The crab auction is the best kept secret of the crab strategy 🦀🤫

The auction @ squeethportal.xyz/auction usually trades at better prices than the Squeeth front end!

This thread covers:

• Reasons to Participate
• Interface Overview
• Auction Tutorial
• Post-auction Analysis For context, the crab strategy allows users to earn funding (i.e. yield) from being short oSQTH without taking a view on if ETH will move up or down. Crab makes money if ETH moves up or down within a certain range.

tl;dr crab explained in simple terms:

https://twitter.com/wadepros/status/1539763842993078273?s=20&t=SFdN7AWbUKDSToB_QJlOag

Crab is a versatile strategy, especially for swing traders:

• Crab aims to gain value in USD
• In a bear market, it tends to accumulate more ETH
• No spread between funding longs pay shorts
• Deposits are 24/7 liquid
• 0 management fees

⚠️ BUT WHAT ARE THE RISKS?! ⚠️👇 There are 5 main risks for crab strategy depositors:

1. Depositing when the profit threshold is LOW (when squeeth implied volatility is low)

2. When the price of ETH is CRAZY up OR down (when ETH is volatile)

3. If you want to stack ETH in a BULL market

4 & 5👇

Squeeth implied volatility = market prediction for the price of ETH → crab strategy profitability threshold Squeeth Implied Volatility:

Implied Volatility is a forward-looking metric designed to gauge how volatile the market may be in the future

High IV signals ETH price movements will be crazy 😱
Low IV signals ETH price movements will be chill 😎

If you buy Squeeth, what affects oSQTH Performance?

• Implied Volatility (IV)
• Funding (via the Normalization Factor)
• Value and Price Movement of ETH
• Price Impact (slippage)

Let’s look at each in more detail 🧠👇 Implied Volatility (IV)

Implied Volatility is a forward-looking metric designed to gauge how volatile the market may be in the future

High IV signals large price swing is ahead
Low IV signals price will remain stable

Lots of people liking the squeeth. Also lots of questions about the squeeth.

Below are some of the topics and details that made the squeeth "click" for me. It's a non-exhaustive list, but I hope it's helpful for you too! Mechanism-wise, Squeeth functions similar to a perpetual swap, tracking the index of ETH² rather than ETH.

If you don't know what a perpetual swap is, check out @apalepu23's primer. It's a great read.

firefly.exchange/blog/primer-on…

Squeeth mental models 🧠👇

• Squeeth makes options perpetual
• Squeeth (short for squared ETH) is an @opyn_ derivative that tracks the price of ETH²
• Long Squeeth is a leveraged position with unlimited ETH² upside, protected downside, and no liquidations • Short Squeeth offers premium, sustainable yield and ETH² downside exposure
• Squeeth is the first implementation of a Power Perpetual
• Automated Squeeth Strategies allow users to earn yield by simply depositing ETH. The contract automatically manages the strategy 🐂🦀🐻

Squeeth is a powerful new derivative invented by @opyn_ that tracks the price of ETH²

We simulated returns from holding Squeeth from Nov 2020 - Nov 2021 with a constant funding rate. Over that period, the price of ETH ~10x, while a long Squeeth position ~50x

Squeeth mechanism🧵 Squeeth (short for squared ETH) is an asset that tracks the price of ETH². It’s an implementation of a power perpetual — a contract that tracks the power of a price (like price², price³, etc).

To understand Squeeth's mechanism, an important concept to grasp is the funding rate.

Squeeth is a DeFi-native option.

Everlasting Options → Power Perpetuals → "Squeeth" (ETH²)

Four ways to Squeeth:

• Long Squeeth
• Short Squeeth
• Automated Squeeth Strategies
• Uniswap v3 SQTH-ETH Liquidity Providers

🧠🧵👇 Squeeth is part option, part perpetual swap, but removes major pain points associated with each instrument

Unlike options, there are no strikes or expiries, rolling costs, or liquidity fragmentation

Unlike perpetual swaps, there is leverage without liquidations on the long side

Squeeth is a new DeFi primitive. It's an extension of everlasting options and as a power perpetual, it has characteristics similar to perpetual swaps.

Let's take a look at perpetual swaps and everlasting options to better understand squeeth! 😎

h/t @_Dave__White_ @AlexisGauba Perpetual Swaps:

A perp swap allows people to bet on the potential increase or decrease of the price of an asset (eg ETH).

• If you are long the perp swap, you think the price of ETH will go up
• If you are short the perp swap, you think the price of ETH will go down

Squeeth is going to change the game for DeFi derivatives. Here's a smooth brain 🧵 about why I'm excited!

Evolution of the concept:

Everlasting Options → Power Perpetuals → "Squeeth" (ETH²)

h/t @_Dave__White_ @danrobinson @snarkyzk @andrewjleone @AlexisGauba @aparnalocked Regular options expire, and if you want to trade them consistently long-term, this takes time, introduces risk, and gets expensive from gas and spreads paid to market makers.

Power perpetuals provide global options-like exposure without the need for strikes or expiries.

Because I like charts 👉 A Visual Guide to the Greeks 🏛📈

This graph shows payoff at expiration vs. current option value in red at 30 days out. The blue line is the p/l for the option at expiration and the red line is its current value at 30 days out. Theta:

Graphically Theta is the distance between the red and blue line. If we're 30 days until expiry and nothing changes, the red line will decay to the blue line and your theta gain will be the price difference here (or if long the option, the theta loss).