The Best Market Conditions to Squeeth: Zen bull, Crab, and Long Squeeth
Squeeth. Squeeth. Squeeth. A lot of people are talking about the Squeeths! But what market conditions are the best time to Squeeth? This article explains the ideal market conditions to:
To Squeeth 👉 https://go.squeeth.com/BestConditions
Squeeth review
Squeeth is a DeFi-native derivative that gives exposure to the squared price of ETH. Owning oSQTH has a payoff that increases quadratically as the ETH price increases. It’s a way to make a leveraged bet on ETH, where leverage increases as the price increases, WITHOUT liquidations.
oSQTH, the token that represents Squeeth, is a fungible ERC20 token, enabling it to be traded separately (in uniswap pools or as collateral for loans). This composability is a major advantage to Squeeth’s design. It also allows Squeeth to be used as infrastructure for DeFi-native structured products such as Crab and Zen Bull!
For an in-depth explanation of Squeeth, check out the Squeeth Primer.
Zen Bull Strategy (Stack ETH Strategy)
- Payoff Profile: Smooth curved line with an ETH stacking bubble!
- Income: ETH returns come from the daily premium paid by Long Squeeth holders
- Max Gain: Unlimited
- Max Loss: Limited (amount of ETH deposited)
- Liquidation: While it’s possible for Zen Bull strategy positions to be liquidated, it’s less likely due to automatic rebalances (MWF) and price-based rebalances for 20% ETH price moves.
Ideal Market Condition to Zen Bull
The Zen Bull strategy is ideal for calmly-rising ETH market conditions during periods of low ETH price volatility (when the price of ETH is calm!).
Specifically, Zen Bull does best when Squeeth realized volatility is less than Squeeth implied volatility (when ETH is calmer than the Squeeth market expects). Zen Bull is a ‘long delta’ ‘short volatility’ position.
The Zen Bull Strategy automatically manages user ETH deposits to create a position with a 1:1 exposure to the price of ETH (approximate delta of 1).
The Zen Bull strategy aims to be profitable in ETH terms (stack that ETH!). The strategy earns returns through sustainable methods (selling oSQTH) vs. DeFi methods such as yield farming where returns dry up quickly. Zen Bull = real yield.
Metrics to Pay attention to:
Current Zen Bull Profit Threshold (Price Bands):
- The most important consideration before depositing in the Zen Bull Strategy is Zen Bull’s profitability threshold (the price bands). If you deposit into the Zen Bull Strategy when the price bands are tight & subsequently withdraw when the price bands are wide, you are effectively selling Squeeth when it’s inexpensive, and buying it back when it’s expensive. Selling low & buying high is not a good look!
- The Zen Bull profitability threshold indicates the ETH price range between rebalances that would result in a profitable period.
- The profit threshold is based on Squeeth’s current Implied Volatility (premiums). The Zen Bull strategy would be unprofitable if ETH moves more than approximately the profit threshold in either direction before the next rebalance (MWF)
Risk:
The two biggest performance risks for Zen Bull Strategy deposits are:
- If you deposit into the Zen Bull Strategy when the price bands are tight & subsequently withdraw when price bands are wide
- If ETH moves more than approximately the profit threshold (price bands) in either direction between rebalances.
While Zen Bull Strategy deposits can be liquidated, automatic rebalancing on a time-based or ETH price changes threshold helps prevent a liquidation from occurring.
To deposit in Zen Bull, go to https://go.squeeth.com/BestZB
Crab Strategy (Stack USDC Strategy)
- Payoff Profile: Upside down smile 🙃 (i.e. a hill, and you stack the most USD when you’re on top of the hill)
- Income: USD returns come from the daily premium paid by Long Squeeth holders
- Max Gain: Unlimited
- Max Loss: Limited (amount deposited)
- Liquidation: While it’s possible for crab strategy positions to be liquidated, it’s less likely due to automatic rebalances (MWF) and price-based rebalances for 20% ETH price moves.
Ideal Market Condition to Crab
Crab Strategy is ideal for sideways market conditions (crabs move from side to side, get it?!) when the price of ETH fluctuates within a relatively stable range with periods of low volatility. More specifically, the Crab Strategy does best during periods when Squeeth realized volatility is less than Squeeth implied volatility.
The Crab Strategy automatically manages user USDC deposits to create a position with neutral exposure to the price of ETH (approximate delta of 0).
Crab strategy aims to be profitable in USD terms. The strategy earns returns through sustainable methods (selling oSQTH) vs. DeFi methods such as yield farming where returns dry up quickly. Crab = real yield.
Metrics to Pay attention to:
Current Crab Profit Threshold (Price Bands):
- The most important consideration before depositing in the Crab Strategy is Crab’s profitability threshold (the price bands). If you deposit into the Crab Strategy when the price bands are tight & subsequently withdraw when the price bands are wide, you are effectively selling Squeeth when it’s inexpensive, and buying it back when it’s expensive. Selling low & buying high is not a good look!
- The Crab Strategy profitability threshold indicates the ETH price range between rebalances that would result in a profitable period.
- The profit threshold is based on Squeeth’s current Implied Volatility (premiums). The Crab Strategy would be unprofitable if ETH moves more than approximately the profit threshold in either direction before the next rebalance (MWF)
Price Impact + Slippage
Negative price impact and slippage happens when a trader makes a trade, and the price is higher or lower than expected (for both buying and selling). To combat negative price impact and slippage, Opyn launched Jumbo Crab, a mechanism that allows users to make LARGE deposits into crab with better pricing and significantly less slippage!
Risk:
The two biggest performance risks for Crab Strategy deposits are:
- If you deposit into the Crab Strategy when the price bands are tight & subsequently withdraw when price bands are wide
- If ETH moves more than approximately the profit threshold (price bands) in either direction between rebalances.
While Crab Strategy deposits can be liquidated, automatic rebalancing on a time-based or ETH price changes threshold helps prevent a liquidation from occurring.
For more details on Opyn’s Crab Strategy, check out this article.
To deposit in Crab, go to https://go.squeeth.com/BestCrab
Long Squeeth
- Payoff Profile: ETH²
- Cost: Daily Premium
- Max Gain: Unlimited
- Max Loss: Limited (amount deposited to buy oSQTH)
- Liquidation: Long Squeeth CANNOT be liquidated
Ideal Market Condition to Long Squeeth:
The ideal market condition to buy Squeeth is when a trader has conviction in the upward price movement of ETH in the short to medium-term. Squeeth (short for squared ETH) supercharges ETH, giving the derivative an ETH² payoff.
Metrics to Pay attention to:
Squeeth Implied Volatility (IV):
- The most important consideration before going long Squeeth is Squeeth’s current implied volatility.
- Implied Volatility is a forward-looking metric designed to gauge how volatile the market may be in the future (high IV signals large price swing is ahead, low IV signals price will remain stable).
- Comparing current Squeeth IV to Reference Vol or historical Squeeth vol can help determine if it’s a relatively expensive / inexpensive time to buy.
- Ideally you would buy Squeeth when IV is low & subsequently sell when IV is high , (i.e. buy Squeeth when it’s inexpensive, and sell it when it’s expensive)
- If you buy Squeeth when IV is high & subsequently sell when IV is low, you are effectively buying Squeeth when it’s expensive, and selling it when it’s cheap. Buying high & selling low is not a good look!
- Note: IV indicates the market’s view of volatility, but it is not indicative of future IV levels.
Premium:
- Squeeth tracks rather than equals ETH² because longs pay a daily premium (in-kind funding) to shorts to maintain the position.
- The premium of Squeeth is directly related to Squeeth’s Implied Volatility (high Squeeth IV = high daily premium, low squeeth IV = low daily premium)
Risk:
Pay attention to Squeeth premiums throughout the period that you hold Squeeth. Holding a Long Squeeth position for an extended period (> 1 year), during which ETH trades sideways or goes down in value, will cause a loss in ETH² exposure due to the daily premium paid to Squeeth sellers.
Compared to a 2x leveraged position, Squeeth will make more when ETH goes up and lose less when ETH goes down, but premium rates are expected to be higher due to exposure to pure convexity (ETH² payoff).
If you buy Squeeth, what affects oSQTH Performance? Read this thread.
To buy Squeeth, go to https://go.squeeth.com/BestConditions
About Opyn
Opyn is building DeFi-native derivatives and options infrastructure. Opyn’s product Squeeth (squared ETH) is a new financial derivative that gives traders perpetual exposure to ETH².
Check us out at Opyn.co, follow us on Twitter, Discord, Medium
Disclaimer: This post is for general information purposes only. It’s also just an elaborate plan to get people to say a funny word. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. This post should not be relied upon for accounting, legal or tax advice or investment recommendations. This post reflects the current opinions of the authors and is not made on behalf of Opyn or its affiliates and does not necessarily reflect the opinions of Opyn, its affiliates or individuals associated with Opyn. The opinions reflected herein are subject to change without being updated.
