BALCO Meeting Notes

BALCO Meeting, April 3rd, 2024

This thread will serve as a periodic summary to our weekly BALCO meeting.

This week, BALCO deliberated on crucial aspects such as the collateralization ratio (CR) target, ETH/BTC trade asymmetry, and strategies to address potential tail risks. The meeting honed in on maintaining the eBTC peg and optimizing the treasury’s position concerning eBTC and stETH.

Optimizing Collateralization and Managing Tail Risks

  • CR Target Adjustments: The consensus pointed towards a proactive stance on managing the CR, particularly if it dips below 150%. BALCO discussed automating responses to deviations from the target CR, highlighting the importance of agility in managing the protocol’s health.
  • Addressing ETH/BTC Asymmetry and Tail Risks: With potential for significant market drops, strategies to mitigate risks without extra spending were explored. A careful balance is needed between automated and manual interventions for responding to adverse market movements effectively.

Enhancing eBTC Demand and Treasury Efficiency

  • Stimulating eBTC Demand: Using stETH to buy eBTC, rather than minting new eBTC, could provide the necessary demand to maintain its peg in an interim situation. Buying eBTC directly from users enhances capital efficiency and supports the protocol’s stability.
  • Implementation and Liquidity Management: Initial steps will leverage the TCD 50 allocations, with a long-term goal of converting the entire stETH collateral allocation to eBTC. Discussions included maintaining a neutral stance on the BTC/ETH ratio within the Treasury and utilizing narrow UNI v3 positions for buying eBTC to facilitate easier peg management.

Next Steps

  • Drawdown analysis on ETH/BTC
  • Execute the rest of TCD50 by purchasing/minting eBTC
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