#8 1.5x BTC Long using 5 Treasury BTC and Oasis

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.

2 Likes

The day the protocol starts using user funds for leveraged strategies is the day I leave and remove all my bitcoins and dump all my badger.
No one can predict how much more the price will fall and even if you are willing to try this with small amount it sets a dangerous precedent.
Stongly against!

These are not user funds they belong to the DAO. The users remain as always in possession of their own funds.

Yes, no one can predict how much more price will fall.

1.5x leverage at current prices would liquidate at $5500 per BTC. The intention is to build out the strategy and tooling while taking advantage of a risk off environment.

It turns out building this in a decentralized manner is harder than we had originally thought. So it will be a valuable exercise in onchain tooling.

It could be quite some time before this is executed.

Moreover, there are plans to offset this strategy with covered call options. Creating a market neutral portion of the portfolio. This will help to offset volatility when these two strategies are running in parallel.

Also for perspective on size. This position would represent $100,000 of the DAOs $36,000,000 in funds, or 0.2% of the DAOs total holdings.

3 Likes

Terrific! I hope this turns out okay! #gobadger

1 Like

Testing our script for opening the long. Started with just 1BTC to test operations.

https://etherscan.io/tx/0xa110f7610cc04fdd16a438ed694cef9ab025c611fb3233e847dfd75a5bcd03bf

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Testing closing the long with 1 BTC as collateral.

https://etherscan.io/tx/0x6059ad1cc64de7aaa6b4f4878d1b06e1d46dd3c5f3db1ca86b630b3878afd9dc

We will now look for an entry for the entire position.

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https://etherscan.io/tx/0x52b76fb6f90df24eaa23d2793e3aef3d35a7f0f5ed2e95b6f8fed6f488b8c77b

The full position is now on.

1 Like