Kunji Finance Strategies
Kunji Finance offers three expert-curated strategies with a robust risk management framework to mitigate systemic and unsystematic risks. These strategies are smart contracts with whitelisted tokens based on the investors’ risk tolerance. The main goal of these strategies is to maintain significant alpha over BTC while managing any possible risks.
The portfolio allocation model is based on the statistical analysis of each asset class and is regulated with the Kunji Finance governance system. The decentralized platform uses multiple proprietary frameworks at different stages of investments based on multiple inputs, which go through the risk tolerance model that helps manage the downside risk. With web3 technology, Kunji Finance offers a platform with discretionary long/short strategies managed by digital asset managers with trading rights. The features of these strategies can be summarized as follows:
- The strategies are framed to generate high returns with a proprietary Optimal Frontier Framework (OFF) and robust portfolio management model.
- The smart contracts ensure the funds’ custody with the user, and DAMs have only trading rights.
- DAMs cannot modify the whitelisted tokens, fund allocation % to any asset class, and leverage ratio. They have limited rights, which allow them to trade on connected decentralized exchanges without manipulation.
Alpha Blue Chip Focused Strategy
The strategy primarily aims to invest in DeFi, metaverse, and other similar digital tokens along with Bitcoin (BTC) and Ethereum (ETH). This strategy aims to seek maximal capital appreciation and achieve optimal returns on assets, for investors, by employing expert investment techniques by active trading in BTC and ETH along with digital assets in the DeFi and metaverse sectors.
With the virtual assets class on an upward curve, these digital assets make for a profitable investment opportunity. DeFi (popularly referred to as “the future of finance”) is likely to change the financial world; thus, it will be a crucial sector guiding the investment decisions related to the pool. Metaverse and Web3 are the buzzwords, and the Digital Asset Manager (DAM) will try to capture the investment opportunities (or upside potential) based on these dominant narratives. In addition to these, BTC (popularly referred to as “the inflation hedge”) and ETH (building the ecosystem around DeFi, and NFTs) will be key drivers of investment methods related to this strategy.
In Alpha strategy, we invest in emerging and growth theme projects with solid teams to generate the best risk-adjusted returns. Teams have an excellent long-term outlook and short-term agility to get things done. Our most bullish and vigilant areas are DeFi and Metaverse.
Outlook:
DeFi or Decentralized Finance, which aims to simplify the traditional financial primitives such as lending, borrowing, insurance, etc., will revolutionize the financial world by eliminating the middlemen and gatekeepers, a key characteristic of the traditional banking system. Bank of America believes that DeFi may bring financial services to the unbanked population globally through a simple smartphone app and might eventually pose a challenge to banks, Wall Street firms, and insurance companies.
Metaverse refers to an immersive, virtual world with its economy fuelled by creators and service providers. Some prominent use cases include online gaming, virtual avatars, the real estate market, etc., and experiences in the metaverse will define the future. With Facebook rebranding itself to Meta, institutional and retail investors are gearing up for the Metaverse in a big way. A recent report by Citi projects a $13 trillion economy and 5 billion users for Metaverse by 2030.
Top Cap Digital Assets Strategy
As part of our Top Cap strategy, we aim for optimal returns by applying active trading techniques and proper risk management to the top 15 digital assets to maximize capital appreciation. This strategy seeks maximum capital appreciation by employing active trading techniques and proper risk management to receive optimal returns on the top 15 digital assets. DAM will identify investment opportunities in these top digital assets and use the right mix of fundamental analysis, price action, and market sentiments to generate returns.
Though the investment mandate for this strategy covers the top 15 assets by market capitalization, the DAM (Digital Asset Manager) running this strategy aims to focus on Bitcoin (the most valuable digital asset) and Ethereum (the native platform for decentralized applications ) primarily because together, these two assets command around 60% of the total market cap. Price volatility, degree of decentralization, and deep liquidity both in the spot and derivatives market are the key reasons our primary focus will be on these two coins while managing the strategies.
Outlook:
Long-term prospects for the digital assets ecosystem are sound. With sovereign nations declaring Bitcoin as legal tender, the adoption cycle of the most valuable asset will accelerate. Digital asset use cases like Decentralized Finance, Metaverse, and Web3 pioneered by Ethereum, along with Bitcoin’s store of value thesis and its popularity as an inflation hedge, will lead to significant growth in this space. Digital assets have significant upside potential due to increased institutional participation and mainstream adoption.
Arbitrage opportunities and Balanced Strategy
In the Arbitrage strategy, we seek to maximize their returns through price anomalies across different markets to achieve optimal returns. DAM seeks to capitalize on opportunities created by price inefficiencies without taking any directional exposure to the digital assets market.
The price inefficiencies across different market segments of Digital Assets present an attractive arbitrage opportunity. Digital Asset Manager (DAM) running this strategy will seek to capture these inefficiencies by taking non-directional trading positions. DAM will mostly take balanced positions to capture any Arbitrage opportunity in Digital Assets with deep liquidity. DAM will utilize complex trading strategies to generate optimal returns for the strategy subscribers through arbitrage.
DAM may employ multiple trading strategies to ensure market-neutral exposure to capture price differentials.
Outlook:
Arbitrage opportunities are available irrespective of market conditions. Price anomalies always exist in the underlying asset and its derivatives, whether in a bull market or a bear market. Due to a mismatch in spot and futures prices caused by bullish or bearish sentiments, an arbitrage opportunity is always available, and the DAM seeks to capitalize on this. Arbitrage strategies aim to provide optimal returns during bull and bear market conditions and in volatile phases.
With the crypto market’s growth and improvement in digital asset liquidity conditions, arbitrage trading will emerge as a critical profit-generating strategy.
Kunji Finance offers actively managed strategies. Unlike automated asset management protocols used for yield-based strategies, our strategies are an amalgamation of discretionary long/short strategies based on the quad angulation of factors like market sentiments, technical and fundamental analysis, and on-chain data, which can’t be automated.
Governance is a critical aspect of asset allocation, as it sets the framework for investment decisions. It acts as a key control mechanism to ensure compliance with established procedures and to prevent unauthorized or rogue trades. Governance structures will include guidelines for the types of assets that can be included in investment strategies and certain limits on portfolio allocation to ensure diversification and risk management. Overall, governance will serve as a critical safeguard to protect the integrity and stability of investment portfolios.
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