DUSD, DETH, and DBIT Machine Operational Update, Weeks 26-27

This report covers the performance and positioning over the past few weeks of DUSD, DETH, and DBIT. Inside, you will find a clear view of performance drivers, allocation shifts, and risk management decisions across each Machine.

Over the past few weeks, the DUSD Machine generated a 6.32% APR, with meaningful contributions from Sentora’s Morpho vaults and tokenized receivables through 3Jane. The period’s focus remained shifting exposures away from concentrated looping and towards real-world-asset (RWA) sources. The Convex USDT position was wound down, loop exposure was reduced further, and the allocation to 3Jane’s senior tranche and PYUSD, was increased.

Taken together, the period’s changes continue the deliberate rotation of the Machine’s positions. With loop exposure now largely unwound, the Machine enters the next period positioned around a more diversified, less rate-sensitive yield base while retaining ample liquidity throughout.

The DETH Machine generated an average 3.02% APR over the reporting period. Performance was modestly lower than in the previous two weeks, primarily due to a softer weETH print, which resulted in a slight compression of the strategy’s overall yield.

During the period, Dialectic Meccanico also completed an allocation from DETH into DQaeETH, EtherFi’s ETH arbitrage strategy. The capital is now fully deployed and is currently awaiting redemption fulfillment, after which the first arbitrage cycle is anticipated to begin, subject to market and operational conditions.

In parallel, Dialectic Meccanico has begun building out the carry trading sleeve, focusing on opportunities that offer positive risk-adjusted returns while complementing the Machine’s existing sources of yield. Initial allocations include strategies such as the Sentora PYUSD/RLUSD Morpho Vault and the recent Aave Monad campaign, with additional opportunities expected to be added as they arise.

Beyond the incremental yield, these allocations improve the Machine’s overall capital efficiency. Maintaining a liquidity sleeve in wstETH is a deliberate design choice, ensuring sufficient flexibility to meet redemptions and rebalance positions as market conditions evolve. By opportunistically deploying excess liquidity into low-risk, short-duration opportunities with attractive risk-adjusted returns, we can meaningfully reduce cash drag and enhance portfolio carry without compromising liquidity or execution flexibility.

DBIT generated 0.78% APR in the reported period. Noting the persistent borrow rate volatility on Morpho and AAVE, the DBIT Machine has concentrated on Across LP provisioning. This decision has been made to address the NAV volatility of the previous weeks. That said, the Machine remains on the lookout for stablecoin carry opportunities as the borrow rates stabilize.

Risk and Disclaimer:

Each Machine Token (DETH, DBIT, DUSD) is a product sold by Dialectic Meccanico Ltd. (BVI) as principal seller, acting for its own account. Each Machine Token is issued at the protocol level via the Makina Caliber smart contract on the Makina Protocol when the purchase price is paid. Machine Tokens are sold on an “AS IS, WITH ALL FAULTS” basis; users bear full risk, including total loss of the amount paid. Dialectic Meccanico Ltd. (BVI) operates the underlying Machines using its own capital. Machine Token holders participate at the protocol level; Meccanico does not manage assets for, or act on behalf of, Machine Token holders.

All Machine activity carries risks including smart-contract risk, oracle risk, market risk, liquidity risk, and protocol-governance risk. Past strategy performance is not indicative of future strategy performance. Investments involve risk, including potential loss of principal.

Nothing in this update should be considered investment, tax or legal advice or the recommendation to sell, or the offer of a solicitation to buy or invest in any investment product, vehicle, service or instrument.