Treasury management is a difficult but important task for every community and I would like to start the discussion.
Currently the conclave is holding 100% USDC which provides us a stable treasury value but 0 growth or yield.
I believe we should consider converting a portion of the current treasury to ETH for a few reasons:
Some proposals like representative WAGDIE purchases will need to be purchased with ETH.
There is the possibly of significant upside to the value of ETH in the coming months which would strengthen our treasury reserves.
Some creators would be willing to take ETH for payments within reasonable price windows: e.g. A 5E request at $1500 is still acceptable if ETH falls to $1000.
The main potential downside is current market volatility leading to a decrease in the value of any purchased ETH. It is possible that there is a further 25%-50% from here with an unknown recovery time.
It’s important to consider that treasury management is not about executing perfect trades. The goal is to limit risk while also attempting to maximize treasury value. With this in mind, I think a 10%-20% ETH allocation is wise.
Proposal and governance process does not give us quick action & I am one of those in the camp of believing we get at least another leg down or shot at triple digits / closer to bottom of 1k then near the top.
Although I don’t want to open the can of worms too much into TA and trading talk, but I would very much like to see us maybe consider areas/targets for accumulation and even have in place ideas for if it goes lower than where we buy in so we can average down and take Advantage of future dips without having to make proposals each time.
So targets for accumulation, and considerations of how much (maybe best to work with % percentages) are some of my recommendations and things I’d like to see in the proposal before it’s drafted out.
Longterm I very much believe in Ethereum and am confident it will rise to much higher prices, but I think we can be patient in how we accumulate and setup a DCA strat versus just fully going in.
I recently brought this up within the Darkblades because we swapped our eth to USDC. I think it would be wise to have 15% or so of the conclave in eth.
Yes this aligns with the direction of where and how I’d like us thinking for the proposal. Not just a one time entry but setting targets and multiple areas of accumulation.
I agree and support this. There are bigger Brains out there for this. But even the possibility to just DCA into eth. As I work in traditional finance world DCA would be my biggest recommendation.
Haha idk if this is too big of a plan but depending on where/how the funds are actually held. CD rates are pretty high in the grand scheme of things. 3month CDs are at like 2.5%
Other wise setting targets could be good. 10% now would be nice, and as we get 5-10% legs down putting in buys would be nice.
Would like to see somewhere around 40% if conclave funds in eth over time
If we see sub 1k eth I would support going in a lot. Idk if 100% is the best but if we do I would like to see that converted back into usdc once we have 50%+ gains
I am strongly against this proposal and the route it seems to be heading in the thread below.
I have been in DEFI for almost two years, part of a DEFI project team for most of that time, involved in treasury allocation discussions and DAO management throughout.
And in that time I have seen projects, both NFT and otherwise, get absolutely rekt by thinking they are god level traders and know how to invest treasury funds.
BattleFly is one example. They amassed several $million and had a runway of years. “Invested” it all in $MAGIC towards the top ($3-5) …, now that investment is worth almost 80% less and runway is months, not years. I’ve seen similarly bad investment decisions from major DEFI projects too, SUSHI being one great example (Back when the DAO voted to use Nomi’s $14m ETH to buy SUSHI). DAOs are notoriously risk heavy with their thinking because that’s how they manage their own funds.
I am up for a discussion about yield opportunities - no reason that USDC shouldn’t be earning 10% APY if invested in a safe way (as safe as DEFI allows anyway).
But choosing a volatile asset for anything more than a token allocation of the fund is gambling with the project’s future. I am not sure what benefits there are to balance this risk, besides potentially securing some ETH for project use at a price we all believe is reasonable.
If this does proceed for operational purposes, I would limit the exposure to 7-10% max (so $10~$15k), and monitor usage as we go.
This is exactly how we risk dying for real.
Accumulate for what? A bull run that might not ever happen? We have “accumulated” $150k thanks to the Two which surely secures a solid runway worth protecting. This is not an investment fund.
This is the point, nobody here is a trader with a flawless record.
We should have some exposure to ETH and not be 100% in USDC. That part you seem to partially agree with and it’s a starting point to work with.
I also agree we shouldn’t move to 100% in ETH and that we are not in a rush to do so.
Exactly we aren’t going 100% ETH and also we aren’t converting any % near ATHs in anticipation of a bullrun.
We have opened a forum to discuss potential targets or area we can agree would be good place to convert a %.
How much of that % & where are possible decisions to make and we would certainly be best to hammer that down to a reasonable / agreeable amount so the proposal doesn’t seem so extreme or risky as you pointed out the risks in fully converting over.
Possibly the word accumulation was a trigger word and we can avoid that. As was the idea of converting 100% into ETH. But that doesn’t mean we shouldn’t have some exposure.
I do also like your idea of collecting some yield on some of our USDC so it isn’t just sitting still. There are inherit risks with that as well if it’s through decentralized protocols and of course centralized as well. That may be better as a separate proposal.
Either way, @chimaera this convo was one @hersilence.eth & I dreaded having day 1 in our first term for these reasons. We didn’t want ‘experts’ to come out of the woodwork and start proposing we invest in this, invest in that etc. We knew the can of worms this convo would have and were biding our time before opening it.
That being said let us remember why @Icculus brought this up in the first place. Some of our payments have been in Ethereum. We may have other proposals that operate in/require transacting in ETH and we should have some in reserve instead of converting over.
You feel 10% is the max. Others seem to want to have at least 20% exposure. I think we have a range to consider on how much would be converted & we should focus on coming to agreement around there.
Are there places that offer 10% yield on USDC? If so, are they reputable enough to be considered less risky than converting 10% of the treasury to ETH at its current entry point?
Don’t get me wrong, I agree with the gambling part - I’m just not sure yield opportunities aren’t.
At the end of the day (and despite my personal feelings), I think there’s good enough arguments to allocate some percentage. The obvious suggestion would be to vote on it: None, 5%, 10%, 15%, 20%.
To be honest I don’t think we ‘need exposure’ at all. I’m not Bobo (I have a fair amount of ETH exposure myself), but I don’t think it’s worth the risk for a project’s longevity to be exposed to volatility. But, if we need some for operational purposes then sure it makes sense to buy some at a price we’re comfortable with.
@TheTwins reputation and risk in DEFI are quite subjective … In AAVE you won’t get 10% yield, but you can on Convex - but then you are exposed to semi-algo stables (eg MIM). So there’s always a balance between ‘safe’ and ‘productive’. If we want to go the yield route I can help present some options.
Why would we die by betting on the token that supports the entire project. @chimaera you seem to be missing the point that if ETH goes to 0, wagdie goes to 0. Being in USDC is an insult to the platform the project lives and breathes on. Also your attacks on individuals commenting on ideas based on the proposers suggestion isn’t very constructive.
We aren’t betting on $MAGIC like idiots, we are betting that ETH will long term provide growth to the treasury. Nouns DAO is 100% ETH. So if that gives you an example of one of the best managed operations being fully risk on in your eyes.
Lots of spirited discussion around this as I expected.
@brennen_eth I agree with your principals on a personal level but personally I believe any allocation > 20% is too aggressive for a treasury of our size. Nouns is a great example but their treasury size is SO large they can easily tolerate a 50% drop and not notice.
What would be the impact to the conclave if our treasury was worth 60K tomorrow? I think it would have a significant negative impact.
@Dontfeedthewolf For a decision like this I don’t believe price targets are that necessary. I assume if a proposal like this were to pass the treasury would simply execute it.
@chimaera I respect your caution. Treasury mismanagement plagues many protocols. Heavy allocations into tokens like MAGIC or SUSHI is an extreme example though. I would push back as hard as I could against any similar type of purchase. I don’t believe any governance token is wise to hold.
Safe but substantial yield is also difficult right now. I am personally not a fan of MIM at all and yields in Aave, Curve, Compound hover around 1% which to me isn’t worth the protocol risk to earn $1500 a year.
I still personally think a 10-20% allocation (10-20E at current prices) is useful for operational expenses that need to be paid in ETH with the benefit of possibly increasing the overall value of the treasury in the future.
Any discussions about yield and other ideas can be separate proposals. Including my own suggestions of trying to convert more over time.
Instead, it’s looking more and more like this proposal will have best success with a focus on 1 time conversion into ETH upon passing with range from 10-20%.
What if we dropped 50%? Would we still have story, and community development? Did we not lift off the ground without the dao? Obviously we had to purchase the mayc and beeple and cryptoad some how but would it just cause us to be more cautious and selective in how the funds are allocated.
these are more thought provoking than needing responses or answers to all the questions. But a very hard conversation I agree. With the fed still being hawkish and some more down turn expected in the market till the end of this year beginning of next I know timing the market isn’t ideal but I think we can find some good buys here in the next two weeks. With the whole merge coming up it could be possible to play into the merge a little.
But based on @chimaeras thoughts and others I think capping at 20% seems right
