or futures premiums — depending on the time of day :)
Why is this important?
It’ll be the first non-custodial solution I can exploit (well, I am indeed taking advantage of market conditions and %s of %s here…) — and I can even theoretically do so on-chain with a supporting tokenized asset that distributes winnings in the form of buy-n-burn (to appease regulators), reducing supply and increasing value of said token.
Why are custodial solutions bad?
With custodial solutions, you’re exposed to risk that that exchange or entity might go sour and run off with all your funds.
Aren’t there risks inherent with smart contracts?
Indeed, but I’d much rather trust audited technology over the word of the ultrarich.
Does this strategy actually work?
Check out my microfunds here on FTX — Cryptocurrency Derivatives Exchange:
Interested? Comment on this article and sign up for yonder exchange here: https://ftx.com/#a=JaresFundingArbitrage
Now, this has only been running about 2–3 hours and has yet to hit the 50x leverage threshold — sitting about 1.38x leverage.
We can assume maybe 25x the hourly funding revenues, or just about $0.38 a day — on $16.13 balance, or 2.3% a day. Nearly risk-free. as we’re nearly perfectly hedged and the only risk here is the difference in price movements between a perp and it’s hedge that go against the funding’s or premium’s direction that everyone else is longing or shorting with us…
UPDATE 11 minutes since finishing up this draft:
We’re @ 1.41x lev, projecting daily and projecting @ 50x lev, we’d be $0.60 revenues/day, on $16.13 is 3.72%/day :D
Onwards, to a smart contract DeFi token by yours truly near you once dYdX delivers on these wonderful promises…
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