What is Neutrl?

Neutrl creates a synthetic dollar, NUSD, that captures asymmetric yield opportunities while maintaining market neutrality. This is achieved through:

• OTC Arbitrage:
  Neutrl acquires crypto assets at deep discounts through OTC deals, with enforced onchain settlement via smart contracts or qualified custodians. These are then hedged using perpetual futures, capturing unmatched yield potential.
• Delta-Neutral Hedging:
  To stabilize NUSD's value, Neutrl uses derivatives to hedge market exposure. This ensures that NUSD maintains a stable value relative to its backing assets, regardless of market trends.

Neutrl leverages basis arbitrage opportunities in perpetual futures markets to generate additional yield:

• What is Basis Arbitrage?
  In perpetual futures markets, the futures price of an asset often deviates from its spot price due to supply and demand imbalances, called a "basis spread". Neutrl capitalizes on this spread by simultaneously holding a long position in the spot market and a short position in the futures market.
• Funding Rate Arbitrage:
  Perpetual futures contracts require traders to pay or receive funding fees to maintain price parity with the spot market. Neutrl takes advantage of this by capturing positive funding rates, where short positions (held by the protocol) receive periodic payments from traders holding long positions.
• Market Neutral Strategy:
  By combining spot and futures positions, Neutrl eliminates directional risk while generating consistent returns from the basis spread and funding rate payments. This approach ensures that yield is earned regardless of whether the market moves up or down.

• Fully-Backed Synthetic Dollar

NUSD is fully backed by a diversified portfolio, offering a higher margin of safety compared to traditional basis trades. OTC discounts enhance the protocol's stability and yield potential.

• Free to Use in CeFi and DeFi

NUSD integrates seamlessly across both CeFi and DeFi ecosystems, with high composability for use cases such as lending, trading, and liquidity provision.

• Peg Stability Mechanism

The protocol maintains NUSD's peg by using delta hedging derivatives against its backing assets. This stabilizes NUSD while capturing yield from spot crypto assets and futures markets.

As yield compresses, investors seek out higher yielding and riskier opportunities. As liquid APY drifts toward the onchain cash-equivalent rate, yield-seekers look for higher yield. They may stake their NUSD, convert to sNUSD, or extend their existing locks to 6-, 9- or 12-month terms.

Longer lock durations unlock more opportunities. With more capital allocated to longer terms, the protocol can deploy into more and larger OTC and basis arbitrage opportunities that are more viable at scale.

Higher deployment increases APY. Higher returns flow back into the yield pool, automatically reindexing sNUSD and increasing APY.

Increased yield attract new deposits. As yields rise, they attract a new wave of deposits, increasing TVL and restarting the cycle.