• Proposal
  • OIP-94: Interim Ranged Stability Policy Levers

Summary: 

Grant Policy Authority to:

  1. Use inverse bonds above backing 

  2. Remove liquidity to facilitate efficient market operations

  3. Add liquidity to reduce volatility as market cap grows

  4. Burn OHM removed from liquidity 

Background

A few months ago, Policy released OIP-76 : Create Inverse Bond Policy Lever as a tool to be used in situations where OHM would be trading below liquid backing price on a per circulating supply basis. Recently, Zeus shared a new paper detailing how Olympus Treasury would be used to facilitate ranged-bound stability.

Range-based stability is based on a historical moving average where the 120-day MA is around $102 as of 20 April 2022. Range-based guidance intends to use inverse bonds in the lower cushion, which we are certainly at right now.

Motivation

It is in the interest of the Olympus ecosystem to start using its Treasury to conduct market operations, such as inverse bonds and adjusting liquidity, to encourage healthy market behavior.

The current situation presents a good opportunity to introduce one of the key components in the ranged-bound stability paper, inverse bonds, with the hope of having a full roll out of this new system in the medium term. That system is planned to operate around a long term moving average of price. In preparation for that system, the Treasury should act to meet a long term moving average now. We propose to use a 120 day moving average to start, which aligns with the proposed stability system.

Rather than simply using inverse bonds to support liquid backing, inverse bonds could be deployed to encourage the market price to meet the 120-day moving average. This would make the target price somewhere between the 120-day moving average and the current market price.

With a liquidity to market cap ratio currently above our target of 20%, there is room to pull this liquidity in order to reduce the capacity of inverse bonds needed.

Implementation Details  

  • A target to meet the 120-day moving average

  • A limit of 90 days for running inverse bonds pending the implementation of range-based guidance 

  • A capacity for inverse bonds with the goal of reaching the target price within 90 days

  • Target a liquidity to market cap ratio of 0.2  

  • Burning OHM that has been permanently removed from liquidity

  • Turn off inverse bonds once 120 day MA has been reached

Note that these parameters will be monitored regularly by Policy and could change upon discovery of new data points.  

Proposal

Authorize the Policy team to : 

  • Run inverse bonds above liquid backing price 

  • Remove and add liquidity to meet targeted ratios 

  • Burn remaining OHM after removing liquidity

The poll will be open through Friday, 22 April. After this discussion period, voting will go live on Snapshot on Saturday, 23 April 00:00 UTC. The proposal will be implemented if passed after the voting period concludes.

Should the Policy team use inverse bonds and adjust liquidity?

This poll has ended.

    I love this and agree, but with one question - Instead of burning the OHM, could it possibly be better used to either:

    1. convert to gohm and deposit in tokemak
    2. create some kind of incentive program for olympus pro partners to pair to ohm or gohm for their POL

    One of the most important things to acheiving ohm's goal of reserve currency is to get more assets trading against it. Both of the above would help olympus to acheive that goal.

      rhett Hey fren, to answer your second question Zeus put a forum proposal yesterday that will work to make ohm A very attractive asset to pair against. Have you gotten a chance to read through that?

        I am super bullish on this initiative.

        Even if it does not have the exact outcome we hope it will, it's a great exercise in learning and will likely teach us many insights that will help us craft future policy decisions. I also imagine it will help us see how the market may react to such forward guidance in a more limited capacity.

        It's gonna be a YES from me dawg.

        This feels like an important next step in the journey. Appreciate all of the hard work that went into this and have enjoyed the discourse

        76 was good proposal but this 94 is pretty epic tbh. fascinating shit as always. didn't expect anything less

        Come on, let no one doubt that the future of Olympus is bright!

        rhett I agree that it may be better to utilize the reclaimed OHM. Perhaps, JonesDAO farming as well or even reselling this with bonds as  opposed to minting new unless that is too circular. However, I’m not opposed to circular strategies. Just trying to think of ways to salvage the OHMs. Maybe use it as collateral within our internal Treasury leverage mechanisms.

        rhett I agree that burning the ohm isn’t a optimal. Let’s keep it to pay contributors or use it for future bizdev

          what we need is also a secondary market for bonds/inverse bonds. they promised bonds v2 would enable this and did not deliver

            Woah.

            I caught some of this in Policy yesterday but got the wrong end of the stick so need some clarification please sers..

            Firstly, Inverse Bonds…does this now mean whenever OHM price is ABOVE the "Buy" part of (wall, wall) Inverse Bonds turn on - or; only if the moving average bottom price falls WITHIN that bottom range, Inverse Bonds are triggered, or; Inverse Bonds trigger if the "Buy" wall runs out of powder and price falls BELOW that range?

            At the point IB is triggered (is this manually issued still or programatically?) users can start exchanging OHM for assets from the treasury, at a premium to market price - correct?

            If so, this is concerning to me as it starts a precedence of the protocol (dipping into its savings account) in order to scale back previous success in OHM printing. Is this a legitimate concern?

            Sure, we burn the OHM which MAY assist price…but it feels a waste to get rid of that OHM…the whole point is to build thick OHM liquidity. It feels counterproductive to burn it.

            We should also be looking at ways to aid the protocol in protecting its treasury.

            My understanding is we are just looking at ways to direct the OHM liquidity (of which there is a lot) to stabilise price, right? I don't think this should be done at the cost of losing treasury assets.

            The treasury should be "Liquidity Provider of Last Resort" - similar to a central banks role of "Lender of Last Resort."

            OIP-93 allows users to provide AMM liquidity and receive their OHM in LP token form as a rebase and AMM fee's in exchange for some Impermanent Loss, right?

            Can we not use a mechanism, whenever we fall to the bottom price range of the 120 day moving average where the protocol "soft rugs" by uncoupling LP's on AMM's and incentivise's stakers to provide liquidity in its stead to AMM pools in exchange for:

            - AMM fee's
            - Regular rebase rewards at normal rate as per OIP-18
            - The unpaired OHM as an additional reward for taking on the role of primary LP (which hopefully offsets IL)

            Drying up OHM liquidity on exchanges works the same way burning it does, except its not permanent.
            The treasury gets to keep its LP pair-assets and redeploy.

            No OHM is handed in for burning...instead becoming an LP is incentivised for a higher OHM reward rate.

            Then once price rises, protocol becomes the main LP again. (Or maybe we keep stakers as main LP's to soak up the excess OHM from breaking LP's until we hit equilibrium).