Set Protocol Launches Dynamically Rebalancing Smart Contract

Ethereum DeFi project, Set Protocol, has announced the deployment of their 50 day moving average strategy that automatically rebalances when price crosses above or below the moving average, August 30, 2019. The strategy is devised around hedging into USDC in times when the indicator confirms a downturn and buying back ETH once the moving average signals that the trend has reversed. 

A Self-Hedging Portfolio

Being able to strategically enter and exit an asset so as to maximize average buy price has been the hallmark of automated trading. The real nuance lies in accurately predicting trends and when they reverse.

Set Protocol has launched a useful tool for traders and investors who utilize moving averages. The 50-day moving average is one of the most important time frames for a moving average. Along with the 200-day average, it makes up the well known ‘golden cross‘.

The process is relatively simple: the smart contract looks for a confirmation signal within 12 hours of price breaching either side of the moving average. The minimum rebalance interval is roughly four days and gives the market some breathing room before looking for entry/exit.

This is the second TokenSet launched by Set Protocol, after their 20 day moving average strategy.

Strategies around moving averages bode well in times of clear directional bias – be it bullish or bearish. As moving averages work as a lagging indicator, prices can dip above and below the average rapidly during choppy markets.

This has been formulated as a long term accumulation strategy for those that believe in the investment thesis of ETH. Price feed for ETH is derived from MakerDAO’s price oracle.

Investments on DeFi

Of all the subsets of financial services, investments and insurance are two relatively untapped markets in the decentralized finance marketplace.

There are a few notable projects like Synthetix and Set Protocol for investments, but insurance projects have negligible liquidity on their platforms.

Lending and borrowing have become the two major use cases for open finance, but there is one major change relative to traditional finance that eliminates a large portion of risk: over-collateralization.

By ensuring liquidations occur at 150 percent of borrowed value, borrowers will be more wary of overleveraging and lenders will be able to adequately secure their investment.