#15: Rebalance WBTC/WETH Ratio

TLDR: Treasury is exposed way more to bitcoin than to ether. Swap 40 WBTC to WETH in order to somewhat correct this.

Background

The latest treasury portfolio report shows the following composition:

Bitcoin: $5,4M
Ether: $1M
Native: $23,3M
Other: $2,1M
Stables: $3,8M

Total: $35,6M

The ratio between bitcoin and ether here is quite skewed, even though from a risk perspective a more balanced ratio would be more favourable.

Proposal

Rebalance some WBTC into WETH. Outside of the treasury’s TCL positions, there is a bit more than 75 bitcoin available as float. ~29 of those are earmarked for a possible deployment of a lower range in the Uniswap V3 TCL position. That leaves at least 40 bitcoin available for selling. The proposal is to free up some bitcoin by unwinding the ibBTC position into WBTC, and swap exactly 40 WBTC for WETH at the given market rate.

Metrics of Success

How long will the investment thesis take to play out?

This is a one time swap.

Will the treasury recoup funds or does the investment represent an outlay?

Rebalancing back to bitcoin could be considered at any time if market conditions change. However, for now it looks like the treasury will be heavy on bitcoin for a while.

What are the risks associated with each investment?

  • Liquidity risk (0 - 10): Liquidity risk refers to how easily an asset can be bought or sold in the market.

2: Current slippage for a 40WBTC>WETH swap is less than 10 bps.

  • Market risk (0 - 10): Market risk is the risk that arises from movements in stock prices, interest rates, exchange rates, and commodity prices. Metrics to consider : VaR, skew, sharpe.

4: There is a chance the price of ether will move down considerably versus the price of bitcoin, although they have shown to be quite correlated in the past. The risk of prices going in the opposite direction, ie ether going up and bitcoin down, is what we are trying to cover here.

  • Execution risk (0-10): How long will it take to execute, how many signers on a Multisig or queue of things that must be signed first.

3: Scripting and executing will take some time since this is an action on the treasury vault multisig, but since we are accepting any market rate this doesn’t really pose a problem.

withdrawal: https://etherscan.io/tx/0xcec41d28afc1e451b644e8c0eef1d89de37cf424661837837f81351d55fa00f4
swap: CoW Protocol Explorer