DEFI STRATEGIES LOW/NO VOLATILITY LIQUID AUTOMATED MARKET MAKING IN USD/EUR/CHF STABLECOINS - DRAGON DYNAMIC FUNDS PLATFORM LTD.
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DeFi
STRATEGIES
Low/No Volatility Liquid Automated Market
Making in USD/EUR/CHF Stablecoins
For Qualified Investors Only
3rd quarter, 2021
WELCOME
DISCLAIMER
SWITZERLAND
The domicile of the Fund is Bermuda. The Representative of the Fund in Switzerland is OpenFunds Investment
Services AG, with its registered office at Seefeldstrasse 35, CH-8008 Zurich, Tel +41 44 500 31 08, www.open- Dragon Dynamic Advisors S. A. is the
funds.ch. The Paying Agent in Switzerland is Società Bancaria Ticinese SA, Piazza Collegiata 3, 6501 Bellinzona,
Tel. +41 91 821 51 21, Fax. + 41 91 825 66 18, www.bancaria.ch. The distribution of Shares of the Fund in investment manager led by Mr. J.A. Michie,
Switzerland must be made exclusively to Qualified Investors. The place of performance and jurisdiction for the a Canadian businessman based in Panamá,
Shares of the Fund distributed in Switzerland is at the registered office of the Representative. Publications to Swiss with extensive experience in private equity,
investors in respect of the Shares of the Fund are effected from the Representative.
mergers and acquisitions, and considerable
UK experience in asset management
This presentation is being made only to and is directed only at: Persons who have professional experience in
matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Top-tier service providers such as
Promotion) Order 2005 (the "Order"); or high net worth entities, and other persons to whom it may otherwise
lawfully be communicated, falling within Article 49(1) of the Order (all such persons together being referred to as Silvergate (Banker), Copper (Custodians),
"relevant persons"). and Trident Fund Services (Administrators).
RESEARCH TEAM
EVOLVENT RESEARCH CORP
Management of $5M+ with provable track
record of consistent 45%+ APY in low/no
volatility products.
Members in crypto industry since 2013
Technical background in Blockchain research,
creation/implementation of strategies,
and auditing.
01 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 02
O P P O R T U N I T Y: 25-35%+ YIELD ON LOW
VOLATILITY, LIQUID ASSETS
In today’s low-yield However, blockchain
environment, there are very has unleashed a new
few superior risk-adjusted Decentralized Finance (DeFi)
yield opportunities in marketplace that is growing
traditional financial markets. exponentially.
Traditional capital is not The “rails” bridging
moving fast enough to institutional capital to DeFi
satisfy DeFi demand for USD have not been around long
stablecoin liquidity. enough for investors to
understand DeFi or its risk/
reward.
25-35%+
YIELD ON LOW
VOLATILITY,
LIQUID ASSETS
03 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 04
STRATEGY OBJECTIVE STRATEGY OVERVIEW
TO TAKE ADVANTAGE OF UNPRECEDENTED YIELD
OPPORTUNITIES AVAILABLE DUE TO MARKET FRICTION,
CAUSING INSTITUTIONAL CAPITAL TO ENTER DEFI SLOWLY
This Strategy has a two-pronged approach.
The first is to deploy and manage a portfolio of
stablecoins in DeFi’s most secure and robust
The Strategy provides investors exposure to liquidity pools to earn transaction fees and liquidity
superior risk-adjusted returns by providing rewards. The second is purchasing up to 25% of
liquidity within the DeFi marketplace. AUM in DeFi Protocol tokens to capture yield from
high-quality DeFi Protocols.
The Strategy seeks secure, low-risk,
high-yield opportunities The Strategy seeks secure, low-risk,
high-yield opportunities
The purpose of this Strategy is to remove
speculation from the prices of various
Expected return of ~30% net APY for investors
cryptocurrencies, as its returns are almost
entirely independent from their price.
The Strategy focuses all of its investment efforts on
The secondary purpose of this Strategy is to protocols with the most robust, liquid and secure
purchase DeFi Platform tokens to capture platform.
additional yield from transactions on the highest
quality protocols.
05 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 06
B A C KG R O U N D - WHAT IS DEFI B A C KG R O U N D - IS DeFi GROWING?
Decentralized Finance (DeFi) is a form of peer-to-peer
finance that does not rely on centralized financial
intermediaries such as brokerages, exchanges, or TOTAL VALUE LOCKED (USD) IN DeFi
banks to offer traditional financial instruments, and
instead utilizes smart contracts on blockchains.
Ethereum is the blockchain network most utilized by
DeFi platforms, but Binance Smart Chain and others
are gaining traction as Ethereum “gas” fees are
becoming an obstacle to smaller traders.
OVER $60B
OF TOTAL VALUE IS LOCKED ON
DEFI PLATFORMS.
07 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 08
B A C KG R O U N D - WHAT IS A USD STABLECOIN? B A C KG R O U N D - USD STABLECOIN FRICTIONS
Because USD stablecoins are Prior to DeFi there was not an easy
cryptocurrencies, most institutional and cost effective way to onboard to
investors have not yet entered the market USD stablecoin and exchange one type
and there is a shortage of USD stablecoin for another with low spreads and little
liquidity in the crypto marketplace. slippage. An investor would typically
need to pay a 0.1%-0.5% fee and undergo
slippage on a traditional crypto exchange.
A USD stablecoin is a There are different types Although all USD
cryptocurrency that is of USD stablecoins: stablecoins are intended
fixed to the price of the to have the same
US dollar. Fiat-backed underlying value, due to
Collateral-backed the nature of the market,
certain investors require
certain stablecoins.
09 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 10
B A C KG R O U N D - WHAT IS A LIQUIDITY B A C KG R O U N D - HOW DO WE PLAN TO
PROVIDER? PROVIDE LIQUIDITY?
A Liquidity
Provider is the This is done to increase the liquidity of the decentralized exchange
term used to for users, as they will be able to transact quicker and in larger
describe someone quantities.
who deposits
cryptocurrency Liquidity Providers earn production based rewards. These rewards
into a DeFi normally come from a cut of any fees charged by the protocol, and
protocol, usually from being awarded protocol tokens.
a decentralized
exchange.
Automated Market Making with our Strategy’s only occurs on
decentralized exchanges designed for efficient USD stablecoin
trading.
Because our protocols mostly on USD stablecoins, they have the
most robust and liquid markets in this market segment. As a result,
transaction fees are lower than its competitors and the platform can
accommodate much larger transaction sizes and volume.
The transaction fees charged on the protocols are paid to us, the
Liquidity Providers, based on their respective ownership of the
liquidity pool.
11 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 12
S T R AT E G Y STRATEGY - OPTIMIZATION S T R AT E G Y STRATEGY - INCOME
OF THE LIQUIDITY PROVIDER
DEPLOY AND MANAGE A VARIETY OF USD STABLECOINS TO
DEFI-AMM LIQUIDITY POOLS AS A LIQUIDITY PROVIDER. THE
STRATEGY WILL GENERATE THREE SOURCES OF INCOME:
PROTOCOL
REWARD STAKING
PROTOCOL
REWARDS
TRANSACTION
FEES
DEPLOY AND MANAGE REGULAR LIQUIDATION PURCHASING AND
A VARIETY OF USD OF REWARDS AND STAKING PLATFORM
STABLECOINS TO REINVESTMENT TOKENS TO EARN
LIQUIDITY POOLS AS A OF PROCEEDS TO ADDITIONAL YIELD.
LIQUIDITY PROVIDER. COMPOUND YIELD.
13 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 14
S T R AT E G Y STRATEGY - 1 S T R AT E G Y STRATEGY - 2
LP TRANSACTION FEE DEFI AMM PROTOCOLS
INCOME REWARDS
TRANSACTION FEES PROTOCOL TOKENS REWARDS
The Strategy receives its proportional share of the To incentivize Liquidity Providers to deposit assets,
transaction fees generated from the respective liquidity Protocol Tokens are paid as a reward. Purchasing Protocol
pool. Fees paid to Liquidity Providers total 50% of the fees Tokens in advance, and using them to create efficiencies in
earned by the pool (~5% APY) DeFi Protocols can boost yield by 5-10%.
Transaction and corresponding fee growth at a rate of Expected returns, with target multipliers, are about
about 10-15% per month. 25-35%. This incentive is heavily linked to the price of
Protocol Tokens, but the strategy is to liquidate Protocol
Tokens rewards and reinvest them into USD stablecoins
frequently.
50% OF THE FEES EARNED BY
THE POOL (~5% APY)
25-35%+
TRANSACTION AND
10-15% CORRESPONDING
FEE GROWTH
EXPECTED RETURNS, WITH
TARGET MULTIPLIERS
15 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 16
PROTOCOL TOKENS REWARD- STRATEGY FEES
HISTORICAL PERFORMANCE
MANAGEMENT FEE:
2% of AUM
ANNUALIZED APY PER MONTH
60%
50%
40%
30%
20%
10%
PERFORMANCE FEE:
0%
1-Sep 1-Oct 1-Nov 1-Dec 1-Jan 1-Feb 1-Mar
Performance fee is 20%
PERFORMANCE
FEE 20% 25%
of profits up to 35% and
*April 2021 yielded 52% APY
if performance exceeds
35%, the performance
fee is 25%.
PROFITS
0-35% 35-75%+
RISKS* USD stablecoins pegged / linked / fixed to USD could be broken by
regulatory action, extreme market conditions or fraud.
DeFi AMM Protocols could be subject to a hack or software bug.
Institutional custodian could be subject to a hack.
*Additional
EXIT FEE 30 DAY
risk factors ~25% of DeFi AMM Protocol pools lend stablecoins to other DeFi
can be
seen on the
platforms which could be subject to a hack, software bug or fraud.
0.5% LIQUIDATION
NOTICE 30 day
Prospectus There is no regulatory regime governing DeFi.
17 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 18INSTITUTIONAL INSTITUTIONAL
FUND
ADMINISTRATOR-
CUSTODIAN - COPPER TRIDENT TRUST
Since 1978, Trident’s experienced, independent and professional
team has forged a hard-earned reputation for providing a highly
responsive personal service, backed by uncompromising attention
to detail. That’s why over 500 funds worldwide, with AUM exceeding
$35B, have selected Trident Trust to support them.
500
AUM EXCEEDING
OVER
FUNDS WORLDWIDE $35B
ALL ASSETS WILL BE HELD BY COPPER, AN INDUSTRY
LEADING INSTITUTIONAL CUSTODIAN.
Over $15B in monthly flow through their custodial
infrastructure
Insured by Lloyd's of London
Pending the second phase of licensing by the UK’s
Financial Conduct Authority
19 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 20ENHANCED INVESTOR
PROTECTION PROTOCOL
RESEARCH AND INDEPENDENT CHECK AND ADDRESS KEY DISTRIBUTION, ADMINISTRATION,
STRATEGY WHITELIST APPROVAL AND TRADE EXECUTION
Board of Directors Independent Smart Independent Smart
research DeFi Contract Auditor Contract Auditor Password and key
Protocols and requests reviews Smart approves address can distribution
whitelisting of Smart Contract and address be used if applicable.
Contracts, addresses, request vs. purpose
and protocols of fund
HackenCybersecurity
Services
www.hacken.io
Copper Technologies Mitmark Services Ltd
UK Limited www.mitmark.com
www.copper.co
ABOUT MITMARK
ABOUT HACKEN
MITMARK acts as a “Trusted Third Party" for
Hacken is a cybersecurity service provider part of our private keys. They are a security
that specializes in blockchain security. and intelligence consultancy firm, staffed
They have focused on the DeFi space and by former UK special forces and security
have audited smart contracts (with over agency personnel. They specialize in working
$1.2B in liquidity provided) and protocols with private and sovereign clients and both
that are almost identical to the ones being public entities and private companies, with
implemented in the fund. an emphasis on financial services, law firms,
private equity and hedge funds.
21 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 22FUND SERVICE PROVIDERS
Fund Administrator
Trident Fund Services (Malta) Limited
www.tridenttrust.com
Custodian and Prime Broker
Copper Technologies UK Limited
www.copper.co
Swiss Legal Representative
OpenFunds Investment Services AG
www.open-funds.ch
Legal Counsel Company Secretary Auditors Banker
Conyers Dill & Pearman. Conyers Corporate Services Richey May & Co. LLP Silvergate Bank
www.conyers.com www.conyers.com www.richeymay.com www.silvergate.com
23 D E F I S T R AT E G I E S 3 r d q u a r t e r, 2 0 21 24CONTACT Dragon Dynamic Decentralized Finance Fund CONTACT: J. A.Michie TELEPHONE: +1-617-922-1117 EMAIL: jam@dragondynamicfp.com www.dragondynamicfp.com
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