I had previously written a proposal for diversifying and investing treasury assets. As some time has passed, some of the protocol investments that I listed have experienced drastic changes in yield highlighting the need for a much more flexible treasury management framework.
Having to do a snapshot vote each time we need to change something with regards to treasury investments is too cumbersome, and will prevent us from reacting swiftly when needed. As a result, I would like to expand on the original idea, but in the form of two separate proposals.
The first proposal (this one) is simply to set asset allocations for 2022 budget purposes. The second proposal (to come at a later date) will be for developing and approving the ongoing active management framework.
Going forward, the DAO will have fixed expenses denominated in USDC (~$1mm annually for compensation). As a result, there is an asset/liability mismatch between the ~500 ETH that our treasury holds and our USDC denominated expenses. The major risk is if ETH weakens significantly against USDC, our spending power deteriorates against the fixed USDC expense. As a result, we need to match a portion of our assets to that fixed expense to ensure we’ll have the ability to pay the compensation expense through any market environment.
- We should convert enough ETH to USDC to secure a $1mm position (~260 ETH) to reserve for our 2022 fixed expenses
a. this represents ~50% of our current ETH+WETH treasury holdings
- These purchases will be split in 4 weeks, 25% for each
- Swaps will be executed by main vault signers, or delegated by said signers to any of the OpEx vault signers through the creation of a specific “Finance” wallet
- Of the $1mm USDC, 50% or $500,000 should be deposited into Aave to earn interest at a rate of ~3% (~$15,000 income) annually
- This will occur simultaneously with our 3rd and 4th swaps - the ETH will be swapped to USDC and then immediately deposited into Aave
It’s important to execute this asset re-allocation as early as possible in 2022, as we will start incurring USDC-denominated expenses in the near-term. We should execute on this ETH/USDC swap as soon as is practicable, and then take a bit more time to develop a more robust and full-fledged Treasury Management framework to be executed later in the year.