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I made the comparison to Sifuvision to point out how, at the time of the $SIFU token vote the information we had about Sifuvision suggested that a 25m investment should be made with concern. I think you’re ultimately right though because I would be comparing the risk of a human (Sifu) vs smart contract risk (GMX) and they are incommensurable types of risk. So you’re also correct that…
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The ultimate discussion here is one of position sizing and in this case if that lies with @yieldchad making proposals as treasury advisor, I am content with that. I would generally be supportive of buying insurance on GLP on riskharbor or other measures to reduce risk. If what is necessary is to keep the position size to 10-13m then that is fine. However, I am not as keen on introducing such limits in this proposal as that is not the goal here. What I will do instead is to add a guideline reflecting the opinion of the community that position sizing, risk-hedging and avoiding overconcentration are crucial and that it has been stated that an additional 10-13m of treasury is a proposed soft upper-limit for exposure to GLP.
Only thing I disagree with on here is that the DAO should not determine the figure in advance and leave the allocation up in the air. I think given the current “political environment” we should just put a figure in this proposal to ensure the DAOs wishes are honored. Yieldchad is recommending 10% and I think this is a good figure. Add the additional 3% exposure we have indirectly through SV and we will be at around 13%.
I have incorporated your view, which is echoed by many others, in the final section of the proposal.
I would personally prefer that the GLP investment come from existing ETH/BTC exposure. Perhaps that can be a voting option in the RFC?
So your suggesting a dollar for dollar swap, altering the directional exposure % essentially. Versus Tika seems to be suggesting we mimic the existing $25mm directional exposure by pulling a few million from the treasury for the stable coin portion of the GLP token to leave us at the same $25mm directional exposure after the investment is made.
Yes, correct. I am bearish on the market and so this is how I would do it if I were trading my personal account.
Ultimately I am happy to do a GLP investment whether it comes from a % of stables and directionals, or all from existing directionals.
this is slightly difficult because, one of the rules about effective proposals is to avoid splitting the vote between two affirmative options and risking the “No” winning out.
And here, if one of the options is to realise a loss on our crypto holdings by reducing overall directional holdings, I would rather that decision not be made through my proposal but instead through a proposal by yourself in the capacity of TA.
For now, this whole proposal can just be seen as introducing zero changes to crypto-exposure, but with the added benefit of some yield on our holdings.
In that sense I hope its still something you’d vote yes on but do let me know otherwise.
@yieldchad → a hedged version of GLP farming would be deposit ETH and BTC into AAVE → borrow 40% ETH against it → use borrowed ETH to deposit into GLP.
@xdcc Not sure if we should be taking any positions with liquidation risk given the current dilemmas with the multisig process in terms of speed and availability.
To add on to @Deal 's reply, I am leaving the hedge-strategies to Yieldchad as for now this proposal simply transmutes the treasury’s existing crypto portfolio into a yield generating one (albeit with the risks and nuances outlined above).
there is no liquidation risk if you supply btc & eth and borrow eth against it. They always move in the same direction. no risk of liquidation. Both sides will go up and down in value always keeping the health factor at the same level
The proposal underline interesting points. What retained my attention is the second risk “GLP holders win when traders lose, and vice versa.”.
- As mentioned in a bull market the risk is slightly mitigated.
- In the current market situation it would not be smart to entered such a huge position. Macro isn’t on our side, charts let the impression that scam pump is incoming just to follow the bearish trend.
When would this proposal be executed if it pass and do we have insights of experienced trader/economist regarding the timing of the proposition?
Typical concentration limits are 7% - 8% max in most asset classes except crypto. For crypto, the limits are reduced to account for the excess vola as well as their tight correlations with US Stocks, making them extremely high beta positions. You would never push high beta out to 15% concentrations. You would be risking close to 1/2 of your treasury in the event of a massive liquidation into an illiquid market.
if there is no liquidation risk then there is no hedging 
I think I would just put the vote as this:
YES - invest from stables + directionals to keep WL treasury directional exposure unchanged
YES - invest from existing directionals, reduce WL treasury directional exposure
NO - do not invest
Then for the WIP you go with the Yes option that got the most votes.
I don’t see NO winning a meaningful vote share, but even if it does, as long as the sum of the two YES options is greater, it should proceed to WIP.
Thanks, that is helpful.
I think the key way to mitigate this risk would be to both, hedge GLP per Yieldchad’s strategy, and to also withdraw from GLP when open interest shifts sharply to short-biased.
There is little need to make speculative bets about the direction of BTC or ETH but in any case since our treasury is already in BTC and ETH it makes sense to divert a portion of that exposure to GLP to earn a yield on it.
Got it. I’ll also make it clear that the sum of the YES options ought to be weighed against the NO when considering which decision to make, and then from there the more popular of the two YES options ought to be taken as the final choice.
FYI you should be able to modify the poll now. Although it might be too late 🥲
yeah I’ll just post the WIP soon it looks like this got plenty of engagement thanks to Alice’s twitter post!