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DPI Momentum Index
DeFi Index, or just ETH? Why not both?
Discuss in #dpi-eth-momentum-index​
β€œDon’t take profits, just rotate!”
Despite the infinite growth potential of DeFi, the DeFi Pulse Index (DPI, an index that tracks the price of a basket of DeFi projects) has been under-performing ETH by over 60% overall since its inception, while greatly outperforming it for short periods of time. The DPI/ETH Momentum Index (DMI) attempts to provide a solution to this with intelligent alpha on top of the DeFi Pulse Index. It capitalizes on shorter-term trends and outperforms the DPI by actively rebalancing between ETH and DPI. DMI offers market-out-outperforming returns to investors by giving them DPI exposure at the right time.
In layman's terms, you don't want to be holding a bag of DPI until you do. The DMI takes care of that for you by automatically flipping your capital from ETH into the DPI at the right moments, outperforming holding spot ETH by ~17% (see backtest results below) while managing your risk and exposure safely by retreating back into ETH when the DPI isn't doing well.

Strategy

DMI triggers a rebalance when the 10 Day Simple Moving Average (10 SMA) of the DPI/ETH ratio crosses the 50 Day Simple Moving Average (50 SMA) indicating a trend reversal. If the 10 SMA crosses and stays below the 50 SMA, DMI rebalances all DPI tokens into ETH to reduce further underperformance in the downtrend. If the 10 SMA of DPI crosses and stays above the 50 Day SMA, DMI rebalances back into DPI to capture upside in the uptrend.
The 10 Day Simple Moving Average (10 SMA) is one of the most popular trading indicators to determine when to enter and exit positions in the short term. In contrast to the 50 Day SMA, the 10 SMA tracks a shorter-term trend. This should make the 10/50 Day SMA crossover a signal of a trend reversal.

Backtest Results

Period from September 12, 2020 to December 3, 2021
Asset
Return
Sharpe Ratio
DMI
+1,175.75%
2.57
ETH
+1005.76%
2.55
DPI
+153.80%
1.29

How does this work for me as an investor?

DPI/ETH Momentum Index functions in a manner similar to a traditional Exchange Traded Fund (ETF).
  1. 1.
    Users purchase the DMI token on the SW DAO platform
  2. 2.
    Funds received from purchases of the token are then placed into an aggregated pool of capital controlled by SW DAO
  3. 3.
    The pool of capital is then allocated in either DPI or ETH depending on the 10-day Simple Moving Average vs the 50-day Simple Moving Average
  4. 4.
    The value of the DMI token then increases/decreases based on the performance of the underlying assets held
  5. 5.
    Users can withdraw their capital at any time by simply exchanging the DMI token back on the SW DAO platform
Since all assets are held in self-custody by the user, there is no potential for SW DAO to "rug pull" the collateral that you have allocated into the DMI asset pool.

Fees

  • Performance fee: 0%
  • Management fee: 3%
  • Buy/sell fee: 0%

Resources

  • Polygon Contract Address: coming soon
  • dApp Link: coming soon
  • Home Page Link: coming soon