BIP 81: Buy The Dip

BIP | Badger Improvement Proposals
1

Overview

Category: Treasury Management

Scope: Use $10million in stablecoin assets from the $17million in BadgerDAO’s treasury to buy wBTC under $57k per token.

Status: Pending

TL;DR:

Accumulate BTC under $57k per token using $10m stablecoins from BadgerDAO treasury holdings.

If wBTC is purchased with 30% of stables immediately (at $46k that’s a 20% discount) and a stop gap at $51k with remaining 70% that’s (a 10% discount) a total of a 13% discount.

If wBTC falls another 10% away from $57k then the remaining 70% is used to purchase at a 30% discount that increases the total discount to 27%.

Minimum program length 3 weeks, or immediately with stop gap measure at $51k BTC price.

Maximum program length 14 weeks.

Specifics

When accounting for the unrecoverable, non-governance assets from the exploit December 2nd there were 2019 BTC lost excluding DIGG. Since that event BTC has reduced in price by nearly 19%. This proposal is to deploy a strategy with the stablecoins currently held in the treasury to purchase bitcoin at a discount to the price at the time of the exploit in anticipation of compensation efforts. This is not an explicit approval to deploy these funds for compensation. Any decision to do so will go through full governance for approval.

Approve the Badger Core team to use up to $10million (+ 1.5 ETH for gas) from Stablecoin and non-strategic assets in the treasury to purchase wBTC over the next 3 – 14 weeks (or stop buy is hit $51k).

The purpose of this proposal is to increase the amount of wBTC that can be returned to victims if a direct outlay of BTC is approved by governance in the future taking advantage of BTC market dynamics.

Stop gaps and Risk Management

  • 30% will be purchased within 24 hours of snapshot passing with the rest to be executed using team discretion within the below framework
  • At least 1 purchase per week.
  • No more than 5% of $10million will be spent in 1 transaction.
  • No more than 5 purchases in any 1 week.
  • The above parameters means that no more than 25% of the $10million will be spent in 1 week, and the entire program could end in 3 weeks, and a maximum of 14 weeks.
  • if BTC price returns within -10% of $57k ($51k) the remaining USDC will be used as quickly as possible to buy wbTC ignoring the constraints above. This would represent a 10% increase in the amount of BTC purchased.
  • Any future BIPs passed by the community may amend or stop this plan, including upcoming governance proposals around exploit compensation.

Actions

Purchase wBTC with $3m USDC within 24hours of BIP passed

Purchase wBTC with discretion following guidelines above

  • Approve BIP 81 as described in the post?
  • Reject

0 voters

3 Likes
2

Prices of wBTC could be adjusted for the current ones :wink: Maybe it’s a good idea to add some DIGG buys to it to get the peg back a little above 1, the main effect will be that DIGG as a coin pegged to bitcoin really is pegged to bitcoin and not more than 20% negative off Faith will be restored

2 Likes
3

So we’re hoping for the continuation of this bull run? :grin:

1 Like
4

I just vote no because I think, in this time it’s better to get in stable and not sure it’s discounted price for BTC

2 Likes
5

This would leave 82% of the treasuries stable coin open for purchasing at lower levels.

6

Not wishing ill will on anyone, but this proposal would be most profitable if BTC went into a 14 week bear market.

1 Like
7

I just think for the DAO, it’s not time to speculate and must be focus to be asap in a new normal (just my profesionnal experience of having speculate in difficult time). I’ve no idea of the market timing

8

It’s the opposite of market timing:

Price is 20% below the price when the hack happened. Right now, the damages arent $120 million any more, but closer to $90-95 million. Three scenarios:

  • we buy now, and price goes up: grats, we saved the DAO a lot of money by buying cheaper. If we dont buy, we missed a chance to repay victims with fewer DAO funds
  • we buy now, and price is flat: doesnt matter what we do
  • we buy now, and price goes down more: repaying the victims becomes even cheaper, but we already locked in a small part in BTC

In the short term, nobody knows what the price is going to do; it’s impossible to predict accurately (if that wasn’t true, you could earn infinite money with that).

So locking in a discount right now is quite smart. It could be higher or lower in 4 weeks, we just cant know.

With the repayment plans being worked on, I’d even argue that not buying at a discount, because you think it’s going to get even cheaper soon, is the actual market timing.

1 Like
9

Absolute worst case… it takes a loooong time to pay people back.
I’m convinced we all agree BTC is generally undervalued, even at ATH.

The biggest damage we take is reputation:

  • Worst-Case Approve: “Badgers did their best, and it took Mt. Gox grade patience to recover funds.”
  • Worst-Case Reject: “Badgers could have done something, tried anything, and did nothing.”

The former seems less worse, and trivial in the long-term eventuality.

1 Like
10

I only think speculation for the treasury is not a good choice in these dificult times (same advice when you run companies). If we buy BTC with stable, it is speculation and upgrade the risks oh the DAO. We must be conservative. I’ve no idea if BTC is cheap or expensive and don’t realy care of BTC price. It’s not really important for the whole DAO but imagine 3 years of bad market with strong regulation.

11

It is good practice if you have liabilities in the thing you’re going to buy. If you’re a Turkish company with debt in USD and have money now to buy some USD to serve that debt in the future, it is prudent to do that now.
Same with Badger and BTC.

2 Likes