Posting a sibling proposal to the April Treasury budget forum discussion. Eastban’s proposal covered allocating ~$1.6M from the treasury to cover run rate, liquidity incentives, DAO accounting as well as treasury diversification efforts. Treasury management has been an ongoing conversation within the community since Q3 discussions how to structure the treasury committee (9 vs 7 etc).
TLDR. The recent April proposal emphasized the important of creating a longer term diversification strategy while achieving the shorter term goal of diversifying 10% to hedge and build resilience. The community was largely in support, there were a number of community questions around how best to approach treasury diversification.
With snapshot passing the budget proposal yesterday (100% in favor), we wanted to dive deeper into the treasury diversification portion of the conversation.
Current State: The majority (>98%) of Threshold’s treasury is in its native asset which makes the treasury balance sheet risky. Over the last year, T has dropped 60+% which in turn naturally impacted the treasury heavily. Diversifying into blue chips such as ETH, or more stables, would hedge the treasury against further market volatility or an extended bear market.
Initial Proposal: The initial proposal was to sell 6.9M T per month and in turn acquire 100 ETH per month until the treasury hits 10% allocation. Currently, less than 1% of the treasury is in ETH. To hit 10% at this rate, looking at ~15 months of acquiring ETH which makes sense as a DCA strategy. Particularly given the market volatility.
Revised Proposal: Would like to suggest amending proposal to include adding diversifying into stablecoins as well in the short term. A lot of treasuries and communities fall into the holding pattern of “the price is too low or price is going higher.” To solve for this, we’d recommend DCAing into stables by selling a monthly or quarterly block. Exploring locked options to prevent market dumping also makes a lot of sense re: getting liquidity without dumping on the community.
Looking at overall treasury approaches, DAOs are moving towards 25% diversification. With 10% in bluechips, 15% in stables pads runway while also hedging against any bluechip downside risk.
Going Forward: As the bear market and market volatility continues, it’s important that Threshold iron out the best way to approach and test out those approaches. In an ideal world, Threshold should have an array of strategies + tools to a) sell tokens responsibly b) diversify treasury. This holds true across treasury tokens, team tokens etc.
SIZE x Threshold: SIZE is an on-chain OTC protocol — treasuries can diversify & sell tokens with custom vesting options. The latest blog on treasury management nests well with the above.
Would love to see if there’s a way for Threshold to benefit from SIZE. Also love any thoughts or feedback.