Diversify Truefi Treasury For Expenses and for holding some ETH

Hi All!!!

I would like to open the topic to take the opportunity to diversify the treasury, mostly to meet future expected expenses including:

  1. Director Fees to be settled for the entirety of 2024
  2. Legal and other fees that may come up over the rest of 2024 and beyond

And also to diversify some treasury assets across major coins such as WETH (or staked ETH onwards).

As a proposal, my request is the following to approve on Tally on-chain:

  1. Convert Tru tokens (as needed) to 100,000 DAI Stablecoin
  2. Convert Tru tokens (as needed) to 100,000 USDC Stablecoin
  3. Convert Tru Tokens (as needed) to 50 WETH.

Feedback from the community is most appreciated!

6 Likes

I support this notion to diversify the treasury into stablecoins and WETH - ensuring we have liquidity for future expenses and reducing market risks. The amounts seem reasonable.

2 Likes

Personally, I would size up the stablecoins amount if liquidity is there. Build up a robust treasury so we aren’t coming back with new proposals often. One option would be to authorize a higher amount, that only gets converted based on certain metrics(like price or price impact).

I am also not sure about converting to ETH, as it correlates decently well with TRU and would likely need to be sold again whenever the money would be used.

Thanks for your input @Codeknight, my 2 gwei

  • I agree we need more stables in the treasury, this is partially what other proposal was meant to achieve [TFIP-14] Providing Onchain Liquidity - via exiting lower positions when the price of TRU goes up. Both could be executed.
  • TRU’s correlation with ETH is not guaranteed to persist, so diversifying into less volatile crypto assets can reduce risk while maintaining bull market upside.
4 Likes

I like this Proposal, it ensures that contractors to the DAO can get paid without worrying about TRU’s price volatility.

cc: @Codeknight I agree to an extent. But if we were to raise more funds, I would recommend doing a liquidity score on TRU to assess our liquidity depth and how much sell pressure we can deal with to scale our stables for operations. As that’s a longer project we can it later initiate this year.

For now, this proposal makes sense to me.

4 Likes

Instead of an outright sale of TRU -which could cause selling pressure- one could also do a covered call. This way one could get the same target stablecoin amount by lending TRU tokens rather than selling, helping minimize selling pressure. Moreover, it would also allow to keep TRU token upside.

To be more specific, one could do a covered call with $500k of TRU and with a 120% strike and 180d tenor. This means TrueFi could lend $500k of TRU for 180 days and cap their upside at 120% of the current spot. And in return TrueFi would earn ~$95,000 USDC in upfront premium. Then after 180 days there are two possible outcomes: a) if TRU didn’t increase by more than 20% then TrueFi gets all TRU tokens back. b) if TRU increased by more than 20% then TrueFi receives $600,000 USDC, ie the conversion amount using the 120% strike. The upfront premium of $95,000 USDC is paid either way no matter what. Institutional trading firms are willing to take the other side and pay the premium as they can make money from the volatility of TRU, ie “gamma scalp”, meaning the more volatile TRU is the more often they can sell high and buy low allowing them to capitalize on volatility.

The above is an example for 180 days and 120% strike, though other combinations are possible too; generally the longer the the tenor the higher the premium and similarly, the lower the strike the higher the premium. Attached is also an example matrix showing indicative premiums across different tenor and strike combinations (these calculations tend to be close to firm tradeable quotes, which we can help receive).

All of this can be done through MYSO Finance (myso.finance), who work together with instituional trading firms to help get matched in size and provide white glove service to orchestrate the process. What’s unique about MYSO here is that the execution can be done fully onchain, and WITHOUT counterparty risk, and covered call terms are fully customizable and bespoke, there’s no other place one can do this at the moment. MYSO has already been used by several whales and treasuries to get access to fully on-chain settled bespoke covered calls, for example we worked together with Telos, Evmos, DIA, UMA, Enzyme and other. The protocol has also undergone three independent security audits by Statemind, Omniscia and Trail of Bits.

The process to get started would be super simple:

  1. TrueFi creates a non-custodia vault on MYSO app and funds it with TRU
  2. MYSO gets firm quotes from trading firm for given covered call parameterization
  3. TrueFi picks best quote and then creates a matching on-chain quote
  4. Trading firm takes on-chain quote and covered call is done, with TrueFi receiving given upfront premium (in this example $95,000 USDC)

We made a proposal outlining how this can be done a while ago here: Covered Calls for TrueFi Treasury & Whales - #10 by aetienne

We’d love to work on this together with TrueFi and be of value to the team and community.

I’m broadly in favor of something like this, but probably the most important term would be determining the strike. For example (not an options expert here), I think Bastion’s previous proposal was on better pricing terms for the DAO

1 Like

Thank you for your fast reply Ryan, much appreciated! And thank you also for pointing to Bastion Trading’s proposal, absolutely, we could also do similar strikes as the ones proposed in there, which were 125-135%. So if we take the average strike of 130% then the expected quote premium for 180d tenor would be ~16.14%. So with a notional of ~$619,578 TRU the expected premium one could generate would yield ~$100,000 USDC.