Settling first on-chain ETH ‘Autocallable’ with Marex and Ribbon Finance

Settling first on-chain ETH ‘Autocallable’ with Marex and Ribbon Finance

The on-chain execution of structured products promises transparency to investors and eliminates counterparty risks.

Crypto trading firms are teaming up with traditional market players to trade onchain structured products amid a U.S. regulatory push to oversee the industry.

Digital assets manager MEV Capital and London-based financial services provider Marex have executed an “autocallable” tied to Ether (ETH) through a smart contract built by the leading decentralized derivatives platform Ribbon Finance, now rebranded as Aevo.

“We are thrilled to provide the smart contract for the first fully on-chain autocallable trade, which represents a significant milestone for both Ribbon Finance and the structured products industry at large,” Jeremy Obadia, Head of Structured Derivatives at Ribbon Finance, told CoinDesk. “Encoding complex payoffs on-chain not only removes the counterparty risk but also allows for a trustless and automated trade lifecycle.”

An autocallable is a structured note that allows investors to earn contingent interest, usually at an above-market rate, if the underlying asset closes at or above a specific level on periodic observation dates. It can be redeemed early and often offers contingent downside protection when held to maturity.

MEV purchased the two-week ether autocallable denominated in the dollar-pegged stablecoin USDC, with a barrier at 85% of the initial price, autocall trigger at 100% and guaranteed coupon of 0.5% per week (annualized 26%). Marex acted as a hedging agent.

How it works: If, after one week, the ether spot price is above the initial price at the time of the trade, the trade terminates early, with the buyer receiving the initial investment plus the 0.5% coupon. If, on expiry, ether trades 15% lower from the initial price, the buyer stands protected, receiving the principal in full along with the coupon. However, if the 85% protection barrier is breached (ether drops over 15%), the buyer takes the loss, which is compensated by coupons to some extent.

“On-chain deployment of exotic options such as autocallables would allow us to enhance several of our market-neutral strategies while staying on Ethereum – a public blockchain we are familiar with,” Laurent Bourquin, Managing Partner at MEV Capital, said.

Marex, MEV and Ribbon eliminated the so-called counterparty risk by locking the maximum payout and collateral in a secured and audited smart contract.

“Bringing Autocallables on-chain and leveraging smart contract features make these products more transparent for investors, allowing instant settlement, seamless lifecycle and removing issuer credit risk. The blockchain technology will change the way products are transacted,” Harry Benchimol, Co-Head of Derivatives Engine at Marex Solutions, said.

Read the full article on Coindesk.

MEV Capital launches DeFi hedge fund looking to deploy $130M

MEV Capital launches DeFi hedge fund looking to deploy $130M

MEV Capital Management Launches DeFi hedge fund looking to deploy 130M$ on Ethereum chain and L2s.

MEV Capital Management Ltd. is launching a new digital asset hedge fund registered “MEV Capital Stablecoin High-Yield Fund,” with a novel approach towards asset custody and transparency. The Fund interacts with Decentralized Finance protocols while employing derivatives for hedging solutions to achieve market neutrality.

Unlike traditional open-ended funds, MEV’s new venture provides clients with real-time access to investment monitory tools and daily P&L for full transparency. Funds will be deployed on the Ethereum public network, using the highest security standards for smart contracts whitelisting process, on-chain transaction monitoring, and multi-signature management.

Laurent Bourquin, Managing Partner at MEV Capital Management, declared, “our objective is to give investors access to advanced market-neutral DeFi strategies while being fully transparent and compliant with regulatory and accounting standards.”

“[…] The investment approach focuses on liquidity provision, market-making activities, and arbitrage on Tier1 dollar-pegged assets.”

The fund is registered with the Cayman Islands Monetary Authority (CIMA), and audited by a CIMA-approved auditor.

The fund has opened its subscription this month for the USDC-denominated strategy, targeting an AuM of 130M$ through 2023. Additionally, MEV Capital Management Ltd is looking to open a High-Yield Fund for ETH-denominated strategy later this year and extend their activities towards other Layer 2s over time.

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MEV Capital Solves Impermanent Loss in DeFi

MEV Capital Solves Impermanent Loss in DeFi

Decentralized finance-focused asset manager MEV Capital hedges losses related to DEX liquidity provision with short-maturity options contracts.

MEV Capital, a decentralized finance-focused digital asset manager, has launched an options-based strategy to prevent on-chain liquidity providers from suffering impermanent loss – the negative outcome instigated by asset price divergences within liquidity pools.

MEV’s Impermanent Loss-Hedge Liquidity Provider strategy (IL-hedge LP), allows on-chain liquidity providers to capture trading fees without being exposed to the downside risk of their open positions.

The IL-hedge LP, which is live on UniSwap v3, combines a tight-range LP position in a liquidity pool with a package of options – with the same underlying assets and maturity date – to hedge the potential downside while LPs accrue fees from the liquidity position.

“We are excited to add this strategy to our offering. The IL-hedge LP generates competitive returns and offers limited system risk by only dealing with a few smart contract layers of UniSwap and the selected most liquid asset pairs, which we consider top tier,” said MEV Capital Co-founder and Investment Manager Laurent Bourquin. 

Orbit Markets, the options structurer MEV Capital working with on IL-hedge LP, issues a contract that hedges the principal value of the LP position for a specified duration of time, typically one or two weeks. 

At maturity, the options contract is settled over-the-counter with either MEV Capital covering the balance if the LP position has increased in value or the options desk settling the difference with MEV Capital if the LP position is worth less than the hedged amount.

According to research on Uniswap (v3) liquidity pools published by Bancor & Topaze Blue, approximately half (49.5%) of liquidity providers generated negative returns due to the price divergence of two assets constituting the liquidity pool and low frequency of LP rebalancing, also referred to impermanent loss. 

“This particular strategy requires active interaction with OTC derivatives providers for digital assets, as the on-chain liquidity for exotic products is nonexistent for now,” Bourquin said. “However, that’s likely to change. On-chain swap contracts should become available in the following couple of years as traditional financial institutions enter the market en-masse and start reproducing investment products in the DeFi environment in size.”

Besides IL-hedged LP, MEV Capital is bridging the gap between traditional finance and DeFi by offering sophisticated digital asset instruments to institutional investors via segregated managed accounts, covered stablecoin notes, and IL-hedged LP offerings.

MEV Capital Partners with Marex Solutions

MEV Capital Partners with Marex Solutions

London, the UK – MEV Capital, a leading digital asset manager specializing in capturing value in the DeFi markets, and Marex Solutions, a renowned commodity broker and provider of OTC hedging solutions, announced their partnership to innovate and create new digital asset products.

With MEV Capital’s proficiency in DeFi and Marex’s established reputation in the commodity markets, this collaboration is poised to pioneer novel and exciting opportunities for clients looking to diversify their portfolios and capitalize on the cryptocurrency industry.

Harry Benchimol, Co-Head of Derivatives Engine at Marex Solutions, said, “We are thrilled to partner with MEV Capital and leverage their unique insight and market-neutral strategies in the DeFi space to provide a valuable offering to our clients. Manufacturing innovative derivatives with MEV Capital’s expertise will allow both parties to create new products combining the best centralized and decentralized finance.

MEV Capital has been a prominent player in the DeFi space, specializing in on-chain yield strategies such as liquidity provision, statistical arbitrage, and carry trading. Their extensive experience and expertise in the DeFi market bring valuable insight and perspective to the partnership with Marex.

The first financial instrument the two companies will collaborate on is a fixed-term DeFi-linked note on stablecoins. This structured product, a first-of-its-kind, will allow professional investors to benefit from the growth of cryptocurrencies while retaining a stable, national currency-linked exposure.

Laurent Bourquin, Managing Partner of MEV Capital, said, “Our collaboration with Marex is a real leap forward for the institutionalization of DeFi. It will facilitate its access and anchor the positioning of digital assets as a new asset class for years to come.”

MEV Capital has been successfully executing on-chain yield strategies for clients for over two years and is in the final stages of opening a dedicated DeFi market-neutral investment fund in the Cayman Islands.

About Marex Solutions:

Marex Solutions is a leading commodity broker and provider of OTC hedging solutions. With a reputation for staying ahead of the rapidly changing financial landscape, Marex continues to offer innovative products and services to its clients.

About MEV Capital:

MEV Capital is a digital asset manager specializing in extracting value from DeFi markets. The company’s expertise in DeFi and on-chain yield strategies make it a valuable partner for clients looking to diversify their portfolios and benefit from the growth of the digital asset space.

Positive Returns During Crypto Winter

Positive Returns During Crypto Winter

MEV Capital, Lithuania-based digital asset management and Web3 data intelligence company with more than $25 million in Assets under management, has outperformed most of its peers and brought positive returns to investors amid one of the most significant sell-offs in the crypto market seen in recent years.

The trend-agnostic crypto hedge fund is implementing market-neutral strategies to generate stable yield returns mainly through liquidity provision, statistical arbitrage, and on-chain loan liquidations on a set of decentralized applications.

During the highly volatile period when the crypto market suffered significant sell-offs induced by the contagion effect from the liquidations of over-leveraged crypto entities, MEV Capital was able to secure a high single-digit return over the same period. From May to July this year, MEV Capital applied conservative trading strategies to safeguard investor capital in the DeFi market. As a result, the digital asset manager succeeded in outperforming most crypto trading firms that suffered drawdowns in the same period.

Our mandate for the last quarter was to protect clients’ capital first during this chaotic time, while yield generation took a secondary role. However, we were happy about our ability to achieve positive returns for the said period,” says Laurent Bourquin, General Partner and Chief Investment Officer of MEV Capital.

“The yields we are able to generate are directly linked to the activity in the crypto-market, which is naturally lower when the macroeconomic conditions are tight, but tends to come with large order flows and volatility spikes, generating other types of opportunities.” 

MEV Capital has been running a set of blockchain-based strategies mainly exposed to stablecoins since 2021. It primarily targets crypto-native entities, HNIs, and institutional investors for DeFi exposure and tailor-made advisory. MEV Capital’s client list includes ex-hedge fund managers, digital asset investment firms, family offices, and a financial product structurer with $4 Billion in sales volume in 2021. 

The next phase for MEV Capital is the expansion and rapid growth. Besides capital allocation and yield strategies, the company is heavily focused on MEV research & development efforts aimed at maintaining a competitive edge and solidifying its market position by focusing on proprietary infrastructure to interact with decentralized networks.

Highest quality asset management in DeFi is inseparable from having in-house trading systems coupled with geo-distributed integrations to ensure the lowest latency and just-in-time order completion. Designing the strategies, fetching the required data, and automating executions in a decentralized environment is incredibly complex. Only a handful of companies can do that at a profitable scale.

Even though DeFi has been around for just a few years, the competition in MEV activities is already fierce. We had to move from standard strategies to focus more on long-tail events and cross-chain cases, where trades are not as crowded,” added Laurent Bourquin.

Currently, the company is preparing for its Seed round in the autumn of 2022. MEV Capital was founded in 2021 by Laurent Bourquin and Gytis Trilikauskis.

DeFi event recap (video)

DeFi event recap (video)

You could do it swaggering like famous investor Peter Thiel, who coined the term “financial gerontocracy” while speaking about the global banks at the recent conference “Bitcoin’2022”. You could call names. Or you could give a hand for support. It seems that our community is of that latter kind.

MEV Capital hosted the conference “Decentralized finance during geopolitical uncertainty” at Rockit in Vilnius, Lithuania. Our partners Gytis and Laurent talked about the infrastructure, development, and products in the DeFi market. M.Sviderskė, CMO at Lossless, covered the intriguing topic of security in DeFi.

And the keynote speaker Feyo Sickinghe, Fund Manager at Target Global delivered his insights on common pitfalls for Web3 entrepreneurs. All these and some other topics have been disentangled during the final discussion “Bridging the gap between traditional and decentralized finance” moderated by R. Saribekian from Synergy Finance.

Building bridges, indeed. More meetups like this are on the agenda.

If you were not there or did not have the opportunity to watch the live stream – not a problem, the video recording is available any time on Youtube for your convenience.


First regulated DeFi Investment fund enters Europe

First regulated DeFi Investment fund enters Europe

Lithuania’s first Decentralized Finance (DeFi) Investment Fund – MEV Capital Stablecoin Enhanced Yield Fund – will invest in crypto assets.

Lighthouse Asset Management has launched Lithuania’s first Decentralized Finance (DeFi) Investment Fund – the MEV Capital Stablecoin Enhanced Yield Fund. The Fund, whose units are available only to professional investors, has a target size of USD 50 million.

The new fund focuses on the blockchain technology-based decentralized finance market, and the stablecoins used in that market have been chosen as one of the fund’s main investment vehicles.

“The creation of this fund is a noteworthy event, reflecting changes in the traditional financial and the crypto markets, which are gradually finding more points of convergence. Decentralized Finance is a kind of fusion of those two worlds, taking advantage of the benefits of both: DeFi protocols utilize stablecoins to apply traditional investment strategies and techniques. The major difference is that blockchain transactions are immutable and settled in a permissionless way without reliance on any financial intermediary. This Fund clearly stands out in our portfolio of funds both for its investment strategy and its management approach,” says Šarūnas Butkus, the Chairman of the Board at Lighthouse Asset Management.

The tools needed to monitor and analyze the Decentralized Finance market have been provided to the fund management company by the DeFi & Web3 research and development firm MEV Capital.

“Decentralized Finance combines the experience of the traditional financial system with digital innovations, so it’s no wonder that in just a few years DeFi’s Total Value Locked (TVL) has reached USD 200 billion. We are the only company in Lithuania developing analytics tools for the decentralized finance market. Blockchain technology enables investors to track many indicators in real-time, meaning that huge amounts of data must be processed every second. Our company helps sort and organize that information, so all that our clients have to do is make decisions. We hope that partnership with Lighthouse Asset Management will enable us to understand investors’ needs even better and expand our basket of products,” says MEV Capital Investment Manager Laurent Bourquin.

In managing investments, the MEV Capital Stablecoin Enhanced Yield Fund uses techniques of liquidity provision, price arbitrage, carry trading (where a low-interest-rate currency is converted into a currency with a higher return), and on-chain loan liquidations.

The Fund plans by 2024 to fully form its portfolio, with a value of USD 50 million.

The Fund formally began operations in September, when its rules were approved by the Bank of Lithuania’s Financial Services and Market Supervision Department. Legal and technological arrangements for the Fund took several months.

In addition to this Fund, Lighthouse Asset Management manages two others whose strategies focus on real estate, digital innovations, high-tech projects, and start-ups.

The potential of Decentralized Finance

The term Decentralized Finance (DeFi) refers to financing programmes carried out by means of smart contracts on a blockchain. DeFi allows borrowing and lending operations and trading in financial derivatives, insurance, and assets. It differs from the traditional financial market in that all operations are performed by the two parties to the transaction, without the involvement of any intermediary (bank or other financial or credit institution).

While DeFi protocols use a variety of cryptocurrencies, a large part of which is settled in stablecoins – cryptocurrencies which are pegged to some other currency, such as the US dollar.

As stablecoins are directly tied to another currency, in the long run their value is less volatile. The total size of the stablecoin market is currently more than USD 100 billion.

The MEV Capital Stablecoin Enhanced Yield Fund in brief:

  • Intended only for professional investors
  • Has a 2% annual management fee and a 20% performance fee
  • Targets an internal rate of return of 20%
  • Managed by Lighthouse Asset Management
  • Audited by Moore Mackonis, UAB

About Lighthouse Asset Management

Lighthouse Asset Management is the first licensed investment management company in Western Lithuania. The main investment directions of the funds it manages are real estate, digital innovations, high-tech projects and start-ups, and other businesses that create real value for the environment, society, and the economy. Its funds’ operations are audited annually and are licensed and supervised by the Bank of Lithuania.

About MEV Capital

MEV Capital is the first Decentralized Finance market research and development company in Lithuania. It develops tools for real-time DeFi market data analysis and intelligence, web3 integrations, and proprietary trading algorithms for operations in both centralized and decentralized crypto trading exchanges. The company’s own financial and blockchain analysts continually monitor the development of Decentralized Finance services and apply that know-how to enhance MEV Capital’s investment strategies.

For more information contact:

Aistė Veberaitė
Project Manager at Publicum Financial Communications
Tel. +370 616 98510