DUSD, DETH, and DBIT Machine Operational Update, Weeks 23-24
This report covers the performance and positioning over the past two weeks of DUSD, DETH, and DBIT. Inside is a clear view of performance drivers, allocation shifts, and risk management decisions across each Machine.
DUSD
Over the past two weeks, the DUSD Machine, which executes Meccanico’s proprietary USD-denominated strategy on the Makina Protocol, generated a 5.15% APR on Meccanico’s deployed capital, with yield driven primarily by looped positions, alongside meaningful contributions from Sentora’s Morpho vaults, Convex crvUSD pools, and tokenized receivables (3Jane).
A key focus during the period was broadening the Machine’s underlying exposure. DUSD is pivoting away from concentrated looping strategies and towards real-world-asset (RWA) sources. This month the DUSD Machine added exposure to tokenized receivables through 3Jane’s senior tranche, USD3, tokenized HELOCs, which DUSD lends against on Morpho, and tokenized reinsurance through Re’s senior tranche, reUSD. Currently anticipated additions include mGLOBAL, an asset-backed lending tokenized fund.
Looking ahead, the most consequential currently-anticipated change will be the full wind-down of looped positions over the next one to two weeks.The DUSD Machine’s strategy is being deliberately concentrated into RWA exposures to reduce the Machine’s sensitivity to net interest margin during borrow-rate dislocations. We also anticipate adding exposure to FalconX’s CLO over the coming period.
Overall, the DUSD Machine’s recent adjustments reflect a continued emphasis on reducing rate-sensitive leverage and broadening yield generation through real-world assets and uncorrelated sources, while maintaining a highly liquid profile on the Machine level.
DUSD Summary:
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DETH
Yield generation in ETH has become increasingly difficult over the past year. As staking yields compress and many of the easy opportunities disappear, managers are often pushed toward greater complexity in search of incremental returns. We believe the opposite approach is the right one.
Over the past two weeks, the DETH Machine, which executes Meccanico’s proprietary ETH strategy on the Makina Protocol, has generated an annualized yield of approximately 4% on Meccanico’s deployed capital. While that number may not seem spectacular in isolation, it highlights what we believe is the most important characteristic of the strategy at this stage: simplicity.
Rather than relying on aggressive leverage, opaque structures, or highly tactical trades, the DETH Machine has focused on maintaining a clean and resilient strategy construction. We characterize the result as a strategy that can once again generate yields that are safer, more scalable, and better predictable while preserving liquidity and keeping risk tightly controlled.
This period has been particularly encouraging because it demonstrates that sustainable returns can still be achieved while staying true to the core principles that have always guided the DETH Machine: capital preservation first, disciplined risk management, and a strong preference for opportunities that can scale.
That said, simplicity does not mean standing still.
Over the coming weeks, we anticipate rolling out a number of enhancements designed to expand the strategy’s opportunity set while remaining consistent with its risk framework. As a small preview, we are currently finalizing an ETH-focused arbitrage engine that will become one of the destinations for a portion of DETH’s idle liquidity. The objective is straightforward: capture market-neutral opportunities that can enhance returns without materially increasing directional exposure.
In parallel, another portion of the liquidity currently allocated to Lido is anticipated to be repurposed as collateral for an allocation into the DUSD Machine, our flagship stablecoin strategy. This integration is particularly attractive because it allows the DETH Machine to benefit from a broader set of yield sources while maintaining a conservative overall profile.
The intended combined effect of these changes should be twofold. First, they are anticipated to improve capital efficiency by reducing cash drag at the Machine level. Second, they are anticipated to increase diversification by adding return streams that are less dependent on any single source of ETH yield.
As always, our objective is to improve returns through thoughtful capital allocation rather than additional risk. The upcoming changes at the Machine level are incremental by design, but we believe they should contribute meaningfully to overall portfolio efficiency and help maintain a more consistent yield profile as the strategy continues to scale.
DETH Summary:
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DETH Asset Allocation Breakdown:
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DBIT
Over the past period, the DBIT Machine, which executes Meccanico’s proprietary BTC-related strategy on the Makina Protocol, has experienced a flat month due to negative returns in the first week for June in the DUSD Machine: a borrow rate spike on loops caused the underlying DUSD strategy to be slightly negative for a couple of days exacerbating the borrow cost for the DBIT Machine. DBIT allocates 35% of its Machine-level positions to DUSD and hence suffered.
DBIT remains small in scale with a few concentrated Machine-level allocations: Makina DUSD, AAVE (approximately 25% of the Machine’s position) - the borrow venue for the carry trade, and Across LP (40% of the Machine’s position). We anticipate to reduce the DBIT Machine’s exposure to DUSD by 50% while it is unwinding the loops which are a major cause of intra-day return volatility.
DBIT Summary:
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DBIT Asset Allocation Breakdown:
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DUSD, DETH, and DBIT Machines are being operated on Makina - the DeFi execution engine.
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