Neutrl: An emerging synthetic USD stablecoin protocol

Recently, a synthetic dollar stablecoin project called Neutrl announced the completion of a $5 million seed funding round. The round of financing was co-led by a digital asset private market and a venture capital firm, with the participation of a number of well-known institutional and individual investors.

Neutrl's product model is similar to similar projects, offering NUSD, a synthetic stablecoin pegged 1:1 to the US dollar, and sNUSD, an interest-bearing asset that can generate income. However, Neutrl has taken a more aggressive approach when it comes to revenue streams: discount arbitrage of OTC tokens.

! Read the new project Neutrl in three minutes: you deposit stablecoins, I'll help you short VC coins

OTC Discount Arbitrage: Neutrl's source of revenue

Institutional investors typically have access to project tokens at lower valuations, but these tokens often come with strict unlocking conditions. In order to cash out early or hedge risk, some institutions choose to sell tokens that have not yet been unlocked at a discounted price through OTC (over-the-counter trading). Discounts are usually large and can exceed 50%.

Neutrl uses the assets deposited by users to buy these discounted lock-up tokens, while shorting the same amount of tokens in the futures market to hedge the risk, achieving a risk-neutral strategy. This means that its earnings are not related to token price fluctuations.

For example, if a project token buys a token that will be unlocked after 1 year at a 60% discount, and shorts the equivalent of the token. No matter how the token price moves, it is theoretically possible to lock in a certain amount of income. However, this strategy is not without its risks.

Potential risk analysis

Although this strategy seems perfect, there are still some potential issues.

1. Funding rate risk: If there are too many short sellers, you may need to continue to pay high funding rates to longs, which may erode or even exceed the benefits of OTC discounts in the long run.

2. Risk of significant token price increase: If the token price rises significantly, margin must be continuously replenished to maintain the short position until the OTC token is unlocked. If a liquidation occurs midway, there may be substantial losses.

3. Liquidity risk: Some projects' tokens may lack sufficient liquidity to support large-scale short-selling operations.

Conclusion

Behind Neutrl is a high-risk strategy arbitrage model. Although its risk management may be more professional than that of the average investor, the potential risks should not be ignored. As a project that absorbs user deposits in the name of a stablecoin, Neutrl may need to be more aware of its potential risks.

However, this innovative model also provides users with the opportunity to access advanced trading strategies, representing a progress in the field of crypto finance. Currently, Neutrl has not officially launched, and interested users can apply for early access through its official channels.

! Read the new project Neutrl in three minutes: you deposit stablecoins, I'll help you short VC coins