Swap Treasury CRV and cvxCRV for AURA

Treasury Council Decision: Swap Treasury CRV and cvxCRV for AURA

TL;DR:

  • The treasury holds 30,215.4887 cvxCRV and 27,848.2560 CRV currently valued at $48,404. These tokens will be swapped for AURA.

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.

Proposal:

The Proposal is to swap 30,215.4887 cvxCRV and 27,848.2560 CRV currently valued at $48,404 for AURA. Because liquidity is thin and the market is juvenile, we propose the following swap mechanics for execution.

Swap Details:

The treasury will swap ½ this dollar value at market price for AURA and place a limit order at -15% below market price after that order executes. If the second order is not filled in 2 days it will be replaced with a market order.

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.

  • 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.

Final execution:

Out: 30,215.4887 cvxCRV and 27,848.2560 CRV ($41730.7)

In: 29966.2514 AURA ($38057.139278)

This represent (at present) an 8% unrealized lose. While AURA is down -43% during our period of buying.