Strategy Analysis

afiUSD uses a structured, multi-tier strategy framework designed to optimise yield while maintaining strict controls on principal risk. All strategies are diversified across blue-chip protocols and proven derivative markets, with continuous monitoring to minimise drawdowns and execution risk.

Importantly, all strategies are designed to carry minimal to zero principal risk unless the underlying asset itself depegs. A detailed risk-mitigation architecture governs position sizing, leverage caps, counterparty selection, and maturity-aligned exposure.

1. Low-Risk Strategy: Lending on Blue-Chip Protocols

The foundation of the afiUSD strategy stack is built on low-risk, highly liquid lending markets such as:

  • Aave

  • Euler

  • Morpho Blue

Objective

Generate stable base yield with negligible liquidation risk.

Characteristics

  • No exposure to volatile collateral

  • Deep liquidity and long operational history

  • Continuous on-chain solvency monitoring

  • Minimal execution complexity

Risk Profile

Very low. Principal risk only arises if the core stablecoin (USDC/USDe) depegs—otherwise lending positions remain structurally safe.

2. Medium-Risk Strategy: Accumulating PTs and Holding to Maturity

This strategy involves purchasing Pendle Principal Tokens (PTs) at attractive discounts and holding them until maturity. We selectively choose assets with strong historical stability and robust backing, such as USDe, based on:

  • Fundamental analysis (peg stability, backing, liquidity reserves)

  • Technical analysis (volatility profile, redemption flows, maturity yield curve)

Objective

Capture fixed yield with predictable outcomes while maintaining exposure only to high-quality underlying assets.

Characteristics

  • Returns are known upfront and locked through maturity

  • No looping, no leverage

  • No exposure to impermanent loss

  • Designed to be non-liquidation-sensitive

Risk Profile

Moderate. Risk primarily stems from underlying asset depeg or protocol-level failure, both mitigated through strict selection standards.

3. High-Risk Strategy: Leveraged PT Loops via Morpho / Euler

This category targets amplified yield by:

  1. Buying PTs

  2. Using them as collateral or looping them through integrated markets such as Morpho or Euler PT markets

  3. Leveraging the fixed yield component to magnify returns

Objective

Maximise capital efficiency and boost fixed yield returns within controlled leverage levels.

Characteristics

  • Leverage applied only within safe LTV bands

  • Automated guardrails to avoid liquidation risk

  • Dynamic rebalancing around maturity timelines

  • Exposure diversified across durations and markets

Risk Profile

Higher relative to other strategies, but still minimal principal risk under normal conditions. Risk becomes material only in the event of:

  • A severe underlying asset depeg

  • Sudden collapse in PT liquidity

  • Catastrophic protocol failure

All loops are executed with strictly monitored health factors and capped leverage to mitigate this.

4. Principal Protection Philosophy

Across all strategy tiers, AFI follows one core invariant:

“Principal risk remains minimal to zero unless the underlying stablecoin itself depegs.”

To uphold this principle:

  • Only fundamentally strong stablecoins with long-term stability signals are used

  • No exposure is taken to untested or high-volatility assets

  • Only blue-chip and battle-tested protocols are integrated

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