Treasury Farming Initialization

Treasury Farming Committee

Monthly Report: June 2021

Overview

The Treasury Farming Committee exists to provide suggestions to PieDAO’s members on ways of allocating and utilizing the treasury. The Committee holds the following goals:

  • Diversify: Maintaining an allocation that lowers the risk of concentrated exposure and ensures operations can continue during bearish market conditions.
  • Positive inflow: Ensure returns on treasury farming and protocol exceed the cost of operation and bring value to token holders governing the protocol.
  • Aim for perpetuity: Creating the condition to enable the DAO to operate forever.

The treasury can be found here:

Relevant balances for our purposes include:
4,841 ETH
27.31 WBTC
16,582 BAL

These funds are largely positioned bullishly, as pure volatile assets.

Initial goals.

  1. Moving the treasury into a farmable state. This means migrating funds to a contract which can support this functionality.

  2. Establishing an initial position leaning more neutral.

Proposed Initial Positioning

Ethereum has had a terrific run, and our treasury is quite sizeable. However we must consider the possibility of a bear market and ensure we realize the value accrued.

The current balance of ETH is valued at around 12 million. We suggest that 1000 of the 4841 ETH should be progressively swapped into DAI. At current prices this is approximately 2.5 million. This opens the door to ~40% of our assets to gain a 33% yield.

Base assets:
3,841 ETH
27.31 wBTC
16,572 BAL
2,545,960 DAI

We can then invest:

  • wBTC and matching ETH in the wBTC:ETH Bal v2 pool earning 23%.

  • DAI and matching ETH in the DAI;ETH Bal v2 pool earning 33%

  • BAL and matching ETH in the BAL:ETH Bal v2 pool earning 58%

  • ETH remaining into the DAI SETH Curve pool staked in Convex earning 14%

This set up would give the DAI approximately $60,000 a week in BAL, CRV, and CVX rewards.

This set up would result in the following breakdown by asset:

And the following breakdown by dApp

The BAL rewards are currently used for buybacks, but I do think it may be a good move to kickstart this pool as planned single interruption to the buyback schedule as it would lock in ~6k a week for the DAO and its members. We still have a remaining ~$50k worth of BAL to proceed with the buyback this month.

We believe these changes to the Treasuries asset deployments provide a great base for further investments, and allow a strong return.

However there is one additional opportunity that can greatly increase our yields with minimal relative investment.

If we shuffle 125 ETH into ALCX and enter an LP we can increase our yield by 22%.

This would be a small investment of ~4.5% of our portfolio auto compounded via Pickle Finance, but would increase our projected monthly yield by nearly double…

This set up would result in the following breakdown by asset:

And the following breakdown by dApp

As you can see this small allocation of assets earns a significant portion of yield and should greatly increase general excitement about returns. We feel this will be an optimal starting position to begin the Treasury Farming journey.

Going Forward

Moving forward myself, and a committee will be meeting weekly; developing a framework for rating our exposure, as well as market conditions which may influence our decisions. We look forward to sharing these with you as they become more defined.

We will be working on further diversification, with likely suggestions of further shifting into stables for many of the reasons discussed in this recent article titled Treasury Building Blocks: Stablecoins, by Monet Supply.

I will be acting as a liaison with this committee and the community. I am excited for the prospect of discussing potential treasury positions with you all going forward, and believe together we can ensure an exciting level of treasury growth.

Linked is the spreadsheet where these graphs derived, .(Note all values have been replaced by static values since it needs an API key to pull prices as currently set up, and I can’t share that.)

Questions, comments, or concerns?
Leave em here, else I’m on discord/twitter and will be hanging in the PieDAO discord #Meetings voice channel Thursday 17-19 UTC if anyone wants to chat.

Do It
  • Yes
  • No

0 voters

5 Likes

Thanks for putting this together, it’s really well done. I think that both stating the goals and the goals themselves as very professional, and the way it should be done. Agree with dollar cost averaging into DAI.

A first question that comes up is wheter thera is a plan for the CRV, BAL and CVX tokens earned from the farming?

2 Likes

I like this!

Some things to consider:

  1. Keep a portion of funds in cold storage to keep safu and only to use if necessary

  2. Additional diversification across protocols. Looks like most of the funds would be invested in Bal v2, but maybe consider farming on other protocols to spread the risk. And for the Curve pool, maybe stake only half in Convex?

  3. Thoughts about cross-chain farming if better yields or stick to ETH mainnet?

PieDAO should use its own Pies as part (not all) of treasury diversification. Even if expected yield is lower than other opportunities, it creates governance incentive to improve Pie strategies.

I still like the idea of Balancer+other strategies to customize the treasury allocation, especially given PieDAO’s history with Balancer. Something like:

  • 20% BCP
  • 20% Defi++ and YPIE
  • 20% Balancer V2 Pools
  • 20% Sushi LP, Convex, Yearn, etc
  • 20% Static tokens (liquid, no strategy for now)
1 Like