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Midas’ First Investments Report — An In-Depth Analysis (August 2022)


Hello everyone, if you’ve followed my other posts, you’ll know that I have been a big fan of Midas Investments, and so I’ve read with a great deal of interest the first investment report that was released this past month. The report itself is exactly the step towards more transparency that many users (including myself) have been asking for, so let’s see what’s behind the curtain shall we?

But first, a brief introduction…

A Quick Introduction to Midas

Similar to other investment platforms, Midas Investments is a crypto-investment platform where you can earn passive income on a wide variety of different cryptocurrencies. But what sets it apart from other platforms? The exchange APY rates. With no lock-up periods, they still continue to offer some of the market’s best native returns (or even significantly higher with their Midas Boost), which are compounded and added daily:

1*YG_U-mxZ21ailu3F0XX7bQ.png

As the Midas team has been striving to become more risk adverse and to be able to maintain yields for the long-term, these rates were reduced as shown above starting August 10th. Although the degen-side of me always wants to see higher returns, the non-degen-side of me prefers sustainability and accessibility rather than unexpected lock-ups as we have seen with the likes of Celsius, Voyager, or more recently Hodlnaut.

As a platform Midas is now going through their 3rd bear market, and they have consistently provided returns that are higher than any non-custodial platform out there. Despite the market crashes over the last few months, Midas has had an exponential level of new capital that has come in, which has ultimately caused them to reformulate and de-risk their strategies again and again in order to provide consistent and stable returns.

After using Midas for now almost nine months, it’s extremely hard for me to take any other “reputable” platforms such as Blockfi and Gemini seriously, who at best might offer a paltry 3–5% APY on blue chips or if you’re lucky maybe around 7-9% on stables. Through their AMA’s, youtube videos, and discord, without giving away competitive-edge secrets, the team continues to try to be as transparent as possible and they continue to give fairly adequate notice about what steps or changes they have made or are planning to make (I’ll get into that further) which has ultimately increased my level of trust in their ecosystem.

The Big Question: How do they generate their yields?

As I mentioned before, in late July Midas published their first Investment Report which highlighted some things that were already known, provided some new details about new strategies, and also shed some light (but not the recipe) for their secret sauce. I’ll specifically get into each of the strategies in a bit, but first and foremost, perhaps the most interesting thing I read was Midas’ “rules” for DeFi risk management in regards to protocol liquidity and asset diversification:

1*S_8KqFWPxWn-GKw4Uee61A.png

These rules that they have put in place have essentially allowed Midas to dodge a lot of bullets that killed a lot of other protocols and platforms, including the run on stETH (which killed Celsius), the UST death spiral (Which wiped off more than $50 billion in a matter of days), and even the temporary depeg of USDT.

Their strategies are good, but they aren’t perfect. In their last AMA, Trevor reported that he estimates 85% of their AUM are completely liquid, with the remaining 10–15% requiring at least a few days to be released. As stated in their performance report (and reiterated in several AMAs over the past few months), the Midas team is working on an auto-alert system that will help warn and potentially exit positions to allow them to prevent funds from being affected from hacks or black swan events.

Another facet about their strategies is that it appears their strategies keep changing (which is also highlighted in their “Trends” strategy which I’ll go into more detail later). Strategies can be altered multiple times in one week, which I imagine might make full transparency of strategies difficult for the Midas team. In other words, I’m not sure how helpful it would be if they were constantly announcing changes in strategy day by day. For me personally it’s difficult for me to track when changes are only made once a month.

Strategies

In the past under their wiki they had their yield strategies broken down into two categories, but in this report we now we see it broken down into several. And although in the performance report they’ve broken it down by protocol, reading through the different strategies, I conceptualized things into two different parts— Base yield strategies and algorithmic strategies. Their “Base-Yield Strategies” are composed of mostly stablecoin plays, and the algorithmic strategies are composed of what they call the “Trends Strategy” and algorithmic trading.

Base-Yield Strategies (stablecoin strategies) make up the largest allocation of their AUM and consist of mostly stablecoin or bluechip yields. The protocols and yield rates they cite are on either:

1. Convex:

1*_HQzfuAghi1emu4VGw_kSQ.png

2. Different lending protocols:

1*4jDRg_jpoLq3zP4rfitFZQ.png

3. And also positions on GMX and Liquity — both protocols that capitalize on market liquidations. I have written about GMX in the past before, but essentially it’s a platform that platform that $GLP or $GMX stakers to profit from liquidations/trading fees with relatively no impermanent loss.

You’ll notice that by looking at the numbers, the average APR’s from each of the Base-Yield strategies don’t match the returns that’s available on the Midas platform. In other words, these strategies only offer an average of 11% APR, so how is Midas profitable if it’s offering 11.6% APY to its users?

The answer is through their their algorithmic strategies. In the case of their “Trends” strategy, these funds only roughly 5% of AUM yet they have a target ROI of 40%. The Trends strategy funds are deployed out of the Base-Yield funds literally when certain market trends present themselves. When a market trends occurs, the Midas team gets signaled algorithmically to execute target ROI’s of around 40%. It’s unclear in the report how exactly these trades are algorithmically deduced, but if they’re able to generate target ROI’s of 40%, I would imagine that this might be a secret worth keeping.

The second algorithmic strategy they highlight is algorithmic trading, where they use two different algorithms to generate target APR’s ranfing 25%-40%. Like the “Trends” strategy, it’s unclear of how exactly the trades are made, but the report details that algorithmic trades are conducted on Bybit for BTC/USD and ETH/USD pairs. Are these returns sustainable? Other algorithmic trading platforms such as Haru Invest who have been doing the same for the past couple of years certainly seem think so. The beauty of algorithmic trading is that returns are based on token volatility, not on whether the overall market goes up or goes down. And even though they have significantly long lock-up periods, platforms like Haru have proven that algorithmic trading can be extremely profitable, no matter the market conditions.

 

Why Can’t they be more Transparent?

Probably one of the clearest explanations that I’ve read from Midas for why they’re not 100% transparent about their methods is a reddit post from their COO, Dan Carson:

We try to be as transparent as we can be
I'll address this further. We do not publish exact strategies for several good reasons:
i) this is what gives Midas our competitive edge. As I alluded to before, we have a team of analysts who constantly monitor the defi space to build strategies that can allow us to support strong yield opportunities on the lower end of the risk spectrum with a sizeable amount of liquidity. A combination of these three criteria is a difficult goal to achieve. Whilst we are not concerned about our users copying these strategies directly, it is clear publishing our strategies in the public domain would be detrimental to the USP that Midas offer. We are now of a size that competitors and potential competitors will be following our news and updates and we would simply be opening the doors to an increase in competitors.

ii) Strategies change on a regular basis. What we post this week may be irrelevant next week. Whilst the broad outline of our strategies will remain constant, the actual strategies within them change constantly.

iii) It would be impossible to please everyone with the information provided. Some want more risk, some less. Some will want us to explore other opportunities. Crypto is full of opinions and opinions are often divisive. We have strong belief in our Defi team. They build our strategies taking in to account optimised yield potential with a strong element of risk management and they deliver the yields we pay out to our users without outside influence/pressure to take our strategies in a particular direction.

Is Midas 100% transparent about all of their methods? No. But as I’m learning about how adaptable and how numbered their strategies are to different market conditions, I understand why it might be difficult to do so — many of the specifics that may give are probably subject to constant change. Regardless of all this, I do have to say that I’ve scoured YouTube videos, discord channels, and other independent reviews, and one thing is certain–people using Midas are getting paid for their deposits and they have also been depositing and withdrawing their cryptocurrencies back and forth from Midas with no problems…and they have been for years. To reiterate, I have not found a single review where they cannot withdraw or access their funds.

 

Security Measures

Audits: Midas Investments has plans on getting an audit by Armanino, but this is only after they get done with either their Swiss asset management license and/or their Emirati (Dubai) business license, which is one of their main focuses that they are working on right now. This summer Midas intends to “have the full company structure finished and announced,” with an estimated completion of an audit by the fall. If you haven’t heard of Armanino, they were the ones that audited Nexo last year.

Insurance: Earlier this year in order for enhanced security, even though Midas itself isn’t insured, all assets have now been placed on Fireblocks, which IS insured. Now I’m not a liability expert, but my assumption is that if your assets that Midas holds gets hacked into, then there will be coverage, but if you yourself get hacked, that will not be covered. This is a really similar setup for many different platforms including BlockFi and Celsius. An interesting thing that I read was that back when they were primarily focused on Masternodes, Midas Investments did experience a hack, but Midas users never felt the impact because the company absorbed the losses themselves. Although this is concerning because hacks imply vulnerability, I am appeased by the fact that they are planning on getting audited to help identify potential vulnerabilities going further. In addition, for me, the fact that they took a hit financial hit before passing on to their users, shows integrity and increases my trust into Midas even more.

2-FA: Compared to where they were in January, they have now incorporated a 2-FA e-mail login authentication as well as KYC to their platform. Starting in May they have also introduced a 2-FA mobile authentication with google authenticator and are working on an option to allow users to whitelist withdrawal addresses as well. Although it does increase security for the platform itself, I know that things like KYC and Google logins are a huge deterrent for some, especially for those who want to give out as little personal information as possible. Alas, security does have its price.

 

What are the Risks?

Like any non-custodial platform, the biggest risk is if it’s not your keys, it’s not your crypto. This is why it’s highly important that you make sure you do your own research to see if you personally trust the platform with your assets. That being said, as I mentioned before they’ve been around this space for more than four years now and from what I have found have a pretty stellar track record. If you find anything to the contrary, please reach out to me because I would very much like to hear about it.

No rates last forever, and especially if the market continues on its downturn, I can’t imagine that these will either. That being said, I do believe that we haven’t seen the bottom of this current bear market, so I do believe that the rates will have to be readjusted in the future, but not because of Midas’ lack of trying. In addition, I used to hold more assets in places like BlockFi, Nexo and Celsius, but as we have seen with all three — the bigger you get, the more likely you will be subject to regulations. If Midas continues to attract more users and more growth and as the crypto market matures with more regulations, I can’t imagine that this gravy train can run forever.

Russia: Prior to the war in Ukraine breaking out, Midas was originally headquartered in Russia. Since then, they have reported that the majority of the team has relocated outside of Russia, with the remaining agreeing to do so if needed. And as I mentioned before, they are in the process of licensure with both Switzerland and Dubai, to further dissociate their former ties. In May’s AMA, Trevor the CEO went even further to report that he was going to Israel in to officially change his citizenship to Israel. That being said the major players on the Midas team have doxxed themselves in AMA’s and on their wiki page and it’s clear that their team is growing more and more international.

 

The Midas Token

Although this might be subject to change, there is currently no real utility for the $MIDAS token except for it being a store of value for the Midas platform. In other words, if you are investing in $MIDAS tokens, you are investing in Midas itself. If Midas earns more money than expected, the extra value is transferred to the Midas liquidity pool, which in turn ads more value to $MIDAS tokens. And within Midas, the token’s value is essentially circulated from Midas boosts, to liquidity pools, and then back to Midas boosts. In late February, they reported that the current emission rate of the token is roughly 1600 tokens a day, and then to be capped at around 5 million which should be in the next 3–5 years, with 1.5 million staked on Midas itself. To date, there’s around 2.9 million in circulation.

If you’re curious about learning more about the $MIDAS token, I highly recommend that you read an in-depth analysis that I did last month. Here, I analyze how exactly $MIDAS has continually been hitting ATH’s all throughout the bear market.

 

Conclusion

It’s been a total of nine months now, and so far I have been very impressed with not only the Midas team, but also the Midas community itself. They’ve really fostered an environment to help common retailers like me try to understand the market with their weekly reports, as well as to teach people how to maximize their profits through passive income. I’ve only gained more trust in Midas, and as the market has gotten more and more dire, I’ve found Midas to be the # 1 place where I’m holding and accumulating my stable coins, especially when places like Anchor, Celsius, and Voyager are no longer viable.

If you have any more questions, I highly recommend that you check out the last AMA that was conducted with Trevor, Midas’ CEO in mid-August. Here, he answers in depth the many potential things one can expect for Midas’ future. If you haven’t tried out Midas yet but are interested, please consider supporting my blog and using my affiliate link: https://midas.investments?p=0191.

Otherwise, if you have any questions or comments, feel free to leave them below. Thanks for reading, and be sure to follow me on twitter: https://twitter.com/CryptosWith

Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!

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Messin' With Cryptos
Messin' With Cryptos

I've made a ton of mistakes along the way in the world of Defi and cryptocurrency. Hopefully by taking some of the lessons learned and cues i've went through, you'll be a bit more success


Messin' around with Crypto's
Messin' around with Crypto's

Follow me on twitter! @CryptosWith https://twitter.com/CryptosWith

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