Hi all, I’ve tried to keep it short and sweet but if you are happy with the general gist of things I can get more info over. I had no intentions of bringing basis into the conversation here but after reading @loitering_gorilla 's post in the TWG I feel there is a genuine synergy even if only for a short period for basis to help PT increase their treasuries yield.
basis.markets & Pool Together
basis.markets has established itself as a DAO on the SOLANA ($SOL) blockchain. The proposal to Pool Together is the opportunity to invest funds held within the PT Treasury in the Decentralized Basis Liquidity Pool (DBLP) managed by basis.markets inhouse team utilizing data and insight from the Basis Trade Engine (BTE).
The Liquidity Pool offers people a chance to put money into a pool and generate a meaningful return on their capital with low levels of risk. The barrier to entry is low, with a minimum stake of $1. Deposits are made in USDC.
The nature of basis trading means the pool operates a market-neutral strategy, eliminating directional risk. Returns are generated by capturing regular funding payments made by other traders. The nature of the strategy delivers returns regardless of what happens in the broader market.
The BTE is the heartbeat of basis.markets and provides the insight that enables the Liquidity Pool to generate a return. The engine pulls live data from exchanges (centralised and decentralised), simplifying the process of identifying the best basis trades at any point in time.
Using strategies such as the classic basis trade and long/short strategies across exchanges, the team have been able to consistently produce outstanding returns with a number of benefits over other strategies.
It’s common to find consistent 100+% APY strategies with high liquidity and managed risk on respected platforms. Where else can you get this type of return consistently?
· High returns (especially compared to the limited level of risk involved)
· Zero directional risk (unlike directional strategies)
· No impermanent loss (unlike traditional yield farming)
· Light-touch management (no need for frequent hedging)
· Diversified exposure (using trusted CEX & DEX platforms)
· Longer-lasting returns (not having to jump into a new pool every 24h)
· Opacity: There is a lack of awareness around non-directional (a.k.a. “delta neutral”) strategies like this. Large players use strategies like this as the bedrock of their returns, but alpha isn’t normally shared with new entrants
· Perceived complexity: whilst the concepts these strategies use are easy to understand, they’re not as simple as ‘buy low sell high’ and some people miss out because they don’t want to learn a new skill
· Impatience: triple digit returns are exceptional by almost any standard. But may seem “slow” compared to leveraged trading, for example.
There is an opportunity for Pool Together to generate yield on assets held within its treasury.
One of the most important changes in the past few years has been the growth in the range of perpetual futures contracts offered by exchanges.
Essentially, “futures” are an agreement to buy or sell an asset at a predetermined price at a specified time in the future. Traditional futures contracts had an expiry date when the asset would change hands or the contract “rolled-over”, but perpetual futures simplify this by leaving the expiry date open, “perpetually” rolling until closed.
Traders use these contracts for a number of reasons, and the popularity of these is growing exponentially for:
· Hedging and risk management: this was the main reason why futures were invented.
· Short exposure: traders can bet against an asset’s performance even if they don’t have it.
· Leverage: traders can enter positions that are larger than their account balance.
There have been opportunities to make money on futures contracts for centuries in traditional markets, but with perpetual futures and the speed and transparency available in crypto markets, a new generation of trade has been born.
Exchanges have learned to cater for derivative product restrictions in certain countries, by offering spot margin trading. This enables traders to long or short any crypto asset but fund this in USD or funded by other investors lending their crypto assets (much the same as a stock lending desk in a bank). This has added yet another layer of opportunity that allows traders to maximise their profitability.
You may have heard people talking about funding, contango, backwardation, and other terms. It can give insightful context into the market but what do we actually mean by ‘funding rate’?
First and foremost, it’s a mechanism that exchanges use to manage perpetual futures contracts and keep the ‘perp’ price in line with the underlying ‘index’ price (e.g. the underlying spot price).
Funding rates are periodic payments made between traders who are long or short a particular asset, helping to balance the demand between the buy (long) and sell (short) sides of the market. It essentially acts as a fee/rebate on your trade, encouraging some traders to take the side which pays them funding.
For example, if the BTCUSD perpetual is trading above the spot price of Bitcoin, the funding rate would be positive. This means that long traders would pay short traders (discouraging long positions and incentivising short positions).
This is the same for any market, such as the stock lending desk at major bank — providing a vital function to the industry — but here, we can use it to our advantage.
No matter the market — bullish or bearish, funding is a fact, and there are huge differences across the range of coins and exchanges.
· Website: https://basis.markets/
If you have any questions I’ll get back to you asap. Regardless I really like what PT does and look forward to providing input to the DAO whenever I can.