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USDT Elephant

Product Details & Payoff Scenarios

Deposit USDT and earn a high fixed yield.

Strategic Use Cases

  • You’re holding USDT and looking to accumulate ETH

  • You want to earn yield in USDT

  • You’re comfortable buying ETH for a discount + yield when market conditions are favorable (-10%)

Conversion likelihoods are based on backtesting data (Jan 2023 - Jan 2024)

Note: The USDT Dragon product tracks the ETH/USDT price.

Payoff Scenarios

For each scenario below, assume the following:

$100K USDT investment in the 'USDT Dragon' Vault

USDT Dragon terms:

  1. Investment duration: 27-day

  2. Underlying asset = USDT

  3. Strike price = 90%

  4. APY = 25% (2% per 27-day vault)

  5. ETH price on Day 1 = $1980


Scenario 1: No Currency Conversion - Deposit USDT, Receive USDT

Example Scenario: ETH price movements during 27 day period

What happens in this scenario?

  • TLDR: deposit USDT, receive USDT

  • ETH price on Day 1 is $1980 and ends on Day 27 at $1920 which is above the strike price of $1800 (90% of Day 1 price). Thus the vault trade expires and no currency conversion occurs.

  • The full principal that was deposited by the user is returned ($100K USDT). The user earns 2% yield paid in USDT (same currency as deposit)

  • Deposit and yield are automatically reinvested for compounding returns into a new 27-day vault

What is the payoff for the investor?

  • Initial deposit = $100K USDT

  • Deposit returned = $100K USDT

  • Yield earned = $2,000 USDT

    • APY = 25%, single 27-day vault yield = ~2%

  • Total payoff = $102K USDT after 27 days (deposit + yield)


Scenario 2: Currency Conversion - Deposit USDT, Receive ETH

Example Scenario: ETH price movements during 27 day period

What happens in this scenario?

  • TLDR: deposit USDT, receive ETH

  • ETH price on Day 1 is $1980, and on Day 27 ends below the strike price of $1800 (90% of Day 1 price). This results in a currency conversion.

  • Upon conversion, ETH is purchased at a 10% discount to Day 1 prices at the strike price.

  • The user also earns the 2% yield which is paid in ETH, effectively increasing the net discount to 12% for acquiring ETH.

What is the payoff for the investor?

  • Initial deposit = $100,000 USDT

  • Deposit returned = 55.6 ETH

    • $100K USDT buys 55.6 ETH @$1800 (10% discount to Day 1 price)

  • Yield earned = 1.1 ETH

    • 2% yield * $100K USDT deposit used to buy more ETH @$1800

  • Total payoff = 56.7 ETH in 27 days

    • Net price discount on ETH = 12%

    • Average ETH acquisition price = $1764 ($100K USDT ÷ 56.7 ETH) vs. $1980 Day 1 price

Scenario 3: Price Moves Below Strike During Trade

Example Scenario: ETH price movements during 27 day period

What happens in this scenario?

  • TLDR: deposit USDT, receive USDT

  • ETH price on Day 1 is $1980 and on Day 10 moves below the strike price of $1800 (90% of Day 1 price). However this doesn't matter because currency conversion is only evaluated on Day 27. In this example, ETH rallies by Day 27 to end at $1920 which is above the strike price. Thus the vault trade expires and no currency conversion occurs.

  • The full principal that was deposited by the user is returned ($100K USDT). The user earns 2% yield paid in USDT (same currency as deposit)

  • Deposit and yield are automatically reinvested for compounding returns into a new 27-day vault

What is the payoff for the investor?

  • Initial deposit = $100K USDT

  • Deposit returned = $100K USDT

  • Yield earned = $2,000 USDT

    • APY = 25%, single 27-day vault yield = ~2%

  • Total payoff = $102K USDT after 27 days (deposit + yield)

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