Since the first inverse bond Olympus DAO has iterated on the framework by which new bond markets are created. This proposal seeks community approval of that framework. This framework will continue to be used to create new bond markets for the remaining duration of OIP-94A.
This proposal seeks approval to repurpose the purchased OHM through Inverse Bonds to be used for lending, credit, DAO swaps with partners and automatic market operations (AMO) in general. While the first approach was to burn, and when needed re-mint, after speaking with counsel and iterating further we adapted the model and will be keeping the tokens in the DAOs balance sheet.
Net Market Activity: Net of the dollar value of all buys and sells within protocol owned liquidity
Organic Flows: Difference between net market activity and bonds sold during the same period. This should allude to market activity beyond what may have been influenced by bond markets. Ex: -$100k Net market activity (more sold than purchased in LP) - $150k inverse bonds sold = -$250k organic flow
Organic Flows 7 day EMA: A 7 day exponential moving average of organic flows.
Liquid Backing: Value of those assets in the treasury that can be immediately liquidated, if required.
Floating Supply: Quantity of outstanding OHM not owned by the protocol.
Liquid Backing per Floating Supply: Liquid Backing / Floating Supply
Discount to Liquid Backing: The % difference between Ohm’s market price and the Liquid Backing per Floating Supply.
Calculations for new bond markets will be prepared on Wednesdays and markets closed and created on Thursdays. Markets will be created with the following parameters.
How capacity is determined
The Inverse Bond framework utilizes the current market discount to liquid backing when sizing capacity for new bond markets. There are three scenarios which determine how new bond market capacities should be calculated.
Discount to liquid backing ≤ 10% or above backing and at or below 120-moving average
- Bond capacity is equal to the amount of spending required per day to reach the current 120-day moving average over 30 days or the number of days until the official Ranged Bound Stability (RBS) launch.
Discount to liquid backing >10% and ≤25% and at or below 120-moving average
Bond capacity is equal to the amount of $DAI required per day to reach the current 120-day moving average over 30 days or the number of days until official RBS launch - Organic Flows 7 day EMA.
TLDR: $DAI required - Organic Flows 7 day EMA
Capacity should be limited to a maximum of 2x the amount of spending required per day to reach the current 120-day moving average.
On June 1, the 120-day moving average was $34.3 requiring an expenditure of $8.25m over 54 days left to reach it, $152.5k per day.
On June 1, Organic Flows 7 day EMA was -$190k per day.
To reach target net market activity, the organic outflow would need to be counteracted along with an additional $152.5k
Total capacity calculated $152.5k - -$190k = $342.5k, however this is greater than the 2x maximum of $305k. New total market capacity will be $305k per day.
Discount to liquid backing >25% and at or below 120-moving average
A one day bond market should be added, increasing capacity by the $DAI amount required to get back to a liquid backing discount of ≤25% - Organic Flows 7 day EMA.
TLDR: $DAI required to reach discount - Organic Flows 7 day EMA
Liquid backing per floating Ohm is $14.35. A discount of 25% is $10.76. Current Ohm market price is $10, a 30% discount.
Realizing a discount ≤25% would require at least $1.1m DAI added to XYK pools, given current liquidity of $63m
Organic Flows 7 day EMA is currently -$567k
New 1 day market capacity: $1.1m - -$567k = $1.67m
Calculated bond market capacity changes must be greater than a $30k difference to warrant re-issuing markets.
When are intra-week Capacity Changes Considered?
Bond market capacities are calculated weekly. However, there are instances where a change in capacity intra-week may be required.
The discount to liquid backing exceeds 25%: in this case a 1 day bond market that increases capacity is required
Existing bond markets run out of capacity early
Organic Flows 7 day EMA at time of launch vs now have diverged by more than +/- $300k. At this time new bond market(s) with updated capacity will be launched
The polling period begins now and will end on Friday, September 16th. Afterwards, this OIP will be added to Snapshot for a final vote.