Autumn comes, and with the change of seasons, the crypto landscape also transforms into its new state. Ethereum sheds the ol' reliable PoW in its long-awaited merge, and scalability solutions are more varied than ever, bustling in eternal competition for the user base.
Amidst the turmoil of the past months, Brahma never ceased its hunt for the biggest yields in the crypto space. While PMUSDC kept our depositor's stables safe and growing, and ETHMAXI was boosting the hard-earned ETH, it was high time for the team to start brewing something truly degen, expanding our reach to other chains, protocols, and risk levels.
Seek, and ye shall find. Thus we're excited to announce the launch of a long-awaited brand new DegenVault - PolyGains[Greek, polús - many, gains - gains]. 100% Polygon, 100% gains, and, in a true Brahma fashion - 100%* principal protected. With the high-confidence signal, bigger yields, and even bigger leverages, PolyGains DegenVault provides an exceptional boost in your returns if you're up for the risk.
Most Brahma's vaults initially launch as DegenVaults, alpha peer-reviewed releases possessing a higher risk profile. One of the core Brahma values is responsible risk exposure; thus, DegenVaults are limited in size and accessible by more experienced DeFi users above a degenvault-specific Karma threshold [check your Karma score here].
For a full refresher on DegenVaults please check out our previous blog.
PolyGains Degenvault follows an already signature Brahma structure, with a degen flare to it. The goal is to profit from the volatile nature of crypto assets by taking leveraged trading positions while simultaneously protecting the initial capital with Polygon-native staking.
The procedure looks as follows:
- The degenvault receives $MATIC deposits.
- The funds are safely parked and multiplied in the stMATIC / MATIC Curve V2 Pool.
- The base yield is harvested weekly and sent to Perpetual Protocol.
- This yield is used to take a leveraged bet based on an algorithmic momentum strategy trained to provide high-confidence signals.
- The position's risk is monitored with a dynamic stop-loss algorithm.
- All trading profits are compounded back into the strategy.
To pull off this balancing act in a high-risk environment, PolyGains employs several levels of optimizations to ensure the robustness and magnitude of the yield boost.
First, The Outcome?
This time around, we would like to switch up the order of the blog post: first, you will see the results of the PolyGains DegenVault backtest, and then the strategy description will follow suit.
The backtest timeframe covers both "bull" and "bear" market periods, and return calculations include all associated transaction costs.
As the benchmark was chosen the stMATIC / MATIC Curve V2 Pool yield base rate of 15%, we consider the absolute initial investment to be 1.The degenvault performance provides degen returns of up to 22.8% APY and a yield boost of 1.52x. But how did we get here?
The Search for Strategy
PolyGains degenvault had to combine active and passive asset management on the part of Brahma. Therefore, the first step of the research was to carefully hand pick the best pool and tradable asset combination that would lead to both stable and sizable returns. "Make the money go brrrrr as smooth as possible" - that was the plan.
The hunt for that sweet-sweet double-digit APY was on, and Brahma’s quants traced down just the catch. Polygon recently open-sourced their zkEVM, a significant addition to their already impressive multi-pronged approach to scaling Ethereum. This momentum and diverse user base, combined with high base yields and liquid perp markets was the perfect combination leading to the main degen vault hypothesis.
But it’s not enough to have a hypothesis alone. To turn it into an actually profitable strategy, we optimized several levels of hyperparameters:
Level 1: Trade execution
- Trade frequency
Level 2: Risk management
- Dynamic stop-loss
- Profit-taking level
Level 3: Signal quality
- Signal confidence level
- Lookback period
All of the optimizations were performed on a cross-validation sample to avoid overfitting.
Starting with the first level, we tested multiple options ranging from 1-day up to monthly trades with different leverage levels to ensure the full coverage of any scenario. Ultimately, the best option combined a 7-day trading frequency and a leverage of 10. And as an output, we can take advantage of degen high-leverage profits with the robust and consistent return that comes along with weekly trading frequency.
Big leverages usually come with big liquidations. Or, in the case of PolyGains, they come with dynamic PnL management. The optimized stop-loss values also account for the trading fees incurred. By this, we not only manage our exposure to the downside risk but also account for the probability of liquidation - all at the same time. Take profit level covers our bases on the other side of the spectrum, contributing to consistent strategy performance by copping all of our best bets at the right time.
Last but not least comes signal improvement. As the base tool, we employ an already proven systematic momentum signal: Trend Scanning. (Refer here for a deep dive.) But not without a twist! PolyGains DegenVault utilizes the increased absolute confidence level of the signal to ensure the accuracy improvement of the high-leverage bets taken by the strategy. This, alongside an optimized lookback period for signal generation, provides for the high hit rate and returns.
With Brahma, your capital never sits idly. PolyGains is built to maximize both your safety and your returns with active and passive management, which alternate based on the week's signal. Market conditions are not always favourable for trading; the strategy recognises this and in these conditions seeks to actively compound interest instead of forcing low EV trades. Sometimes the best trade is one you didn’t take. As a result, even under unfavorable market conditions, your assets are growing with the best rates and security available.
Let's Talk Risk
Going back to one of our previous posts:
DegenVaults are unaudited experimental strategies. Investors that are resistant to such degen-like products are hence gated with a vault-specific Karma threshold. Even as a DeFi degen, investooors are recommended to thoroughly navigate the docs before apeing in.
It is important to access all of the actual risks before aping in. Brahma preaches responsible and transparent risk handling. So be aware of the following possible unfavourable scenarios before you ape in:
- MATIC liquid staking token depegging: MATIC will be deployed to the MATIC/stMATIC curve pools and staked on Convex. The strategy will suffer capital losses if any stMATIC loses its peg to MATIC. [Importantly stMATIC is redeemable (after a short cool-down period) which should support peg stability. That being said Pool liquidity will constantly be evaluated and Brahma will look to diversify the pool exposure going forward if necessary]
- Momentum signal accuracy degradation: degenvault returns will have a chance of underperforming benchmarks if the market direction is poorly predicted.To support the transparency and ease of risk assessment PolyGains DegenVault also includes the Brahma Pool Health Risk Framework. Brahma's backend infrastructure ensures that pools are monitored round the clock with automated alerts set up to provide actionable warnings in the event of a significant change in the health of a pool.
To support the transparency and ease of risk assessment PolyGains DegenVault also includes the Brahma Pool Health Risk Framework. Brahma's backend infrastructure ensures that pools are monitored round the clock with automated alerts set up to provide actionable warnings in the event of a significant change in the health of a pool.
Users will also be able to see the pool parameters in the PolyGains product page as well as in Discord.
Read more about the pool monitoring at the documentation page.
Get your $MATIC ready and head to the PolyGains DegenVault now: https://degenv2.brahma.fi/vault/polygains
The current KARMA threshold for the PolyGains DegenVault is 69 and the vault launches with a Tier-1 TVL of 600K $MATIC.
If you’re looking for the degenvault to expand your risk portfolio, you are a Polygon-maxi, or maybe just wanted to ape in with fellow degens - PolyGains DegenVault is here to cover all of your needs.
With the principal protected under constant monitoring of the Brahma team, the strategy provides a significant yield boost for those up for the risk.
Time to shake them Polygon bags and make your way to degen heights! Brahma is rewarding the early depositors with the pot of 10K KARMA points, which will be vested over a period of 6 weeks and will be distributed proportionately.
Until then, make sure you check your KARMA to be eligible for degenvault access.
Got more questions about the PolyGains DegenVault? Head to FAQs here.
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Disclaimer: The content of this post is provided for informational purposes only.
This article is not an offer of securities, an invitation to sell or a recommendation to subscribe for or purchase any securities, and it has been prepared without any consideration of particular investment objectives. Nothing herein constitutes investment advice or recommendation.