Fixed-term products come with a cost that must be acknowledged—when people discuss TermMax, they rarely say it directly: the funds will sit idle. If you don’t address this, efficiency will always fall short of that of a floating pool.
Idle time happens in two places. First is while waiting for execution. With fixed-term funds, you need to match specific terms and a counterparty. Until your orders get filled, that money just lies there with no yield. A floating pool skips this step—once you deposit, interest starts accruing immediately. Second is the gap after maturity. There is always a time difference between redemption and rebuilding the position, and the less familiar you are with the operations, the longer that gap tends to be. $BTC
The AMM design combined with range orders helps mitigate the first problem. With a counterparty order book that is always present, the waiting time for execution drops dramatically—this is its practical advantage over pure order matching. The trade-off is that you have to accept the price provided by the curve instead of patiently waiting for a better quote yourself. Here, you trade off efficiency against pricing quality.
The second problem depends more on product details. Features like automatic rolling, batch operations, and placing orders in advance before maturity can shrink the gaps to very little. In the traditional bond market, institutions roll positions several weeks ahead. On-chain today, most of it still relies on users watching the dates themselves.
When calculating real returns, this portion of idle time must be included. Nominal annualization is based on the holding period. If, say, 10% of the time in a year the money is waiting to be filled or is being moved to a new position, then your real return should be discounted accordingly. The shorter the term, the more frequently you have to roll, and the more obvious the discount becomes. That’s also why I don’t recommend repeatedly rolling very short-term positions—the friction will eat up most of the spread.
My own algorithm is rough but good enough: multiply nominal annualization by the proportion of time the funds are actually in positions, then subtract on-chain operating costs. The resulting number is usually about one section lower than what you see on the landing page—but that’s the return I actually get, and it’s the basis for deciding whether to add more.
How do you all handle the idle periods between rollovers?
Risk warning: The above is my personal analysis of capital efficiency and does not constitute investment advice. Please conduct your own research and assume all risks independently.
@TermMax #TermMax
Idle time happens in two places. First is while waiting for execution. With fixed-term funds, you need to match specific terms and a counterparty. Until your orders get filled, that money just lies there with no yield. A floating pool skips this step—once you deposit, interest starts accruing immediately. Second is the gap after maturity. There is always a time difference between redemption and rebuilding the position, and the less familiar you are with the operations, the longer that gap tends to be. $BTC
The AMM design combined with range orders helps mitigate the first problem. With a counterparty order book that is always present, the waiting time for execution drops dramatically—this is its practical advantage over pure order matching. The trade-off is that you have to accept the price provided by the curve instead of patiently waiting for a better quote yourself. Here, you trade off efficiency against pricing quality.
The second problem depends more on product details. Features like automatic rolling, batch operations, and placing orders in advance before maturity can shrink the gaps to very little. In the traditional bond market, institutions roll positions several weeks ahead. On-chain today, most of it still relies on users watching the dates themselves.
When calculating real returns, this portion of idle time must be included. Nominal annualization is based on the holding period. If, say, 10% of the time in a year the money is waiting to be filled or is being moved to a new position, then your real return should be discounted accordingly. The shorter the term, the more frequently you have to roll, and the more obvious the discount becomes. That’s also why I don’t recommend repeatedly rolling very short-term positions—the friction will eat up most of the spread.
My own algorithm is rough but good enough: multiply nominal annualization by the proportion of time the funds are actually in positions, then subtract on-chain operating costs. The resulting number is usually about one section lower than what you see on the landing page—but that’s the return I actually get, and it’s the basis for deciding whether to add more.
How do you all handle the idle periods between rollovers?
Risk warning: The above is my personal analysis of capital efficiency and does not constitute investment advice. Please conduct your own research and assume all risks independently.
@TermMax #TermMax