Funding Rate Reversion Vault FAQ
About the Strategy
What is NX Funding Rate Reversion Vault?
The Funding Rate Reversion Vault is an investment strategy designed to capitalize on inefficiencies in funding rates while maintaining a market-neutral risk profile. It is tailored for the current market environment, where funding rate imbalances create opportunities for arbitrage.
How does the Funding Rate Reversion Vault work?
After users deposit USDC into the vault, the funds are used as collateral to borrow SOL on Drift. The borrowed SOL is sold to establish a short position on SOL. Simultaneously, a long position on SOL/USDC is opened in the perpetual market to maintain a delta-neutral position and take advantage of negative funding rates.
Is the target APY guaranteed?
No, the target APY is based on backtested data from the past two months. Actual APR may vary depending on market conditions. If funding rates turn positive, losses may occur. This strategy is ideal for users who anticipate negative funding rates on Drift.
Who is the target user?
This strategy is designed for users seeking passive stable income (approximately 20%) from negative funding rates on stablecoins and willing to commit to long-term staking.
How does the Vault generate yield?
The Vault generates yield primarily through negative funding rates by leveraging opportunities available on the Drift platform.
Is my fund safe in the Vault?
NX Finance prioritizes safety. Funds in the Vault are managed securely through Drift's platform:
Limited Permissions: NX Finance can only manage and trade funds; users retain full control and can withdraw after the lock-up period.
About Vault Operation and User Experience
Does the strategy have a redemption period?
Yes, funds in the Vault are subject to an 8-hour redemption period before withdrawal. This helps minimize fees, transaction slippage, and other unpredictable costs while optimizing profits.
Why is my ROI < 1 after staking funds in the Vault? Is this normal?
Yes, it’s normal in the short term due to trading slippage and short-term price fluctuations in Drift’s perpetual market. The strategy generates profit only when Drift’s overall funding rate remains negative.
Why can't I deposit funds into the Vault?
The minimum deposit is 10 USDC. If your deposit exceeds 10 USDC but still cannot be processed, it may be because part of your funds are in withdrawal. You can deposit again once the withdrawal process is complete.
About Fees and Rebates
How are fees charged?
A 15% performance fee is applied to total vault profits. Of this, 20% (equivalent to 3% of total vault profit) is redistributed to users through a rebate program.
What are rebate rewards?
Rebate rewards incentivize users who invite others to join:
Earning Rebates: Invite friends to the platform; you earn 3% of their total profits as rebate rewards for each successful invite.
Distribution: Rebates are distributed weekly and can be claimed via the Position page.
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