Rebalancing strategy

Volatility farming redefined

Bundles.fi employs a threshold rebalancing strategy as its core mechanism to drive bundle performance. This approach systematically adjusts asset weights to capture value from market fluctuations.

How Threshold Rebalancing Works

Threshold rebalancing captures value from market fluctuations by selling overperforming assets and reinvesting in those with higher growth potential.

The strategy monitors deviations from target weights, triggering rebalancing when an asset exceeds the predefined threshold (e.g., 5% deviation). It sells the overweight asset (due to strong performance) and reinvests in the underweight one.

Value Generation: Long-Term Dynamics

While rebalancing does not generate immediate value, fees align with arbitraged value at execution, yielding no profit at that moment.

It enables buy-low/sell-high dynamics over time. Deviations prompt swaps that realign the bundle, capturing rebounds from market cycles. In volatile conditions, where prices rise and fall, this exploits mean reversion: selling highs and buying lows compounds gains that a static hold would miss.

Over the long term, with sustained volatility, the compounded effect of these adjustments accumulates greater value than holding unchanged weights, as the bundle continually optimizes exposure to rising trends while mitigating underperformance.

Rebalancing Fee Extraction

Rebalancing fees are paid with $BUN. If the bundle accumulates excess $BUN—due to repeated rebalancing or $BUN appreciation used to repurchase depreciated assets (relative to others)—15% of the fee value is extracted from the bundle. This occurs after $BUN has gained value, positioning it as a structured accrual rather than an isolated cost. The extraction is allocated as follows:

• With a Curator: 5% to the curator, 10% burned.

• Without a Curator: 15% burned.

This mechanism supports the protocol's deflationary design, reducing $BUN supply while incentivizing balanced growth, and integrates seamlessly with dynamic threshold adjustments for opportunistic rebalancing.

Fully automated through arbitrage

Arbitrage is the process of buying an asset on one market at a lower price and selling it on another market at a higher price to earn a profit.

Arbitrage automates rebalancing when thresholds are crossed, keeping bundles assets aligned with their target allocations.

This makes the bundles entirely self managed, requiring no action from investors while keeping asset weights within their target allocations.