Treasury Council Decision: 1.5x-2x long BTC at or near current levels
TLDR: Using https://oasis.app/ BadgerDAO will use 5 wBTC to gain leverage between 1.5x and 2x. The bitcoin price is down 50% from the all-time high and as a Bitcoin focused DAO we believe this gives us a chance to gain more exposure to BTC at an ideal time.
Background
The Bitcoin price has recently touched and recovered quickly from its 200-week moving average. At present, the price is still trading under its 50-week moving average. Since, 2018 when Bitcoin was trading under its 50-week moving average these periods lasted between weeks and a months and marked the bottom of the bearish price cycle.
Proposal
At 1.5-2x leveraged position would liquidate between ~$10k and ~$15k at current prices. This is unlikely to occur and in the case of this occurrence BadgerDAO possesses enough BTC to add to this position to protect against liquidation.
The Oasis app allows for MakerDAOs protocol to be used to borrow DAI and buy more BTC. With the available DeFi application we believe this is the best solution for gaining leverage without creating excess protocol risk.
A main goal of this investment is to practice the execution of this position. Therefore, if the BTC price reaches $42,000 USD this position will be unwound and profits will be taken in USDC to pay for DAO operations.
Metrics of Success
How long will the investment thesis take to play out?
This investment would close at $42,000 USD per BTC and is expected to play out between 3 months and 3 years based on the extent of historic Bitcoin bear markets.
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
2: Oasis and MakerDAO are established protocols with a long history of safety. Oasis’ smart contracts have been audited by ChainSecurity, a trusted Blockchain security auditing firm.
- Liquidity risk (0 - 10): Liquidity risk refers to how easily an asset can be bought or sold in the market.
1: MakerDAO has billions of dollars invested and has remained liquid during severeserver market drawdowns
- 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 - Bitcoin’s price is volatile and large drawdowns are possible. However, a 50% draw down from ATH recently gives confidence that a bottom could be near.
- Credit risk (0 - 10): The risk of loss from the failure of a counterparty to make a promised payment, this should cover airdrops expected.
N/A
- 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.
6: This is an untested strategy and may require multi-sig operators to perform new operations in a timely manner.
