Swap Treasury bcvxCRV for AURA (part 2)

Treasury Council Decision: Swap Treasury CVX for AURA

TL;DR:

This proposal is to swap 33k bcvxcrv for AURA using a similar strategy of the last swap that allowed for an optimization in the number of tokens purchased.

Background:

Aura has launched recently and is now adding AURA rewards as yields on top of the current BAL rewards. It is now possible to deposit the TCL balancer tokens into aura for enhanced yields.

Currently AURA is providing 13x the yields of 1 CVX. We believe the token is underpriced relative to the yields it can provide the BadgerDAO treasury.

What’s changed since the last swap:

  • Our swapping strategy was successful in mitigating >70% of the tokens downside from relative to its ATH.
  • GNO has entered the Balancer War (it’s officially a war now) https://twitter.com/0xMaki/status/1541892838954110976?t=4lJuD6XrMVfkRv_AoHfBeA&s=19
  • AURA is -50% from ATH
  • CVX is likely to remain correlated with AURA, but AURA has more short term upside
  • AURA yields can be used to repurchase CVX if balance is needed

Proposal:

The Proposal is to swap 33k bcvxcrv for AURA using a similar strategy that allowed for an optimization in the number of tokens purchased.

Swap Details:

The treasury will swap this dollar value at market price for AURA. If the order fails to execute after 2 days, replace it with another market order. Repeat until filled.

Metrics of Success:

  • How long will the investment thesis take to play out?

The treasury will yield BAL and AURA assets by using AURA to direct yields to Badger/wBTC TCL. Another probable form of yield could be a Badger/AURA pool so acquiring AURA is neccessary to achieve this liquidity pair.

AURA yields can be used within a month or two to repurchase CVX if desired.

  • Will the treasury recoup funds or does an investment represent an outlay?

The treasury will earn back the cost of the investment through yields generated by holding the asset. If needed the asset can be sold to recoup some or all of the initial investment depending on market conditions.

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

5 - Aura is a new protocol but it is built ontop of Balancer, one of the oldest and well developed AMMs in DeFi. The Aura contracts have been audited and their community is trusted by many.

  • Liquidity risk (0 - 10)

Liquidity risk refers to how easily an asset can be bought or sold in the market.

5- The liquidity for AURA is thin so selling large amounts may cause losses due to slippage if the asset must be sold in a rapid manner.

  • 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.

8 - The Market risk is high because AURA is a new asset and may be mispriced.

  • Credit risk (0 - 10)

The risk of loss from the failure of a counterparty to make a promised payment, this should cover airdrops expected

1 - There is no reason to believe promised future yields will not be paid out by the Aura ecosystem.

  • 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.

4 -The treasury multisig will need to sign to respond quickly to this proposal as the yields in the ecosystem will diminish with time and aura’s price volatility will likely diminish as well.

This swap was successfully executed.

~33k bcvxCRV become cvxCRV 50,419.8412 this was swapped for 28,290.1616 AURA with a +3% bonus under our limit order from cowswap execution.

https://explorer.cow.fi/orders/0xe87791b1cd1d8d6fc90dd1cab804e11e8ef640922cbbd3b00473dc0082e04e7b042b32ac6b453485e357938bdc38e0340d4b927662bd2f91