dETF — Should you ape?
Diversification. That’s what the professional traders always mention but the same guys don’t share exact details on what to spread your funds into. It’s a concept that’s so easy to understand, and yet… so obscure.
That’s when ETFs (Exchange Traded Fund) were first created. A basket of stocks put together with a theme in mind to allow new and veteran investors to buy in, with the knowing that these individual counters will hedge against one another in a maximum exposure, minimal risk environment.
But should we ape in at all? Let’s discuss.
This article will focus on bishares.finance offering on the Binance Smart Chain. Launched in early July 2021 as a decentralized ETF (dETF) platform, BiShares has grown steadily to offering three distinctive dETFs as of the time of this writing. On top of that, they also offer the following options on their platform:
— Stake $BISON token in a single native pool
— Pair $BISON and BNB to create an LP (Liquidity Provider) token
— Pair dETF tokens, which are the fund tokens from BiShares, with BNB LP tokens
All of the above grant rewards in the native $BISON token but there’s more. A very interesting feature is that users who stake $BISON in the single native pool earn platform fees which will get redistributed in BUSD.
As with any ETF offering in the stock markets, once of the defining features of Bishares is the ease of use for someone new to Cryptocurrency as well as a safe haven for seasoned folks to park their funds for short to long term in a way where instant liquidity can be tapped upon, should the need arise. Compared to traditional ETFs, this is a huge advantage. The amount of fees involved when liquidating ETFs on the stock market can be substantial as it is normally a percentage of the fiat value sold. On DeFi (Decentralized Finance), the only cost is the transaction fee or gas fee as we like to call it and sometimes a performance fee.
It all started with the biT10 fund, a basket of the top tokens in the Binance Smart Chain ecosystem. Followed on by biAPE & biChain dETFs. Bishares will soon have a DAO (Decentralized Autonomous Organization) in place to allow the community to vote on new dETFs and their participating counters which is a plus in my book.
Spend some time to assess each token within the individual funds to get a feel of what kind of risk exposure you would undertake when you purchase. Personally, I feel that all three current funds are unique in the makeup and cater to different segments of the crypto market. My own favorite would be both the biAPE & biChain funds. The reason is rather personal to me. I am familiar with the ApeSwap ecosystem and know almost all the tokens and by profession, I am an working in IT, specializing in infrastructure so the biChain fund calls out to me.
Oh, there is a third reason which I will highlight down below in a later section of this article.
How to buy in?
Bishares has made it especially easy for anyone to invest in dETFs. Once connected to your wallet, all you will need is to select the appropriate fund, key in the amount of shares you would like to purchase, select the asset to use from the dropdown menu (BNB is available on all funds) and then click on “MINT”. Price per share is indicated on each individual fund’s page.
The fund’s page will also display participating tokens as well as the ratio of allocation of each in the respective fund.
Users also have the option to mint fund tokens by supplying each individual token in the ratio as shown under the Multi Asset tab. This is more for advanced users or for those who already hold the exact same tokens in their wallets. Again, select the number of shares required to mint and the amount of individual tokens will be calculated. All you need is to approve all of them and “Mint”.
Another relatively uncommon option would be to purchase dETF tokens directly off ApeSwap or the ARBEX exchanges. The Bishares own DEX (Decentralized Exchange) — ARBEX currently supports swaps of the biChain token while ApeSwap supports buy and sells of the biAPE token.
So there you have it. An easy, simplified method to get on-board investing with Cryptocurrencies. Whenever the next time someone who hasn’t gotten their feet wet with the digital movement asks for assistance, a good way to enable them would be to start them off with dETFs first.
Redemption Process
Should there be a need to one day exit from your dETF positions, the process is will just be a repeat of the above, except for a couple of differences. Instead of “minting” fund tokens, you will be “burning” fund tokens. With the exception of the biT10 fund, where the output tokens will be all the underlying tokens in the fund, users can choose to withdraw in a single asset/token or withdraw the entire basket.
Fund Token Yield Farming
Instead of just leaving users to invest in funds, there is always opportunity to Yield Farm for additional rewards. Bishares did not alienate their users and have also provided farming pools to earn additional passive income while investing in the dETF funds. On farms.bishares.finance, users can provide liquidity together with $BNB and deposit the biXXX-BNB LP tokens in their respective pools to generate rewards in the form of the $BISON token.
A simple example would be for a user to purchase the biAPE fund token, and then pairing it with $BNB into a LP token and subsequently depositing the LP token into the biAPE-BNB LP pool to generate $BISON rewards. The rewards can then be again deposited into the single staking $BISON pool or paired with more $BNB tokens into a BISON-BNB LP and compounded for more $BISON. Bishares has given the capability to the user to make their funds work as hard as they can!
ETF Strategies for Maximizing Returns
As usual, here are some of my thoughts on how best one can leverage on the service provided by Bishares.
First off, I would always take a snapshot of the fund price upon purchase. The three funds offered today have a strike price of around USD$5+. Most users will just monitor this individual metric but there are other strategies that one can consider if delved further.
Alternately, taking a snapshot of the individual token prices upon the time of purchase can be a good idea as well. This helps to track the individual token performance over a period of time.
Understand which fund you have purchased and which sector of the Crypto space the “theme” involves is a must. An an example, biChain fund is made up of the top blockchain tokens/coins and news of their price rises and falls are very prevalent on social media. Keep track of the big rises in order to capitalize of parabolic moves upward so that you can redeem the fund token and exit that particular coin/token if required.
Dollar Cost Averaging is one of the common strategies surrounding ETFs. As prices usually don’t fluctuate much, increasing one’s stake in the fund is recommended. Although in Bishare’s case, one can also diversify into another fund to mitigate risk instead of DCA.
Swing trading fund tokens can be a good strategy for those new to trading. As dETFs contain a basket of counters, they may not exhibit huge price movements in bull or bear markets and is a safe method for those seeking to hone their trading skills.
Sector rotation is a huge plus with the current number of funds available and the guaranteed inclusion of future fund types on Bishares. A good understanding on what will boom in the short to mid term will allow users to exit a lesser performing fund for a punt into a prospective higher performing fund in the future.
Spotting trends that may affect the funds is definitely a good skill to nurture. A seasoned investor will capitalize on this and grow his/her portfolio in ways that buying and holding will not offer. Bishares offer a safe and low risk platform to experiment with instead of going to market with single volatile assets.
Feel free to contact my personal friends @Prashant2001 @Holomoku88 at the Bishares Telegram channel — https://t.me/bishares for more information.
