April has come and gone in a flash.
In the last month, Umami has made major progress on its highest priority goals, including:
- Shortlisting several code auditors that can provide a thorough security audit for Umami in May or June.
- Completing the logic for Umami’s USDC Vault smart contracts & progressing to testing.
- Completing a new Autocompounder for a major Balancer LP to be launched soon.
- Shipping revised & up-to-date Docs.
- Revamping the Arbi’s FE & providing dynamic updates for key metrics on arbis.finance & umami.finance.
- Completing Umami’s first formal DAO Snapshot & building a Dutch Auction smart contract for its upcoming OTC fundraise.
- Significantly improving UMAMI-ETH liquidity on Umami’s primary Uni v3 LPs.
This coming month may be Umami’s biggest yet. Many exciting things are in store for us.
Treasury value, excluding UMAMI and ARBIS tokens holdings:
- End of February, $5.61M
- End of March, $5.90M
- End of April, $5.55M
- In April, there is a Net Treasury Loss of $350K (or 6.3%)
For comparison, the total crypto market cap on March 31st was $2.053B and $1.701B on April 30th, which is a net decrease of 17.19%. Relative to the market, the treasury is doing quite well!
Gross Yield ($201.74K at time of writing):
- 31.13 ETH ($86.1K)
- 26.2 ETH distributed as Dividends to marinators ($72.46K)
- 4.93 ETH available for reinvestment ($13.64K)
- 3516 esGMX ($90.5K)
- 61394 TCR ($8.64K)
- Uniswap V3 fees ($16.5K)
- 2.43 ETH
- 518.7 UMAMI
- 54.69 million Arbis
- Smaller amounts of USDC, L2DAO, IMX, xIMX
Net Yield is $129.28K, using Gross Yield — Dividends
Expenses: Umami’s OpEx was ~$175k in April. This includes compensation for full-time team members & contractors, as well as business expenses like email and communication platforms. OpEx in April was elevated in part by one-time costs of ~$20k associated with creating a legal DAO entity in the Cayman Islands.
The team recognizes that the April OpEx costs are not sustainable for the long term and has already cut OpEx significantly for May. Umami has reduced its total staff to 10 individuals spanning FT, PT & advisory roles. Voluntary exits of senior-level FT team members & junior level FT developers has greatly reduced fixed-OpEx.
Overall May USDC fixed OpEx is now below $100k. That said, Umami will need to cover significant one-off costs in May to secure a code audit & pay contractors to build a suite of new Arbi’s Autocompounders.
Asset Appreciation for Umami’s treasury is a net depreciation of $305K, using this formula:
Asset Appreciation = Net Treasury Gain — (Net Yield — Expenses)
Treasury positions and changes:
Currently the breakdown of our treasury is:
- 77% GLP, GMX, esGMX
- 9% CVX
- 5–10% Liquid funds for Uni V3 LPs
- 5% Hedged short positions
- < 3% MAGIC/ETH LP, DOPEX, gOHM
Major Treasury Allocation Adjustments in April
We did not perform any major allocation adjustments in April, but we did have a few observations.
The APR for GLP in the first two weeks of April was ~40%, but dropped to ~25% in the second two weeks of April. We examined the stats from the GMX platform and noticed that trading volume on GMX has been lower in the second half of April, which explains the APR drop. Historically, trading volume on GMX has increased over longer time periods, so we don’t think this decrease is permanent.
The value of GLP tokens also dropped by close to 10% in April, which is responsible for the vast majority of the value shown in Net Treasury Loss. With our hedging strategy, we were able to limit the drop to under 8%. In fact, we now have empirical evidence that the hedging strategy is achieving the volatility dampening effect that we want (see chart below). We are still under-hedged given how much GLP we have, so going forward we need to adjust the amount of hedging upwards to get even closer to being delta neutral.
Tracer Perpetual Pools
The APR for staking the 3sETH and 3sBTC tokens have also declined from ~100% to ~40%, which is likely due to the combination of price decline of TCR tokens (from $0.20 at the beginning of April to $0.14 at the end) and other traders also taking on hedged positions.
This means that while we can use Tracer’s perpetual tokens to hedge against price volatility in both bull and bear markets, the yield is still going to be higher in a bull market and lower in a bear market. Ideally, we would not want our yield to get crushed in bear markets, so we will be looking into other protocols and strategies that could help us hedge against yield volatility.
Uniswap v3 LPs
Currently we have ~$750K in treasury assets into Uni v3 deployments, and this generated roughly $16.5K in revenue, which is up significantly from $13K in March (a 27% increase)! StevenT’s got a few more improvements to our Uni V3 strategies cooking up in the background.
We don’t have too many small altcoin positions left, the biggest of which is MAGIC/ETH LP at 1.5% of total treasury. Since the position is still generating decent yield, we will not adjust it for now. We might revisit the decision if the yield starts deteriorating.
Overall, Umami is holding up quite well in current conditions. Even though the Treasury had an overall loss in value, we had enough liquid assets set aside as well as yield revenue to cover expenses. We were not forced to sell any of our core holdings during this market drawdown, which is one of the core goals of a sustainable treasury strategy. For an interesting read on Treasury Management, check out https://www.egirlcapital.com/writings/121357906, the tldr is that “boring is good” when it comes to making things predictable and sustainable.
Currently, Umami is generating ~$200K, pushing ~$70,000 monthly to Marinators & mUMAMI Autocompounders & hedging out the majority of market risk with Tracer’s derivatives. We also are boosting our treasury income (and monthly ETH payouts) with revenues from Arbi’s Autocompounders & our Uni v3 platform. We hope that a few more yield products will be rolled out in May, please stay tuned to our announcement channels.
For areas to improve on, we are almost ready with some backend upgrades that will allow us to do live dashboard updates of treasury holdings. With better tracking processes, we can also quickly detect when our hedges are out of balance. We are investigating new methods for providing yield even in harsh market conditions.
Our devs are also building automated smart contracts that will harvest & deploy rewards to mUMAMI, cmUMAMI & stARBIS daily. This will significantly smooth-out returns for depositors & improve APY on the mUMAMI Autocompounder.
If there’s anything you’d like me to add to the next update (early June), let me know! Our team is always happy to answer any questions you have, and will be providing you with more detailed updates like this one in the future.
Thanks a bunch & lesssgooo Umamies!