TCD #64: Treasury Stablecoin Farming (Take 2).
TL;DR:
- Swap 600$k worth of Stablecoins into either:
- 300$k sDAI and 300$k stUSD, or
- 200$k sDAI, 200$k stUSD, and 200$k stkGHO.
Background
There is currently about 675 $k worth of Stablecoins in the Treasury that can be utilized in yield farming opportunities instead of sitting idle.
The main pushback against the initial proposal was that the strategy had potential to be operationally intensive. With that in mind, the updated proposal offers a simpler strategy to swap Stablecoins in the Treasury for sDAI, stUSD, and (potentially) staked GHO.
Implementation
The proposal is to swap 600 $k worth of USDT and USDC into either:
- 50/50 sDAI and stUSD, or
- 33/33/33 sDAI, stUSD, and stkGHO
These funds would still be considered part of the Stablecoin runway, and could be swapped back to USDT/USDC as needed. Some buffer (~75 $k USDC) is left for payments.
Metrics of Success
How long will the investment thesis take to play out?
Indefinitely, until the funds are needed elsewhere.
Will the treasury recoup funds or does the investment represent an outlay?
The Treasury expects to recoup funds and spend them on operational expenses when needed.
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 - The proposed opportunities are considered to be well-established, low-risk protocols (Maker, Aave, Angle).
Liquidity risk (0 - 10)
Liquidity risk refers to how easily an asset can be bought or sold in the market.
3 - sDAI and stUSD are liquid, while stkGHO has a 20 day cooldown period to be mindful of.
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.
2 - Stablecoins tend to have low market risk. The expectation is that the Treasury will be able to unwind the position with less than 1% loss of the collateral due to potential peg issues.
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 direct counterparty risk involved in the opportunities presented.
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.
2 - The strategy is not operationally intensive.
