Pre-Launch AMA

ReFi Pro Pre Launch AMA (7 Jul 2022)

Huf (Head of Investments) - ReFi Portfolio and Market Update

• We had a very good week last week, we added about 10% of the fund from $2m up to just over $2.2m and we've continued that in a steadier sense. We gave back a little bit to the market being short over the weekend but our philosophy with any trading, farming or investing is that you want to win big when you get it right and lose a little when you get it wrong. That's why we always have stops in place.

• We did flip bullish yesterday, bought some $SOL exposure via perps and some $SOL call options which have done really well, so ReFi Portfolio is back around $2.25m - $2.3m level.

• With regards to the market view, Me, Marc and Jun had a long call yesterday and we just think that a lot of these moves right now are positioning related, not so much fundamental really changing. For macro outlook, we've got CPI data coming out on the 13th of July, big Fed meeting at the end of the month and GDP data thereafter as well.

• So has inflation suddenly disappeared? Have recession fears disappeared as the bond market saying that it's all green lights? No, we're due a relief rally. Are we putting aggressive risk on? No, at the moment but there is definitely a sentiment shift and we're happy to ride that, we’re positioned accordingly.

• Moving forward, obviously you will have noticed that the daily reporting has been a little bit less consistent over the past day or two, it’s because we are going to be moving to Multifarm and an announcement will be coming up. I’m proud of what we've done for the ReFi Portfolio in these choppy waters, avoided the temptation to over-trade, saving our capital and really positioning big when we do have conviction in something. We've done well for the Third-Party AUM and we've got a real strategy in place now for ReFi Pro as well.

Q1: So what is the ReFi Pro minimum investment amount, and why do you need to gate with a minimum in place? Don't you want maximum AUM?

• A1: The minimum investment amount for ReFi Pro is currently set at $25,000. It's really tempting for somebody to say I'll just put $1K or $2K in and to try this thing but this is not kind of client base that we're going after.

• We really have taken feedback onboard and we've set a minimum where we're optimizing. Rather than getting lots of tens of $2,000 tickets, we can get one $25,000 ticket. It's about maximizing effort versus AUM. We’re not tied to that in any sense so, (for example) if existing ReFi token holders will be able to deposit less than $25,000, they could be whitelisted for that as a way of showing our gratitude of being an existing ReFi token holder (still a plan). But for the clients where we're looking to onboard them into ReFi Pro (especially those with millions in their treasury), that minimum isn’t going to be too much of a concern.

Q2: Is the 2% management fee on entry only or is it charged annually? What about the 20% performance fee, is that on exit only or charged annually?

• A2: The 2% management fee is on entry only, not annual. Performance fee operates on redemption only as well. Our interests are aligned with our investors, if ReFi Pro makes a profit and you decide to withdraw, we will take a performance fee.

• If Refi Pro doesn't make a return, obviously we can't charge you performance fee and we won’t charge periodic performance fees on your capital. We're just doing what is standard across the industry, which is management fees and then performance fees only at point of redemption.

Q3: Refi Pro is very similar to a fund. How is the token not a security?

• A3: Obviously we can't give a legal opinion on this. Within DeFi, generally speaking you'll see a lot of anonymous founders and teams and part of that is just due to regulatory spotlight on how these are treated. We have engaged with an external legal counsel about the $REFI token and that opinion will extend to ReFi Pro, but that's a safeguard for us internally as opposed to anything that an investor needs to worry about.

• I think the way that an investor needs to treat this in terms of their own personal accounting is similar to the approach that they take for any DeFi investing, where they deposit into a vault, they earn some kind of return, and then it's up to them to seek independent advice on how that is taxed in their local jurisdiction.

Q4: What is your view on the fair value of $REFI token, and what is your forecast for ReFi Pro uptake and future token fair value?

• A4: We wrote an article a couple of months back and it was called 'How to Value ReFi' and at the time ReFi token had a few value drivers. Number one was obviously farm growth. Second was reflections, so that was very much volume based and there's a market beta component of that as things get more bullish and there's more attention back on the sector.

• What changed with ReFi Pro is that we’ve added some additional benefits for $REFI token holders now, they will accrue an aspect of the management and performance fees on any institutional capital that's being managed by Huf, Marc and Jun (ReFi investment team).

• If you're asking about the fair value of the token, is that you can trade it like an equity stock and that equity stock gives you a right over future distributions paid by the operating asset which is the ReFi farm, and the ReFi farm has a couple of levers to it whether it's options and derivatives or seed investing.

• If anything, I think the token is actually more valuable than it was when we wrote the previous article. What we’re going to do is actually work on updating that article just to reflect some of the new dynamics of the $REFI token, so we can model our assumptions on management and performance fees and then update the discounted cash flow model, so do look out for that.

Q5: What is the EIP-4626 protocol and how is it different to other vaults in crypto?

• A5: You can read up more about EIP 4626 Tokenized Vault Standard for ETH here https://eips.ethereum.org/EIPS/eip-4626.

Q6: With Refi Pro launching, how are the farmers managing the fund, assuming that the amount can be fluctuating, as in people deposit and withdraw at various times?

• A6: The backend architecture we'll be using is Fireblocks. So if you deposit into ReFi Pro, let's say $25K and there will be a monthly epoch. So there would be no point depositing now if the next epoch started on the 1st of August, for example. It's in your interest to have the fund or invest your funds towards the end of the month ready for the new epoch.

• Once those funds have been swept up, the smart contract will immediately send those funds to Fireblocks into a dedicated ReFi Pro vault and the monthly epoch then begins.

• Let's just assume it's one client, it goes up 10% so it's now $27,500. The value of your Pro tokens will be a one for one to the USDC value, so you'll be able to redeem those at the end of the month at 27,500 subject to performance fee.

• So let's say you put $25,000 in, you will get 25,000 tokens (let's call them Pro Tokens for now). Once that has been calculated you can then redeem at the end of that epoch or you can choose to keep it invested. We will have flow charts to help explain exactly how this works under the hood but the idea is that investors can enter on any monthly epoch date and they can withdraw on any monthly epoch date, and if you choose to stay invested for two epochs or three epochs etc, it will just track the USDC value of your proportional allocation in time.

Q7: What ways might ReFi Pro benefit small holders of the $REFI token?

• A7: This has been touched upon in previous Qs, but if you’re a small token holder and down anywhere between 10%-80%, for that kind of investor there's a couple of things I would say. Firstly, ReFi Pro has been launched with the sole intention of benefiting existing ReFi token holders in a way that also serves an institutional client base. Institutional clients are not going to buy the ReFi token because it doesn't have the return profile that they're looking for. They're looking for something lower risk where they can deposit and they can get exactly one for one value. So the ReFi token, again, you need to think of it like an equity stock with several streams of revenue to be distributed later.

• Secondly, by having ReFi Pro clients coming in, the farm can be still up without Huf, Marc and Jun having even to put on a trade. So the benefit for a token holder is you get in today at today's price or you hold at today's price knowing that the team is doing everything they can to to really make this into a billion dollar business, which is what we said at the onset. Within the ReFi umbrella, the $REFI token will always be core to the project.

Q8: Do any of the current ReFi investment team members have experience with seed or VC type investing?

• A8: Jun actually worked for a private equity firm for a small period of time. Huf and Marc have done angel investing within DeFi and fintech. Our plan there is to partner with DeFi protocols and builders who know what they're doing and on the last Spaces we said that we've starting to develop a relationship with Avalanche Labs and the team there that are behind all the upcoming DeFi protocols that are launching. The way that we can be beneficial to them is we can do some beta testing, give feedback on DeFi protocols, provide liquidity early on, acquire some tokens early on, etc.

• For an analogous experience we can draw upon I would say the honest answer is limited, but there is deep industry relationships within DeFi where it's beneficial for new protocols, founders and projects to actually have us on their kind of roster as somebody that they partner with. We're absolutely front and centre of a lot of people's mind when it comes to DeFi and extracting yield from DeFi and I think as we grow, we're going to see more and more of those opportunities. So again, just diversifying how we access our alpha and being early and building in bear market.

Q9: Will there be a different risk vaults you can deposit into (low, medium, high, or leverage short long game and a high risk basket)?

• A9: Not initially, and initially it's gonna be a USDC fault with a low to medium risk appetite because that's what the market wants right now there's a lot of people sitting on stable ground assets, they don't necessarily need or want and 50%-100% return, I think people will be skeptical if you advertise yourself in that kind of magnitude, but what i really firmly believe in is that we can we can do some relatively low to medium risk stuff, whether it's delta neutral plays, derivatives, funding arbitrage.

• There's a couple of levers we can pull on and we can get that kind of 20%-30% return in a very kind of risk mitigated manner. Let's build that and let's do that to showcase our ability, show proof of concept and then we can add bells and whistles. Like I've always said with with ReFi: let's do one thing and do it really well. When FaaS set off as a sector, it was so tempting for people to go into Nodes or NFT's or GameFi, etc. Our view is just do one thing and do super well and establish yourself as a leader and that's what we want to do for ReFi Pro, establish ourselves as a leader in institutional-grade treasury management.

Q10 (Not ReFi Pro Specific): What is the most important chart to keep an eye on for the next month?

• A10: Generally, look at the dollar. That's what everybody's trading. Everything that you're trading is is based off the dollar and dollar strength will weigh on equities, fixed income market and crypto. The two have been coexisted for the past 48 hours (strong dollar and risk asset doing well) It's not a sustainable correlation and so i would keep a firm eye on the dollar and there's no reason why from 107 it can't rip up till like 120 or 150 that's when it really, really starts to weigh on traditional markets.

• I just don't see a scenario in which the two can go together. Other than that keep a close eye on where the yield curve is, main metric for crypto is a risk asset and looking at the NASDAQ a lot because it is obviously a barometer for risk appetite for tech and there was a lot of leverage in the NASDAQ as people put risk on into the tech sector. You can almost see elements of crypto trading like a leveraged play on the NASDAQ.

Q11: TrexDAO must be very happy with how we’ve managed their portfolio.

• A11: They’re very happy. They gave us $1,500,000 in Tether and then we were really hesitant to put any risk on so even though our initial proposal was to do all this stuff with Lido Finance and ETH based farming we actually held off just because we said the markets really uncertain at the moment we don't want to do any of that. Thankfully that was the right play, we managed to get a short exposure and made them 7%-8%. Reality is that from $1.5 million, they only ever wanted to put 200K at risk so all the money we've made actually is a lot better than what it looks. It looks like we've made $100K based on $1.5m invested, but in reality it is from $200k they allowed us free reign to be used in DYDX, Deribit or FTX. So the actual return on capital invested for them is 50% in the past three months so they're actually super happy to the extent that they've got internal approval to up the allocation to $800K away from stables and we’re starting to ramp up our exposure, for example some of the $SOL call options are for them.

Q12: It was mentioned there was an Algo for trading from the order book. Any more information on this or whether it's just something that you've got an idea of and we've kind of going to progress at some point in the future?

• A12: We're constantly looking at iterating how we make our returns to the point about ReFi Pro and how we allocate capital and how we make our returns. Yes, we can get into venture stuff, we've already proven that we can do things in the options and derivatives market, we're starting to do a little bit of funding arbitrage. We're not as vocal about that because we don't want the opportunity to to run away from us. Similarly, if there is an opportunity, both me and Marc have experience in working with quant teams and creating algo strategies and coding them up.

• Right now we're just iterating and testing some stuff, if we feel like it's worth the investment to get it actually formally done and which will require an investment then then we'd be happy to to start allocating some capital to to running more systematic strategies. Very much something we've done in the past in TradFi, it can work and i think also as we scale our operations there will be a portion of the fund which is always kind of market making and that's what we'd like to do. Can I give a timeline on that? Not really. Just to know that we're constantly looking at ways of improving investment management.

Q13: So how does the complexity of management change as ReFi Pro onboards more investors?

• A13: No changes. If we think about Fireblocks when I log into it. I see the ReFi portfolio and I can allocate and make trades there (connect to Aave, Compound, Deribit, Kucoin for example) for ReFi portfolio and TrexDAO and there will be a third bullet which is ReFi Pro and everything is on the aggregated wallet doesn't matter if we have one or 100 clients we'll be running the same strategy. So let's say all those 1,000,000 tickets roll in and we've got a fund of let's say 10 million we'll just we'll just allocate our strategies across the three wallets as we do anyway, so the whole point of ReFi Pro is to do this in a scalable manner.

• In the run up to ReFi Pro, we've had a lot of people saying i've got 500K, a million, 50K, etc. we’ve had the nice problem of actually saying I can't do it because it's not scalable for me to manage a separate pool of capital for that amount of management fee, because even on $1,000,000 inflow it's only $20K of management fee.

• What we really want to do with ReFi Pro is make it a volume business and and get 10s if not hundreds of $1,000,000 in and manage just one portfolio for ReFi Pro and have one return profile that that suits the needs of many people. If somebody comes to us and says we want something fully bespoke, we do have an offering for that, but the minimum for that will be $5,000,000 plus.

Q14: Do you know how The Gentlemen's Club would DCA in the near future?

• A14: Robin who's been doing a lot of our community engagement in real life is going to be working with them and he will have a dual mandate to connect with partners. One of the big focus for him is connecting with NFT projects that have a treasury. He's going to NFT summit in the UK and our idea there is to really kind of build relationships with multiple communities and be the kind of go-to treasury management solution, not just for for DAOs but for NFT projects, miners and anybody in the cryptocurrency ecosystem that has capital that needs to be managed and I'm excited for that because previously that rested on my shoulders and I think I was spreading myself a bit too thin. Now that we have people in that role with incentive alignment, we are very well-covered and going forwards.

CLOSING REMARKS

Huf (Head of Investments)

• I was in the Whale Chat today and I was super humbled. People in the Whale Chat are testing ReFi Pro and they're putting in anywhere between 50 USD - 1000 USD and as part of that conversation, we were also thinking like how do we support the $REFI token in anticipation of the ReFi Pro launch? Because as good as Bob X or Robin we all can be at marketing, the absolute best marketing tool in the world is token price.

• We were all having a discussion and then the whales all kind of chimed in and said oh well I'm down to buy 1 ETH and then somebody else came in and said I'll also going to buy 1 ETH and it's obviously no promises, but the fact that multiple people put their hands up and said why don't we start a little buy wall in anticipation of ReFi Pro launch just humbled me because even in the midst of this horrendous bear market where we are locked (myself included on my personal account) to see an engaged community not just the whale chat, but in the official Telegram chat it makes me really confident about where we'll go as things turn around because if people are happy to put the pressures last few weeks that they have in this in this market and they think they can outperform ETH which is up 5-7% today by putting it into ReFi.

• I’m just really super encouraged by that and obviously like many of you know I've been buying $REFI tokens from my own account over the past couple of weeks and months and I think I'm just humbled that we have a community of people that that operate like yourself - included Bob X, know that you've been doing some small buy orders just to test out how the liquidity works.

Bob X (Advisor)

• Our chat is like no other. It's always calm everyone seems to know everyone. I guess that's what you get with a with a bear market, lot of kind of noise go away and we've got such a great core group of guys that are in the chat every day which is really really good, and our community has been fantastic (especially for) stuff i've been working on putting out (engagement) has been really really good. I think as we or robin kind of expands the in real life meetups it’ll become even better and everyone will just become friends face to face rather than kind of just over a keyboard with all the silly names we have.