So far, the year 2022 has not been kind to crypto market participants. War, changes in the macro environment, and inflation have all paved the way for most crypto assets to fall 80%, 90%, or more. Investors, traders, farmers, and flippers alike watched the collapse of LUNA, the downfall of 3AC, and the lending crisis that ensued.
All these factors have culminated to make the current crypto landscape extremely difficult to trade, with only the most qualified being able to generate a consistent profit relative to the market.
For those determined to stay engaged and make trades, who can’t resist the urge and sit on their hands, how should they proceed?
Perhaps they shouldn’t trade at all, but rather, let those most qualified trade for them.
Enter STFX (Single Trades Finance Exchange): a protocol that acts as a marketplace where users can allocate money to individual traders.
The unique part about STFX? As the name suggests, the length of lockup for funds raised is one trade.
This flips the traditional idea of fundraising on its head. There is no multi-year lockup for investors and no performance anxiety for traders. You can bet on an individual trade, whether the fundraiser is a trader you recognize and respect from crypto twitter, or maybe you just think the parameters of the trade make sense.
Investors receive profits on winning trades, minus protocol, and performance fees, or lose their capital if the trade was closed in a loss. Simple.
STFX is built on top of GMX. This provides STFX with perpetual trading infrastructure and allows them to focus on the features that make their protocol unique, including:
Making it easy for users to fundraise as a trader, or to invest in other traders
Allowing traders to build an on-chain reputation linked with twitter
Giving traders more optionality as their reputation increases
On top of this, investors will actually be able to get an idea of what the specific trade the ‘fund manager’ plans to execute is. There will be multiple available parameters of the trade, e.g., the asset being traded, entry price, whether the trader is short or long, etc. The trader will be able to obscure one of these parameters so that they don’t lose too much of their edge.
An additional feature the STFX team has hinted at is enabling “curators”, which would consist of investable vaults that act as a fund of funds.
In TradFi, a fund of funds (FOF) is an investment manager that takes the capital investors give them, and just disperses it into other funds. This leaves (most) of the actual trading and portfolio management up to the individual funds.
What this feature and the STFX protocol as a whole do, is change the task at hand for people who wish to remain active in this harsh market but still want to make money.
As you may have heard many times before, most traders lose money. This is a core principle behind the success of GMX and GLP, on which STFX is built.
Rather than actually trading, users can just allocate capital, which is a different skill, and perhaps one that is easier to pick up. We have seen on-chain trading, investing, yield farming, NFT flipping, and everything in between. Could on-chain capital allocation be next?
On-chain asset management is an idea that has been talked about for some time. Protocols like Enzyme Finance allow users to create or invest in vaults, which can be made up of a variety of assets. For those that want the adrenaline that comes with a short-term, high-risk, high-reward, leveraged trade though, there aren’t really any other options.
Conservative DeFi participants may say the best option in today’s market is to just sit out or take more passive trades, and they may very well be right. Compared to previous bear markets, there are more tools at one’s disposal for passive, or lower-risk yield generation.
Stablecoin farming
Options-vaults
Farming low-risk LP pairs
Even if someone was bullish on what STFX could provide, they could just invest in GLP. GLP is a (semi) safe basket of strong assets, which would experience increased liquidity, price, and fees if STFX fulfills its goal of bringing more traders to GMX.
Trading is difficult to get good at. If you have the trading bug, delegating the execution of trades to other, ideally more qualified, individuals might just be preferable to actually trading yourself.