Bulletin #5 (The Final One)

ⓘ This bulletin was sent to Set subscribers on 2020/08/22. You can also read it on Medium. Give it some claps!

It’s a very sad moment for me. I have to announce that 100 Waves Sets fell victim to high transaction prices on Ethereum network and will be phased out soon. I understand this is unexpected and quite shocking news for all investors, so let me explain why I had no other choice but to pull the plug on it.

When set is about to rebalance, it posts a transaction to the Ethereum network. This is quite a complex transaction (usually using more than 2.000.000 gas – compare to standard ETH transfer cost of 21.000). When I launched my first set, gas price (rebalancing transactions have to be mined swiftly, so I used gas price close to “fast” price) was around 5 Gwei and ETH price was around $150. Total price for the rebalancing transaction was then in the $4-5 range.

I assumed that transaction cost will be no issue, even if it goes up 2x or 3x. I was more concerned with the execution price (slippage) for rebalancings. I thought I’d easily cover this cost from my own money or from streaming fees. Then I learned that Set Labs Inc., owner of Tokensets platform will reimburse all the transaction costs. I was thinking “OK, this is a nice gesture”.

During the next months gas prices kept climbing up and up. After some time I realized that paying transaction fees from money earned by sets is not feasible and I’m dependent on Set Labs covering those costs for me.

Now, when gas price is 100 Gwei (or more) and ETH up 2.5x, it routinely costs more than $100 to launch the rebalancing, sometimes even more than $200. While some efforts to mitigate this situation are under way, this won’t improve soon, I’m more inclined to think that it will only get even worse short (or even medium) term.

If it’s not possible to change how the protocol behaves or how the smart contracts were designed, perhaps strategy could be modified to decrease rebalance frequency? I started with reducing the number of tranches, then I got rid of tranching completely. I’ve introduced “threshold” values to eliminate small rebalacings. Many rebalancings were skipped because of this. Unfortunately, this wasn’t enough. Lastly I was informed that Set Labs will only cover 2 (their estimation) or 1 (my estimation) rebalancings per month. It’s impossible for my strategies to have a number of rebalances that low.

100 Waves strategies rely on scaling in and out of the position. It’s the DNA of it. Without it, it would be just another trend-following strategy with some fixed parameters that happen to deliver great results in the past. While sometimes strategies do not trade for a full month or more, it’s not unusual to have 10 or even more rebalancings if the market is choppy. This has little to do with strategy being “too active” or “overtrading”. I’ve seen other Sets trading 100% of capital back and forth during the single day. My strategies are cautious, and I can’t change this.

That’s why I had to call it a day.

I’d like to thank all investors and the Tokensets community for their support. I got encouragement from some of you when I needed it the most. Other social traders were friendly and helpful as well.

Set Labs Team deserves the highest praise. They were patient with me, while I was integrating my strategies with blockchain infrastructure. They were always reachable and helpful. And – let’s not forget – they covered the transaction fees for the whole existence of my sets.

I’d like to say big thanks to my family and to my friends. They had to endure me talking endlessly about some “tranches”, “strategies”, “zones” and even things like “syncing asynchronous promises”.

I’ve spent hundreds (if not thousands) of hours spent backtesting, coding, creating the website, presentations and so on. It’s sad and disappointing that it ends this way, before the strategies could show its real value. I’ve not only put a lot of effort into it: I’ve invested a very significant capital in 100 Waves. It wasn’t just “putting money where my mouth is” to encourage investors and convince them that I have a skin in the game. It was an important part of my own investment portfolio. Closing those sets will be a problem for me, too.

What’s going to happen next?

Today (August 22nd) the strategies would rebalance (if needed) as usual. Tomorrow (August 23rd) in the evening (European time), I’ll rebalance it to 100% cUSDC (100 Waves Dollar Yield) or 100% ETH (100 Waves Ether Hoard and 100 Waves Ratio). Having strategies allocated in one asset only will help keep the cost of withdrawing assets low. Please withdraw your investments at your convenience.

If there is enough interest, I'll provide trading signals for my strategy for free. Please go to my Discord channel or drop me an email if you’re interested.

I’m aware there’s v2 of Set protocol coming. Lower transaction costs and multi asset Sets are promised among other things. I’ll be watching it closely and who knows, maybe we’ll be riding 10000 Waves together in the future.