# Untangled Strategy Vaults on Perps

**Published by:** [Untangled](https://paragraph.com/@untangledcredio/)
**Published on:** 2025-05-15
**URL:** https://paragraph.com/@untangledcredio/untangled-strategy-vaults-on-perps

## Content

IntroductionUntangled is building vault infrastructure on top of Perps exchanges to enable any managers or DAOs to create delta-neutral strategies to optimise yields. Delta-neutral strategies have emerged as one of the most effective ways to capture structural yield within DeFi. By neutralizing price exposure while extracting funding and fee revenue from perpetual futures markets, these strategies echo the relative value approaches familiar to institutional investors in traditional finance.Beyond crypto hedge funds, DeFi-native protocols such as Ethena have adopted this approach at scale, with Ethena surpassing $6.3 billion in TVL. Although centralized exchanges still handle larger volumes, decentralized perpetual exchanges (perp DEXs) have grown significantly. For instance, Hyperliquid, the leading perp DEX, sees around $6 billion in daily trading volume in 2025, which is approximately 10% of Binance's. This article focuses on the decentralized perpetual ecosystem and outlines how Untangled is building institutional-grade vault infrastructure to capture on-chain yield with full transparency, auditability, and control.Primer on Perpetual FuturesPerpetual futures (perps) were first proposed by Robert Shiller in 1993 as a way to estimate the value of income-generating assets or hedge hard-to-trade instruments. They gained popularity in the cryptocurrency markets for enabling leveraged bets on price movements. For instance, Bitcoin miners use perps to lock in future revenue and reduce volatility. By 2022, perps were among the most heavily traded instruments in crypto.Perps - No Expiry FuturesUnlike traditional futures, which converge to spot prices at expiry, perps have no expiration. They maintain a floating price near spot through a funding rate mechanism: periodic payments between long and short positions.TradFi Futures vs. PerpsFunding Rates: A Market-Clearing Mechanism for PerpsPerps differ from traditional derivatives in several important ways:They can be held indefinitely until closed by the trader.Long positions typically pay a funding rate to short positions when the perp price is above spot, and vice versa.Funding represents the cost-of-carry, settled peer-to-peer.In contrast to variation margin in traditional finance (handled via clearinghouses), DeFi funding is decentralized and designed to balance open interest.Perps Funding Rates Settlement MechanismFraming Delta-Neutral Yield Strategies in PerpsWhen a trader opens a position on a perp DEX, their trade is matched against either another trader (via orderbook), a liquidity pool (via AMM), or a hybrid system. These design choices affect hedging accuracy, slippage, and rebalancing frequency.Perps DEX TypesArchitectural types of perp DEXs:Orderbook (on/off chain): Hyperliquid, dYdX v4, VertexAMM-based: GMX, Jupiter, OstiumHybrid: Drift (vAMM + on-chain orderbook)Hyperliquid — Orderbook Model with Native Liquidity VaultBuilt on HyperBFT, a custom Layer 1 with HyperEVMLiquidity providers deposit into Hyperliquid Provider (HLP), which absorbs unmatched flowYield comes from trading fees and funding imbalanceHedging requires querying net open interest via APITransparent, index-based funding ratesGMX — AMM-Based Perpetuals on ArbitrumGM pools act as counterparties to tradersVaults like hedged GLP/GM earn predictable fees but face drift riskPer-asset funding uses borrow-fee based modelSuitable for passive vaults and less frequent rebalancingFunding skew determines borrowing costDrift — Hybrid Model on SolanaCombines virtual AMM (vAMM) and Just-In-Time market making via DLOBNative support for programmable strategy vaultsEpoch-based resets for efficient rebalancingCross-margin and isolated markets allow multi-asset hedgingCapped, dynamically tuned funding ratesThese models determine whether a hedge earns or pays funding, affecting overall strategy returns.Strategy Vault through a Hedged Liquidity Pool ModelDelta-neutral vaults aim to exploit inefficiencies in perp markets, especially during sustained imbalances in open interest and funding. This is distinct from directional exposure (e.g., long-BTC), staking-only strategies, or passive ETF-style products. By combining a yield-bearing LP position with a managed short hedge, delta-neutral vaults offer:Positive carry through trading and funding feesNeutral price exposurePerformance resilience across market cyclesA representative implementation is the Hedged Liquidity Pool Model:A Typical Hedge LP Share Strategy ImplementationLPs deposit into a perp exchange liquidity pool (e.g., JLP on Jupiter)Vault monitors token weights (e.g., 50% SOL, 30% ETH, 20% BTC)Vault shorts the same assets on the same or another perp exchangeObjective: neutralize delta while capturing yield from both sidesStrategy Vault Performance Optimisation FrameworkDelta-neutral strategy success depends on multiple profit drivers and their optimization. Below is a summary framework for assessing PnL components:Perp Delta-Neutral Strategy Profit FunctionConclusionDelta-neutral strategies represent a compelling frontier in DeFi yield generation, offering institutional-grade products with risk-mitigated returns. As DEX perps mature in liquidity and infrastructure, the opportunity to deploy smart, capital-efficient strategies at scale continues to expand. Untangled is building the infrastructure to power these vaults—transparent, modular, and chain-agnostic—enabling asset managers and DAOs to deploy delta-neutral strategies that harness crypto-native yield opportunities without taking on directional market risk.

## Publication Information

- [Untangled](https://paragraph.com/@untangledcredio/): Publication homepage
- [All Posts](https://paragraph.com/@untangledcredio/): More posts from this publication
- [RSS Feed](https://api.paragraph.com/blogs/rss/@untangledcredio): Subscribe to updates