- MNYe will have a streaming fee of 0.95% (95 bps)
- Token holders will be able to benefit from the opening of the perpetual short position
Dizin Koop has launched a new token on Ethereum’s Optimism layer-2 network that gives holders access to USD-denominated yields.
The Market Neutral Yield token (MNYe) utilizes basis trading, also known as cash and carry arbitrage, by plugging into derivatives platform Perpetual Protocol and Uniswap V3.
Under the hood, the MNYe token will automatically open a futures position on Perpetual Protocol while buying an offsetting position from Uniswap V3, creating a market-neutral position.
Allan Gulley, product manager at The Index Cooperative, explains that there will be no price exposure regardless of what the price of ether (ETH) happens to do because “we are short ETH in Perpetual Protocol and we are long ETH with the assets we get from Uniswap, and those two ETH positions offset each other.”
This kind of trading strategy is most commonly performed by hedge funds and experienced financial professionals in traditional finance.
“It’s not familiar to most people,” Gulley said. “But now it’s fairly safe and accessible to anyone who wants to understand it and wants to experiment with it, and that’s what gets us really excited.”
By owning MNYe, token holders will be able to benefit from the opening of the perpetual short position as they will be paid a funding rate — or what Gulley describes as dollar-denominated payments — multiple times a day.
“What we’re doing is farming that funding, so we maintain that short, perpetual position, and there’s a spot position to offset it,” Gulley said. “That’s what causes the value, or the interest, to accrue to the value of the token.”
Margin requirements for the perpetual position are automatically managed by the token, Gulley said. “USDC is deposited as collateral and used to open the short ETH perp position, the token maintains a conservative collateralization ration to avoid liquidation.”
MNYe will be Index Coop’s second yield bearing product, after the Interest Compounding ETH Index (icETH) — that enhances staking returns with a leveraged liquid staking strategy.
Token holders will be charged an annual streaming fee of 95 basis points, or 0.95%, for owning the token. The fee will be revenue for Index Coop to continue building and sustaining its products.
US IP addresses are currently restricted from buying the MNYe token from the Index Coop app — a nod to regulatory uncertainty around the securities implications for such a token — but anyone can access the cryptoasset on secondary markets from Uniswap or decentralized exchange aggregators, Gulley said.
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Source: https://blockworks.co/earning-yields-just-became-easier-with-index-coops-latest-token/