Umami Finance Community Treasury Update — May 2022

Your monthly Umami treasury update from Carnation & Steven-T

By Carnation & Steven-T

Henlo Umamies!

Umami hit some critical milestones in May, setting us up to ship some truly transformative products this coming month. Here are some of the major highlights:

  1. Initiated full code audit with Zokyo (including for Delta Neutral USDC Vault)
  2. Completed smart contract code for Delta Neutral USDC Vault and initiated testing
  3. Completed a total of FOUR Superstaker Vaults to be launched in June alongside the Delta Neutral USDC Vault
  4. Shipping revised & up-to-date Docs
  5. Obtained DAO approval to fully integrate Arbis into Umami, which will include an ARBIS -> UMAMI token swap
  6. Shipped a completely revamped umami.finance Front End that includes Umami’s mUMAMI Autocompounder product (previously on arbis.finance) and fiat <> crypto oncramping via Banxa
  7. Adding >$3m in UMAMI liquidity to Umami’s UMAMI-ETH LP to keep pace with surging Whale-demand for the UMAMI token.

Overall performance:

Treasury value, excluding UMAMI and ARBIS tokens holdings:

  • End of April, $5.55M
  • End of May, $5.41M
  • In April, there is a Net Treasury Loss of $140K (or 2.5%)

For comparison, the total crypto market cap on April 30th was $1.696T and $1.313T on May 31st, which is a net decrease of 22.58%. Relative to the market, the treasury is in much better shape.

Gross Yield ($120.2K at time of writing):

  • 31.45 ETH ($55.8K)
  • 23.42 ETH distributed as Dividends to Marinators ($41.6K)
  • 8.03 ETH available for reinvestment ($14.2K)
  • 2398 esGMX ($43.5K)
  • 69952 TCR ($3.9K)
  • Uniswap V3 fees ($17K)
  • 4.76 ETH
  • 257 UMAMI
  • 18470 TCR
  • Smaller amounts of USDC, ARBIS, L2DAO, IMX, xIMX

Net Yield is $78.6K, using Gross Yield – Dividends

Expenses: Umami’s OpEx was ~$175k in May. The monthly USDC fixed OpEx was $100k. Umami had several significant one-off costs 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:

The community voted to raise the max supply cap of UMAMI tokens to 1 million. We deployed significantly more liquidity into our Uni V3 LP positions, for a total of $3.5M of liquidity across all our trading pairs.

Currently the breakdown of our treasury is:

  • 70% GLP, GMX, esGMX
  • 4% CVX
  • 20% Liquid funds for Uni V3 LPs
  • 4% Hedged short positions
  • <1% MAGIC/ETH LP, DOPEX, gOHM

GLP and GMX

In May, the APR on GLP and GMX remained in the 25–35% range. Even though the markets were down, there were still significant amounts of trading volume. Volume and Fees are truly two of the few “up only” numbers. A comfy position to be in while the markets do their thing.

Volume and Fees graphs taken from https://stats.gmx.io on Jun 1, 2022

Tracer Perpetual Pools

TracerDAO have released their V2 perpetual pools, and the TCR incentives have migrated to V2. We are currently migrating our V1 tokens to the V2 tokens. We are exploring further integrations with TracerDAO using the V2 pools in the near future.

Uniswap v3 LPs

Currently we have ~$3.5M in treasury assets into Uni v3 deployments, much of which was added in May to meet the community’s request to deploy more UMAMI/ETH liquidity after the mint. The deployments generated roughly $17K in revenue, which is up slightly from $16.5K in April.

StevenT’s got a few more improvements to our Uni V3 strategies cooking up in the background.

Learn more about his unique Uni v3 LP strategy in this YouTube video!

Altcoin positions

The CVX token price has gone down considerably after Terra imploded. However, CVX remains a yield-generating asset that we will continue to harvest from. Our other altcoins allocations are quite small now, and will likely remain small for the near term.

A Farewell to the OHM Fork Era

Since I started with Umami back in February, I have witnessed the complete transformation of Umami from an OHM fork to a builder of unique strategy vaults focused on sustainably scaling protocol revenues.

With the passing of the proposal to cap the UMAMI supply at 1 million tokens, the metrics and benchmarks used to value UMAMI must also change to reflect that.

Net Asset Value (NAV) per token used to be the appropriate metric to evaluate OHM fork tokens, but going forward we will be retiring the use of NAV entirely. But for old time’s sake, let’s examine NAV a final time to see how Umami held up.

In February, UMAMI circulating supply was 290K with a NAV of $18.72. By the end of May, using the pre-minting circulating supply of 350K, the NAV would be $15.46. Using this evaluation, each UMAMI would have lost 18% of its backing value, while the broader market as a whole would be down 30%.

Up until now, the accounting of the treasury assets have been excluding the holdings of the ARBIS and UMAMI tokens. Because ARBIS had very little liquidity relative to its market cap, and UMAMI had an uncapped supply, including their value as part of the treasury would have inflated the treasury figures for no good reason (not to mention how confusing it is to say that an UMAMI token is backed by more UMAMI in the treasury).

Going forward, we will break down the treasury assets into “native” assets (ARBIS and UMAMI) and “non-native” assets (all others), and provide a total treasury value that includes both groups.

For a historical comparison, the non-native treasury assets were worth $5.6 million in February, and worth $5.4 million by the end of May, which is a decrease of 3.6%. Again, the broader market was down ~30% during this time period.

This means that in a downwards market, the treasury was able to generate enough yield and fees to reward the marinators, cover OpEx, and still outperform the broad market.

I believe this speaks strongly to the resiliency of the treasury strategies that have been deployed as well as the team’s efforts to restrict any OpEx bloat.

Final Thoughts

Similar to last month, Umami is holding up quite well in current conditions. There were several large non-recurring OpEx items to fund the development of Umami’s revamped Front End (including a detailed dashboard from Multifarm coming soon), a dynamic model for our upcoming Delta Neutral USDC Vault by OTBalance, and a full code audit from Zokyp.

Currently, Umami is generating ~$120K in monthly revenue, and pushing ~$40,000 monthly to Marinators

Here’s an interesting thread regarding treasury management strategies adapted for crypto from Sequoia. TLDR is that by staying lean and investing heavily in R&D, the bear markets are great for getting ahead of the pack.

If there’s anything you’d like me to add to the next update (early July), please let us know! Feel free to come hang in the Umami community discord, and we welcome any feedback, suggestions, and questions from everyone.

Thanks a bunch & lesssgooo Umamies!

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