TL;DR on Curve's Tri-Crypto
Curve's Tri-Crypto LP tokens consist of 1/3 ETH, 1/3 BTC, and 1/3 USDC. Their impermanent loss (IL) closely follows Balancer's IL formula. For more detail, check out the Balancer IL calculator.
What is the 80-20 Curve Tri-Crypto Vault?
The vault uses Curve tri-crypto collateral to LP into Rage's ETH-USD perp (using the 80-20 strategy). We built the vault to offer bulls a way to maximize fee collection (yield) while maintaining upside as an LP in Curve's tri-crypto.
Using our open-sourced Python simulations, we backtested the strategy on the past three years of minute price data from Binance and found that it outperformed UNI v2, while providing significantly more liquidity for the DeFi ecosystem.
The graphs below show our conservative estimates at how the strategy would have performed since January 2019. We excluded the following factors that realistically should improve Rage's performance vs UNI v2:
- Trading fees from non-arbitrage traders (leverage trading -> more fees)
- RAGE token emissions
- CRV token emissions
Yet even without these factors, the strategy outperformed UNI v2.
3 Year Backtest Results
Over the three year period, we can see from the below graph that the 80-20 Curve Tri-Crypto strategy performed slightly better than Uniswap V2, particularly during bull runs.
The above graphs suggest that in the long run, the 80-20 Curve Tri-Crypto Vault performs like UNI v2 with higher yield. To better understand how it might perform in the short term, let's examine a few scenarios.
NOTE: The above/below examples do not include the additional yield from CRV+RAGE.
Bullish Market Conditions (August - December 2020)
The Tri-Crypto vault diversifies its collateral between ETH and BTC. This reduces variance and results in steadier fee collection over the long term. In this time period, BTC outperformed ETH and the vault outperforms UNI v2.
Bearish Market Conditions (February - April 2020)
During the crash of March 2020, the vault performed slightly worse than UNI v2. However, the BTC allocation somewhat hedged the ETH exposure and the difference was minimal.
Crab Market Conditions (September - November 2021)
When the price tends to stay the same, the Tri-Crypto vault generally outperforms UNI v2 because it's collecting yield from the Curve collateral in addition to its Rage trading fees.
The 80-20 Tri-Crypto Vault significantly outperforms UNI v2 in the Bull and Crab cases while only minorly underperforming in the Bear case. Once we include all expected yield sources, the Vault sizably beats UNI v2 in most backtests.
To dig deeper, check out the open-source code we wrote to generate these graphs and run your own simulations. Please reach out in our Discord with questions.