Currently Olympus Bleeds liquidity.
How does Olympus bleed?
1)gOHM liquidity pools / proteus emissions
2) Conducting treasury buybacks while having non-stable LPs up.
What steps can policy take to stop the bleeding?
1) Stop incentivizing gOHM-xyz pools crosschain and scrap the idea of gOHM/xyz LPs in general.
If we have two LPs, gOHM/ETH and OHM/ETH and the interest rate for a 5 day period is 3%. Assuming price is stable at the end of the 5 day period. You have two LPs down 1.5% in value (assuming they have the same liquidity if not it's just a smaller sell from gOHM/ETH into OHM/ETH). This is just a slow bleed of liquidity from arbitrage cross-chain. It doesn't matter if the asset it's tethered to is volatile or not. if its stable-coin LPs we bleed against stables, if its ETH LPs we bleed against ETH. We need to be taking every step to stop the bleeding if we are going to exist here for 2 years with an interest rate. This is not marginal.
Solution: Disincentivize and disband any gOHM liquidity pools and make the OHM token crosschain so people can wrap in and out of gOHM like they do on mainnet while having OHM-xyz LPs crosschain. Stop minting protocol emissions into LPs, it's just a liquidity drain. "The protocol doesn't own its crosschain liquidity" Why would the protocol not move 5-10mill worth of liquidity cross chain for itself? We risk more than this in yield farming protocols.
2). While conducting buybacks remove ETH LPs, kill incentivizes for non-stable LP pairings.
By not removing OHM/ETH LPs the treasury is essentially agreeing to buy ETH at current market prices.
"But trading fees" Who cares about trading fees when the treasury is actively trying to manipulate its market to a certain price. The goal of the buybacks should be to move price with the least amount of resistance. What we saw with ohm and the dump from the day of inverse bonds was that policy pretty much actively told people to buy ohm because "muh inverse bonds" People leveraged up. They then removed liquidity and eth started to roll over and had a drop which led to people selling because OHM/ETH drags OHM down. Since there is less liquidity it's more drastic of a dump. "How do you know this is what happened" I literally sold some ohm for this exact reason at $26. The treasury is taking a directional trade by doing buybacks with volatile LPs.
NOTE: It's important to understand by doing this we are not "Timing eth" We are simply removing extra volatility while the treasury makes an attempt to move the price of OHM. If the price of ETH goes up the treasury has more ETH backing than if we had all that ETH in LPs. If the price of ETH goes down, we don't get dragged down while trying to conduct market operations. Once at desired target simply re-add eth LP to re-capitalize on the trading fees.
If any response to this is "it's marginal" You haven't done everything possible to stop the bleeding. We have been minting free arbitrage into liquidity pools for months, I've brought it up multiple times in the discord and the only response I've ever gotten is "it's marginal" Literally nothing policy has done has worked and it's time to stop the bleeding by putting a tourniquet on residual emissions that relate to free arbitrage for MEV bots.
Olympus emissions should be an OPT in system. I.E. No emissions should go directly into LPs. Only to stakers.
gOHM LPs mint free arbitrage crosschain that take liquidity out of olympus
Buybacks in their current form are just the protocol buying current emissions (gohm LP) and ETH.
The Treasury is taking a directional trade by conducting buybacks with an eth LP. (Don't care how small current LP is if policy cared they'd take every action necessary.)
Re-add eth LPs once the proper target for ohm has been achieved.
Actions to take:
Remove Ohm/eth LP during buybacks/ market operations, Disable proteus all together(It's in motion but optimism, polygon, arbitrum still paying out? Talk to trader joe to disincentivize avax/gohm pool), Make the OHM token crosschain and disincentivize the use of gOHM/xyz liqudity pools / allow people to wrap in and out of gOHM natively on each chain