Introduction
In partnership with Circuit, Drift provides users with access to market making yields through vaults managed by Circuit. Users deposit assets to be used to carry out market making strategies and receive yield in return. Such strategies typically require substantial market knowledge and experience, making it out of reach for most market participants. Circuit’s Market Making Vaults democratizes access to such opportunities for everyone.
How does it work?
There are various vaults on Circuit. Each vault employs a specific trading strategy for specific assets. Users deposit the relevant assets into the vaults of their choice and Circuit handles the execution of those trading strategies. In return for providing liquidity, depositors earn yield on their assets. Vaults are fully on-chain and built using smart contracts where only the depositor can withdraw their funds.
Vaults Available
- Supercharge: SOL delta-neutral market making strategies
- Turbocharge: SOL, JUP, BTC, and ETH market making strategies
- JitoSOL Basis Vault: JitoSOL delta-neutral basis trading strategy
Note: Withdrawals are subject to a 7 days redemption period. Withdrawals can be requested at any time. Funds will be made available for withdrawal at the end of the redemption period.
Strategies?
Delta-Neutral Market Making strategies are strategies which have no exposure to movements to the underlying asset. The strategy involved holding long and short positions simultaneously to reduce directional exposure. The strategy profits from taking the spread while participating in market making activities.
A basis trading strategy exploits price discrepancies between a futures contract and the underlying asset's spot price by trading the difference, known as the basis. Traders buy the asset and sell futures if the basis is positive, or sell the asset and buy futures if it's negative, holding until the futures expire. Profits are realized when the futures and spot prices converge at maturity. This arbitrage strategy is common in commodities, currencies, and fixed income markets, requiring substantial capital and market expertise.
Where do the yields come from?
Depositors receive a share of the profit that Circuit earns in proportion to the amount deposited. Vault managers takes a 30% performance fee, which means that 30% of the profits made will go to Circuit and 70% will go to depositors. You are able to monitor the performance of each vault on Circuit’s platform.
Risks
Volatility Risk: Extremely volatile environments might affect the effectiveness of these trading strategies which will impact profitability.
Counterparty Risk: The vaults face counterparty risk when trading with other market participants. If a counterparty fails to fulfill their obligations, such as delivering securities or making payments, the market maker may incur financial losses.
Ready to start earning?
Participate in vaults and start earning here: https://www.circuit.trade/#vaults
