I think the objective to enhance diversification with a less correlated asset is good idea.
However, there are many ways this can be achieved.
We can also work with partners such as @Avantgarde to deploy part of the Treasury for them to manage. We can create smaller pilots to test how this works. However, substantial enough so it has some impact.
We can also convert to ETH and USDC for investments into web3 funds. This will partly diversify from APE, but remain within the overall sector. It can also create an avenue for builders in the APE ecosystem looking for VC funding which we can look to match with grants.
The point of this proposal is to freeze funds, not diversify their distribution/usage. Everything you said is entirely contrary to this idea, as it involves using more treasury, not less.
The remaining 80% would be for ideas like the ones you wrote.
Sustainability study should be dropped here tbh which strengthens your argument & concerns imo. The study has many projections of an $ape only treasury and the consequences.
Let us add some more color to the conversation. One of the main pillars of finance is diversification, as it enables the reduction of risk. Having the majority of the treasury in a single asset leaves the overall risk profile unnecessarily high. And whilst BTC has been less volatile than APE historically, it does not generate revenue for the DAO.
This discussion is evolving around notion of making DAO more sustainable. Part of our report covers sensitivity analysis, in other words how sustainability of DAO would react to implementation of certain financial instruments. Stablecoins have a rather dramatic effect in reducing volatility compared to BTC and can also serve as an additional revenue stream for the DAO through blue chip DeFi protocols.
For example the table bellow illustrates Required Returns vs Stablecoin Yield Index. Numbers in purple, orange, and green correspond to required returns that are in line with current, 2023 average, and long term average levels of yields on stablecoins respectively. Numbers in red represent required returns that are in excess of current yields. In other words, anything in red could be challenging to achieve based on historical data without moving further out on the risk curve.
In this table, with an allocation of $300m, the DAO would require a yield of 3.65% in order to cover all operating expenses, which is an achievable number compared to conservative estimates of yields currently available in the market.
Yeah… we should definitely copy these geniuses. I guess fiat does bleed slower than their token, so in a way that was a “good” move. Even if in the same period BTC doubled in value. But hey, who could have possibly predicted that the token designed to be the best store of value would be a good place to store value?
So yes, let’s indeed look at Arbitrum… for what not to do
Can we pivot the conversation a bit to broader treasury management?
I think we can all agree that having a treasury almost entirely in one asset (as much as we all believe in ApeCoin) is likely not the smartest financial move for the DAO.
I would like to see a proposal from someone with experience in this space on how to better manage the treasury. As we are starting to see larger grants funded via AIPs (as they should), I don’t see simply riding the wave of $APE price up and down as a sustainable strategy to ensure funding remains available for builders in the future.
Be brave, VonFrontin, you’re just as smart as anyone else out there. “Look around, son,” my dad once told me, “The world is built by people no smarter than you. Including that skyscraper over there, and that car over there.” It was perhaps the best advice he gave me. The more you look up to “experts,” the more money leaves your pockets.
Oh I’m plenty brave. I’m also self-aware enough to know that I am in no position to give anyone (let alone a 9-figure DAO) advice on exactly how to manage their money.
I will add to the DAO where my expertise allows, and where I believe I am adding value and not extracting. In the same way I don’t raise my hand when someone asks “Is there a doctor in the house”, I won’t offer advice in other areas where I am not qualified.
Financial management and/or DeFi strategies are not one of those areas, so I yield to those who have spent more time learning those areas and seek to learn from them, in hopes that one day I may be able to add value in that area as well.
That said: I would like to see a better financial management of the treasury outside of “Put it on all $APE”. That means diversification in terms of tokens held as well as deploying other defi strategies such as staking, swaps, etc.
I’ve never gone deep into those strategies in my personal finances, so I’m not in a position to tell people what has worked vs not based on my own experience. I’d love for someone who has had success with that educate us all, for our own benefit and for the benefit of the DAO.
And yes, we are the DAO, and all of us have the ability to add value to it (and we should).
Diversification is perhaps one of the most well know and solid ways to be successful when managing investments. VF is correct in saying that placing all of the treasury in a single asset is a poor move. $APE is extremely volatile and has been an abject failure thus far. One could easily make the argument that if $APE fails, the DAO deserves to fail. I’d agree. But I don’t understand the objections to a diversification strategy.
I agree with the core of this proposal very much. We need to diversify the treasury. It’s true that if BTC fails, chances are everything fails but the same could be said for ETH, which is a productive asset, actually correlated with BTC, that would generate real yield for the treasury.
Its worth pointing out that there will always be a market impact, OTC sale or otherwise. The buyer on the other side of any OTC deal would likely be a market maker looking to TWAP away their inventory risk anyway. This proposal simply passing allows speculators to front run the future sale by the DAO, however a covered call strategy would create the best of both worlds allowing us to earn revenue up until the final point of an OTC sale at a price we all agree is “better than today’s price” if we just OTC’d the lot.
If we approved these 2 proposals we would have:
APE Revenue from sequencer fees on ApeChain (because gas is APE)
ETH revenue from staking ETH
USDC revenue from selling covered calls / APE
I think this would be a reasonable start towards productive treasury management in a risk adjusted way, now if only we could manage those pesky Coinbase fees!
tldr; I agree, but please buy ETH and stake it instead of holding BTC on Coinbase and having to pay even more custody fees. (we currently pay $388,000 per month for Coinbase custody, but I hear we’re going to transition to onchain governance so hopefully these are temporary costs as we would have a smart contract house the treasury onchain)
Thx, Amplify. ETH is good, too. I picked BTC b/c there are quite literally upwards of 100 chains coming online in the next 2-3 years and it’s hard to predict what it will do to ETH. The Superchain (OP, Base, etc for others reading) was just the first of many. And having spent time in Asia, I see that no one uses Twitter, Telegram is king, and TON is on the rise. Just one example. The problem of being an application layer is that many others can build those. Nobody can replicate BTC anymore.
So just a lot of variables whereas BTC is just a rock, a known entity. In the end, nobody has a crystal ball, just going with least risk (imho).
Another AIP can be created if people want further diversity, with ETH in mind, for sure.
After review, this Topic submitted by @Sasha has been “Returned for Clarification”. The ApeCoin Special Council waits for answers, and the community will be notified whenever the author responds.
(we currently pay $388,000 per month for Coinbase custody, but I hear we’re going to transition to onchain governance so hopefully these are temporary costs as we would have a smart contract house the treasury onchain)