You and @powerpoolAdmin both offered to help with expalaining the below in detail. I approached both of you here (via private message) and on discord (via private message) explaining what I have done to compare PIPT’s index to the actual PIPT performance and voiced my concerns that the outperformance of PIPT is enormous (so much so it is actually independent of the index) asking to get further concrete detail/data on how I can replicate the PIPT performance from first principle…This is a rather basic request for any financial product…
My point all along is trying to verify what you are saying is true…In finance it’s exteremely basic that you need to be able to explain and fully understand an asset’s returns…Stating those drivers is not enough…We need to be able to breakdown how much of the return is coming from fees collected inside the pool or “secondary market float” (whatever this means)…In the end of the day there is a formula and a very finite number of actions (e.g. rebalances) that determine what the return is…To say that ‘everything is on the blockchain’ is also unhelpful as the way these contracts interact is incredibly complicated and beyond the reach of most humans on the planet (including me)…
Frankly, I find it ridiculuous that a) this information is not available yet…it seriously answers one of the first questions any investor should have about PIPT and all other indices b) nobody else has requested (which makes me think most ppl don’t care/don’t get it or are just looking to get rich quick).
I believe that the performance of the index should be part of the details section of each index on powerindex.io and it should be clearly broken down into its drivers…maybe in the form of waterfall chart or something like this:
I can see there is ‘Fee returns’ under details but that is quite unhelpful as the amounts need to be put in the context of the NAV…looking at the data I can see fees average less than 3k/day …in the context of a 10m NAV it doesnt seem like FEES explain the enormous outperformance of PIPT vs its index…which prompted my question/quest to delve into this
Have you considered the fact that not enough or no arbitrageurs are arbing the spread between the PIPT index and the underlying tokens? The discrepancy you are noticing may be due to the inefficiency of the market.
okay, I got you. As I can understand, answering the question in this way will require lots of info gathered and analyzed in one place, and it is rather time consuming. But, it’s necessary to do it. Seems like one of the future tasks for the PowerHouse (Management board).
As I see now, the main driver of difference should be rebalancing nature of AMM.
Here you can find available on-chain data: https://duneanalytics.com/0xBoxer/powerpool_2
You are right, PIPT/YETI perform not as static token basket. It is AMM that rebalances all the time, and it is not the best approach. This is why we designed, developed and implemented Dynamic AMM, that can fix this issue with AMM-based portfolio management. Besides that, I can say that this was compensated by very juicy CVP rewards.
We examined some wallets of our users and they not only made 2-4x (depending on when they minted/bought an index), but also 30-40% in CVP rewards.
I will be glad to dig into it deeper with you. We also have MB and research group member @vasilysumanov who is working on grant provided by Balancer Labs and PowerPool aimed on AMM research and development. They plan to run simulations and data analysis of PowerPool pools soon.
