TCD #40 - Remove Funds From FRAX and Balancer/Aura LPs
The performance of each treasury asset and the treasury as a whole must have clear accountability to allow future governance by BADGER token holders. The following is research by $1500Badger on Remove Funds From FRAX and Balancer/Aura LPs
TLDR; Remove Funds From FRAX and Balancer/Aura LPs due to declining yields and a change in market conditions.
During bear market conditions the Treasury sought to find yield farming opportunities during an expected depreciation of non-stable assets. TCD #38 and BIP #74 defines a core TCL position that will remain during various market conditions. With the upcoming launch of eBTC and the Bitcoin Halving approaching the Treasury is no longer focused on reducing risk through LPs and yield farming but instead intends to use Treasury assets to mint eBTC and provide liquidity for the DAO’s new product, as well as gaining exposure to price appreciation that is expected from the 2024 Bitcoin Halving.
For now the liquidity deposited on Liquis will remain but will continue to be monitored for performance.
The Treasury should:
- Remove liquidity from USDC/FRAX/Badger
- Remove liquidity from Badger/rETH
Once removed from liquidity pools the assets will remain in the Treasury vault until future decisions are made.
Metrics of Success
How long will the investment thesis take to play out?
The assets will be removed from the liquidity pools on a consensus vote and likely will be removed within a week.
Will the treasury recoup funds or does the investment represent an outlay?
This process is recouping funds from previous TCDs.
What are the risks associated with each investment?
- Protocol risk (0 - 10)
Likelihood of a smart contract or a system of smart contracts (protocol) is exploited or funds are lost
0 - This will reduce the protocol risk of the Treasury by removing exposure to FRAX, Convex, Curve, Balancer and AURA.
- Liquidity risk (0 - 10)
Liquidity risk refers to how easily an asset can be bought or sold in the market.
0 - The Treasury will continue to provide liquidity for the Badger Token per BIP#74 and TCD#38 using Uniswap V3 and loans to off chain market makers
- 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.
5 - The treasury is increasing its market risk to each individual asset by removing them from these liquidity pools.
- Credit risk (0 - 10)
The risk of loss from the failure of a counterparty to make a promised payment, this should cover airdrops expected
0 - There is little to no counterparty risk in this decision…
- 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.
1 - This decision will require a simple execution of removing liquidity from the individual pools.