dYdX ETH MM Vault

Summary

Ticker: dYdXETH Primary liquidity venue(s): dYdX Hedging venue(s): Lighter, Defx Borrowing venue(s): Aave Underlying product(s): Aave USDC borrowing, two sided market making on dYdX, hedge overlays Base asset: wETH Vault type: Collateralised active market making vault

Short description

A tokenised vault for wETH that supplies ETH as collateral to borrow USDC from Aave and provides active two-sided liquidity on dYdX, giving depositors automated access to market making returns in a single composable asset with professional risk management and active hedging.

Description

Unlike passive LP vaults, this strategy is active market making on dYdX. The vault uses wETH as collateral on Aave to borrow USDC, then deploys that USDC as working capital to run two-sided quoting on dYdX.

The strategy may hold inventory risk as part of normal market making. To keep risk within a defined envelope, Axtior may actively hedge exposures on Lighter and Defx.

Because dYdXETH is a standard ERC-20, it can be transferred, used as collateral (where supported), or integrated across DeFi while continuing to track the performance of the vault’s collateralised active MM strategy.

1. How the Vault Works

1.1 Deposits and Shares

• You deposit wETH into the dYdX ETH MM Vault.

• The vault mints dYdXETH to your address.

• The number of dYdXETH you receive represents your pro-rata claim on the vault’s assets and PnL.

• Over time, the value of 1 dYdXETH (in ETH terms) floats based on the net performance of the strategy (after vault fees), including the effects of USDC borrowing and market making performance.

1.2 Collateralisation & USDC Borrowing

• The vault supplies wETH into Aave as collateral.

• It borrows USDC against that collateral within a predefined risk envelope.

• Borrowed USDC becomes the working capital used for market making on dYdX.

• The curator may adjust borrow utilization and maintain buffers to manage collateral health.

1.3 Active Two-Sided Market Making

The vault deploys borrowed USDC to support two-sided quoting on dYdX

The strategy may adjust:

• Quote width and depth

• Inventory targets

• Participation in venue-specific maker programs

Primary return drivers typically include:

• Spread capture

• Maker rebates (if applicable)

• Venue incentives (if active)

1.4 Hedging & Inventory Management

To manage directional and inventory risk, Axtior may hedge on:

• Lighter

• Defx

1.5 Rebalancing & Risk Controls

Axtior monitors:

• Inventory skew and turnover

• Fill quality and adverse selection

• Volatility and regime shifts

• dYdX uptime, performance, and operational risk

• Hedge efficiency and basis risk

• Aave collateral health and USDC borrow costs

Within the defined risk envelope, the curator may:

• Reduce or pause quoting on dYdX

• Tighten risk limits during high volatility

• Adjust borrowing and maintain safety buffers

• Maintain liquidity buffers (where applicable)

2. Yield Model

The vault’s return profile is driven primarily by:

• Market making PnL: net spread capture after execution costs

• Rebates & incentives: where offered by dYdX

• Risk management quality: inventory control and hedge efficiency

The dYdXETH share price reflects net performance after:

• Venue-level fees and execution costs

• Hedging impacts

• Aave borrow costs and collateral management effects

• Strategy-level fees defined for the vault

3. Who Is This Vault For?

This vault is designed for:

• wETH holders who want professional, dYdX-specific active MM exposure in a single ERC-20.

• DAOs and treasuries seeking orderbook yield while maintaining ETH balance sheet exposure.

• Integrators building ETH-native structured products referencing active market making strategies.

You should be comfortable with:

• Inventory-driven drawdowns

• dYdX venue and operational risk

• The curator’s discretionary execution and hedging decisions

• Borrowing and collateral risks associated with Aave

• Periods of negative performance

4. How to Interact

4.1 Depositing

• Choose the dYdX ETH MM Vault in the interface.

• Approve the vault to spend your wETH.

• Deposit wETH and receive dYdXETH.

4.2 Holding & Using dYdXETH

While you hold dYdXETH:

• Your exposure tracks Axtior’s actively managed MM strategy on dYdX, funded by ETH-collateralised USDC.

• You can transfer dYdXETH, use it as collateral where supported, or integrate it into other DeFi strategies.

4.3 Redeeming

• Initiate redemption of dYdXETH for wETH.

• The vault reduces pro-rata MM exposure, unwinds hedges as needed, and repays the associated USDC borrow on Aave (subject to venue mechanics).

• You receive wETH based on your share of the vault assets at that point in time.