Market Making & Investments layer
The Market Making and Investments Layer, which is actively monitored, serves as the driving force behind the HFD Ecosystem. Funds from the Bonding Treasury are allocated to this layer for utilization. Market Making aims to produce steady returns with a reduced risk level, while Investments involve greater risk but offer the possibility of higher returns. The functioning of this layer can be summarized as follows:
Market Making is a crucial component of the HFD ecosystem as it drives liquidity and stability. The funds from the Trading Treasury will be diversified and invested in various fundamentally strong cryptocurrencies. The portfolio will be actively managed by HoFiDa Limited in cooperation with Core Contributors and subcontractors. The main algorithm being used for now will be a High-Frequency grid and dollar-cost averaging (DCA) algorithm, which have proven effective in this highly volatile market.
The algorithm managers have extensive Market Making experience, having executed over 1.5 million daily trades for various well-known exchanges. Using highly scalable algorithms in this volatile market allows an active Market Making Layer to generate consistent and stable yield without taking on high-risk strategies. For now, this results in the garnering of more tokens of approximately 0.03% to 0.1% a day.
An example of this approach would be buying 1 Ethereum at a price of $1000, then selling it for $1001, and subsequently repurchasing it at $1000. By following this approach, the DAO generates a Realized Profit of $1. This approach is commonly used in the Market Making space to provide liquidity and stability to the market. The Realized Profits will be used to keep the DAO diversified for buybacks, Operations, and R&D. This approach allows the DAO to generate returns while maintaining a diversified portfolio and supporting the growth and development of the ecosystem. Below is an example of how this strategy will look in practice:
Hodl Finance DAO - Grid Trading Strategy
The calculation and measurement of Realized Profits is a crucial aspect of the operation of HFD. The profits generated from each completed trade by the algorithms will be determined by taking into the calculation of the buy, sell, currency, and asset involved in the trade. To ensure transparency and accountability, a monthly trading report will be compiled and published on the dashboard and various social media channels. This report will provide an overview of the number of trades executed and the resulting Realized Profits, as well as information on the buyback of tokens and their distribution.
The crypto market is extremely volatile, which is perfect for highly scalable bots. This creates an active Market Making layer that can make stable additional rewards without taking high-risk strategies.
In addition to Market Making, HFD will explore opportunities to invest in new and emerging crypto startups and projects. This may include participating in venture rounds and providing consulting services to support the launch and development of these projects. To ensure alignment with the community's values and goals, the investment rules are outlined in the DAO's constitution and be subject to approval through a voting process among DAO participants if applicable.
HFD seeks to prioritize transparency in its trading activities, assets, and distribution. This is achieved through the use of a real-time dashboard, which provides visibility into every trade executed by the DAO. Additionally, read-only APIs are available to provide further transparency and access to information about the DAO's assets and distribution.
It is important to note that the DAO will seek to engage in a high volume of trades on a weekly basis, and the operation is fully automated. This means that community members can monitor the performance of the DAO through the dashboard without the need for active participation.
Last modified 28d ago