If you are looking for ways to utilize idle capital, the Market Maker Vault (MM Vault) on derivative DEX platforms could be an option, but it also requires careful consideration.
Currently, there are two popular vault mechanisms:
Type 1:
• Profits come from transaction fees and the net losses of traders (e.g., GMX, Jupiter Perpetual).
• Some vaults combine additional short token strategies to reduce downside risk while earning additional funding if the funding rate is positive.
Type 2:
• Functioning like a traditional market maker, profiting from the bid/ask spread.
• More stable because it is not affected by asset prices or funding rates, but depends on trading volume.
WHICH VAULT IS GOOD TO DEPOSIT MONEY INTO?
When the market is strongly rising:
• Vaults with transaction fee + short token styles will yield good profits, especially when the positive funding rate is high.
• For example: If BTC is surging, with a positive funding rate, profits from the vault will be very stable.
When the market is flat or declining:
• Vaults operating like traditional market makers will be safer.
• Not affected by asset prices, as long as trading volume is stable, you will earn profits.
When the market is highly volatile:
• Vaults like HyperLiquid's HLP or Paradex's Liquidator Vault are very suitable, as they take advantage of opportunities from mass liquidations.
RISKS TO NOTE:
• Management fees: Some vaults charge quite high fees (around 20% of profits), so you need to calculate carefully before participating.
• Market trend: It is necessary to accurately predict the market trend in the coming months to choose the right type of vault.
If you understand how it works and grasp the market trend, Market Maker Vault could be a potential investment channel. However, you need to be careful with management fees and the risks of choosing the wrong timing. Do thorough research before investing!