Summary: Increase protocol-owned liquidity to assist in market function with reserve bonds active via the emissions manager.
Proposal: Add 330,000 OHM to the OHM-USDC Uniswap V3 Pool between 23 and 57.5 USDC per OHM (2-5x premium on current backing).
Background: There is currently very little OHM available in liquidity pools, with ~ 160,000 OHM in full range POL across chains (mostly on Ethereum) and ~ 65,000 in third party liquidity across chains, again mostly full range. This means a trade of only 1,125 OHM (~ $18,500 @ $16.5) moves price by 1% (though there is a significant amount more pair assets providing liquidity at lower prices, especially USDC. Protocol-Owned Liquidity (POL) has been thin for the past 2 years due to the discount/low premium state of OHM, where the OHM side of a pair would represent dilution at prices that either reduce backing or increase it minimally relative to the increase in supply. Third parties have filled the gap, but with concentrated positions that have mostly been exhausted at the time of writing.
If higher premiums are experienced, the protocol should provide additional liquidity to assist in absorbing flows from reserve bonds and volume from market participants. This will ensure proper market functionality and avoid excess volatility.
The proposed amount of 330k OHM (~ 2.1%) in this concentrated range is roughly half the effective depth of POL of 2021's full range LP (which was ~ 10% circ offered from 0 to infinity). It is likely that additional liquidity should be provided, especially should market price exceed the 57.5 upper bound of the position. However, I think this provides a good baseline. Alternate suggestions on size and range are encouraged, but the beauty of OHM is being able to adjust these policy parameters on-chain as needs and realities reveal themselves.
Timeline & Implementation: This should be implemented along with the emissions manager if it passes, and use the non-circulating OHM from inverse bonds as the source of funds.
