How Starkiller Capital Used Definitive to Execute a $700K TWAP for $10 in Network Fees

How Starkiller Capital Used Definitive to Execute a $700K TWAP for $10 in Network Fees

As alpha opportunities are increasing onchain, hedge funds and liquid funds are discovering powerful tools to execute sophisticated onchain trading strategies.

Definitive Finance is the go-to solution for advanced traders everywhere, ushering in a new paradigm in onchain trade execution with an end-to-end solution offering advanced order types, superior execution prices, deep liquidity, multi-chain Solana and EVM support, and automated post-trade reporting out-of-the-box.

This case study explores how Definitive enabled Starkiller Capital to execute a large trade in a medium cap altcoin with unparalleled efficiency and minimal price impact and slippage.

Onchain Challenges

Funds and sophisticated investors face significant challenges when trading.

1. Limitations of CeFi & OTC Desks:

• CeFi token listing timelines are long, resulting in a limited asset universe that lags DeFi.
• OTC desks don’t trade most onchain tokens.
• OTC desks often quote wide spreads and high fees.
• Rarely is advanced algorithmic trade execution, such as TWAP orders, offered — especially for onchain assets.

2. Manual Execution of Large Orders:

• The low liquidity conditions of onchain markets often require a human trader to trade small increments manually over time, necessitating the hiring of 2+ traders for uninterrupted around-the-clock execution.
• Humans are prone to execution errors and are significantly less quantifiably precise than algorithms.
• 24/7 market monitoring is unsustainable without automation.

3. Lack of Institutional-Grade Tooling & Support:

• Funds should focus on analysis and discovering alpha (their primary mandate). Instead, the lack of institutional-grade support distracts from the primary mandate and results in time-consuming and expensive workarounds to simply support trade execution.
• Advanced trading algorithms, optimized order routing, risk tooling, and reporting are woefully missing from most onchain trading solutions.

Starkiller’s AERO Trade

Starkiller Capital, managed by Leigh Drogen, uses proprietary momentum and trend-following models and other quantitative screens to invest in a concentrated portfolio of liquid tokens. In its 2-year tenure, Starkiller reported returns in the 95th percentile of overall returns among all hedge funds during the same period (as of Q2 2024).

Starkiller wanted to execute a $700,000 buy order for AERO, a $500 million market cap token at the time. AERO was not available to trade on major CeFi platforms such as Binance. While it was available on CeFi venues such as Coinbase and Kucoin, liquidity for AERO was extremely thin and only a fraction compared to available liquidity onchain. Even the largest OTC market makers were not equipped to handle this trade efficiently, quoting an astoundingly wide 26.19% bid/ask spread with no TWAP support.

Starkiller Capital needed a more advanced and cost-effective solution to navigate the complexities of executing a large trade in a medium-cap token.

The Solution: Definitive’s Advanced Trading Platform

Definitive’s platform is designed to streamline onchain execution for institutional investors and those trading in size. It provides traders with segregated, non-custodial trading vaults and access to sophisticated trade execution algorithms (TWAP, Limit, Stop, Take Profit) across 100+ DEX and onchain liquidity venues on EVM and Solana.

For Starkiller Capital, Definitive was the one-stop-shop for its AERO trading challenges.

TWAP (Time-Weighted Average Price) Orders

The TWAP order is one of the most highly utilized features among Definitive’s institutional clients. It allows large traders to deploy capital over time, minimizing both price impact and market presence, and can generate higher returns with minimal effort.

Starkiller used a TWAP order to execute its $700,000 AERO trade on Base, with over 678 separate trade fills for a total execution cost of just $10.71 in network fees. This advanced order type enabled Starkiller to return +21.33% more AERO on the trade than the 26.19% spread quoted by OTC market makers. Definitive’s TWAP also offers order flow masking by randomizing order fill times and sizes, as well as execution through proxy addresses, to mitigate against frontrunning attacks and similar onchain threats.Smart Order Routing & Smart Slippage

Definitive’s trade automation features enable price sensitive traders to achieve the best onchain execution:

• Smart Order Routing algorithmically identifies the best liquidity routes across 100+ DEXs and onchain venues to minimize market impact and lock in the best execution prices.
• Smart Slippage automatically determines the ideal slippage setting for each trade, optimizing for high success rates while protecting against MEV exploits, by simulating each transaction off-chain before submission.

Definitive’s algorithms automatically routed Starkiller’s AERO trade through multiple venues, including Uniswap V3, PancakeSwap V3, Aerodrome itself, and others, to achieve optimal execution prices.

Profit & Loss and Order Fill Histories

Every advanced trading vault on Definitive comes with best-in-class reporting tools. These tools include real-time order fill analysis, per-position profit and loss (PnL), and auditable activity histories. These trading analytics are ubiquitous in TradFi, but often lacking in DeFi and are essential for ongoing portfolio monitoring and management.

For Starkiller Capital, this meant comprehensive post-trade analysis for streamlined trade reconciliation and review.

Starkiller’s AERO TWAP Executed on 4/4/2024

Advanced Trading With Definitive

Definitive’s platform has proven invaluable for investors looking to navigate the complexities of onchain execution while leveraging advanced trading capabilities and trade support common in TradFi.

For Starkiller Capital, the ability to execute large-scale onchain trades with minimal market impact has provided a significant competitive edge. Leigh Drogen from Starkiller states,

“Without Definitive, we would not be able to execute our strategy with efficiency across an asset universe otherwise inaccessible and impractical on CeFi or through OTC desks. I am confident we could not have gotten better execution (or as seamless a trading experience) anywhere else. A meaningful portion of alpha in our strategy has shifted onchain, Definitive allows us to access it without sacrificing our operational cadence or operational security.”

— Leigh Drogen, CIO, Starkiller Capital

As the DeFi landscape continues to evolve, Definitive remains at the forefront, offering innovative solutions that empower investors to attain the optimal onchain trading experience. By leveraging Definitive’s advanced trading features, institutional investors can focus on their core strengths — analyzing markets and discovering alpha — while leaving the intricacies of trade execution to Definitive’s sophisticated, proprietary execution engine.

At Definitive, we believe onchain is the future and the majority of trading volume will transition from CeFi exchanges to DeFi markets. Join us in accelerating this movement. Onboard to Advanced Trading today at www.definitive.fi.

Definitive is the leading institutional DeFi platform for advanced onchain trade execution.

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Disclosures:

This document is intended only for sophisticated investors; it is for informational purposes only and does not constitute the provision of investment advice. Client assumes full responsibility for its trading activity and should consult its advisors for its specific situation. Definitive is not registered as an investment advisor and Definitive assumes no liability, obligation, or responsibility for client decisions regarding the use of its trading platform and other products. Please see our Terms of Service for additional details.