Current Allocation Approach

Staked ETH

In alignment with the protocol’s focus on liquidity and risk-adjusted allocations, the proportion of liquid staking tokens (LSTs) such as stETH in the total backing assets is reduced and diversified. This ensures that while staking rewards remain a valuable revenue stream, liquidity risk is minimized, and redemption efficiency is preserved.

Liquid Stables

During periods where perpetual futures contracts yield less than U.S. Treasury securities, maintaining perpetual positions becomes less attractive. Furthermore, during market downturns, funding rates are more susceptible to turning negative, which could add pressure to the protocol’s revenue generation.

To mitigate these risks, Seablocks has increased its allocation of backing assets to stablecoins, particularly USDC held on major platforms like Binance. Stablecoins offer a reliable yield, closely tracking U.S. Treasury returns while providing immediate liquidity for redemptions and protocol operations.

By incorporating stablecoins into the asset backing strategy, Seablocks enhances its resilience across different market conditions while maintaining flexibility to adjust allocations dynamically:

• Bull Markets: When perpetual funding rates improve, more of the backing assets are allocated to perpetual futures positions, capturing funding rate spreads and maximizing potential returns. In this scenario, stablecoin holdings are reduced to optimize yield.

• Bear Markets: As funding rates decline and U.S. Treasury yields become more attractive, a larger portion of backing assets shifts toward stablecoins, mitigating revenue volatility and providing stability to the protocol.

This dynamic allocation approach ensures that SeaBlocks can respond to shifting market conditions effectively, optimizing returns while maintaining liquidity and stability.