By Wen Moon And Steven-T
Your Treasury Manager, Wen Moon, here with your monthly Community Treasury Update!
This was definitely an eventful month for Umami to put it lightly. To begin with the elephant in the room, the month of August saw the unfortunate pausing of the v1 USDC vault. In keeping with our commitment to putting its users first, we drew on our treasury assets to compensate depositors and make them whole.
Additionally, with the pause of the USDC vault, we saw an expected drawdown in the price of Umami. The treasury has seen this as an excellent opportunity to buyback undervalued UMAMI, both through its LP and by taking some off the market indefinitely. It should be noted that the treasury does not count UMAMI token holdings, whether in wallet or in LP, to its Treasury Value numbers.
Despite these facts, the treasury has performed very well, and even managed to outperform BTC this month! The gross yield generated through the month of August has outperformed even July’s numbers. Remember, UMAMI marinatoors receive at least 50% of this treasury yield. Even though our vault was paused, the interesting fact is that vault fees were never passed on to stakers, that means this month marinatoors actually got more yield in the form of wETH, not less! Paired with the lower UMAMI price, this has resulted in a much higher APY!
Now, without further ado, let’s dive into the numbers!
Overall Performance
Treasury value, excluding UMAMI token holdings:
- End of July, $6.16M
- End of August, $5.47M
In the month of August, there was a Net Treasury Loss of $685,425.75 or 11.12%.
For comparison:
- The total crypto market cap was 1.128T on July 31st and $1.024T on August 31st, which is a net decrease of 9.22%.
- The price of Bitcoin was $23,288 on July 31st and $20,041 on August 31st, which is a net decrease of 13.94%.
- The price of Ether was $1677 on July 31st and $1,553 on August 31st, which is a net decrease of 7.39%.
As you can see, the treasury performed very much in-line with the rest of the market.
Gross Yield: $129,232 at time of writing, which constitues a 28.3% APR return for the whole treasury!
- 62.94 ETH ($97,745.82)
41.07 wETH from GLP, 49.78 wETH distributed to marinatoors
21.87 ETH from Uniswap kept for reinvestment - 461.8 esGMX ($23,260.86)
- Uniswap V3 fees ($65,451 Inc. UMAMI)
21.87 ETH
1,474.35 UMAMI
23,847.34 TCR
9,022 KROM
3,584.34 USDC
26,647 L2DAO
Net Yield was $65,451 using Gross Yield — Marinator Payout.
Expenses: Umami’s OpEx was $312,488 in August (Including the one-off USDC Vault reimbursement of $92,366.49). The monthly USDC fixed OpEx was $207,055.
Asset Appreciation for Umami’s treasury is a net depreciation of $438,388.75 or -7.1%, using this formula:
Asset Appreciation = Net Treasury Gain — (Gross Yield — Expenses)
Treasury positions and changes:
Currently the breakdown of our treasury is as follows:
Liquid Runway: is $4,409,276 or 17.6 months (assuming monthly opex of $250k). This a new metric we will be sharing, which outlines the Liquid Opex Runway that that we believe the Treasury possesses. This is the value of any blue-chip liquid treasury holdings. This month, it constitutes our GLP position, treasury stables + ETH and our GMX hedges.
GLP & GMX
This month Marinatooors were able to experience enhanced wETH rewards thanks to our increased allocation to GLP. With over 41 wETH earned vs July’s 38 wETH, that’s a 7.9% increase in value given back to our community!
As we saw volatility in the over all market we took this as a opportunity to take profit on most of our hedges and re-evaluate our strategy. The result was a net locked in profit of $59,962 after paying funding fees. Going forward we will continue to hedge but overall we have been experimenting with using GLP as a method of hedging the volatile portions of our treasury through reinvesting most of our profits in it. I am proud to say that we are continually growing our runway in GLP!
Uniswap v3
The UMAMI/ETH pair saw extraordinary volume with over $10,079,000 traded approximately. Compared to July’s high volume of $2,382,000, the monthly increase was due to a few factors including the excitement around Umami’s V1 USDC Vault. With a starting price of $29.46, the monthly unlock saw an elevated volume of profit takers and new investors. After $1.75M traded in the first two days we saw the price move to a relative all time high of $37.30. Later in the month, the announcement that Umami is pausing its USDC vault resulted in much higher volume then what we would normally see. The net result for our UMAMI/ETH LP was 20.54 ETH ($31,945) and 1,474 UMAMI ($25,677) in fees collected.
The effects of a falling UMAMI price should also be noted. We started the month with over 360 ETH as liquidity support. Approximately 300 ETH of this was used to buyback umami through LP. This means the circulating supply of UMAMI has been reduced and the ETH that was previously accounted for in our treasury has been exchanged for UMAMI in our treasury. We took this opportunity to adjust our liquidity pools between the price of $15-$20 to remove 10,000 UMAMI from the liquidity supply indefinitely, effectively buying back our UMAMI into our treasury. We will continue to optimize the LP at these attractive valuations and will pursue our goal of providing maximum value for Umami holders.
As for other Uniswap liquidity positions, we have consolidated and reduced exposure to altcoins as part of a broader strategy to increase our treasury stability against a volatile market. This resulted in our Uniswap treasury allocation being now 3% compared to 12% last month. Although these Uniswap treasury positions are fewer, we were still able to produce $7,815 in fees (14% APR relative to treasury allocation)
Altcoin Positions
This month, as mentioned, we decided to consolidate our core strategy by taking profits on some of our key altcoin positions and using the proceeds to lengthen our runway, by investing into GLP.
This has meant that, much to the dismay of many of my fellow CVX-lockoooors, we have sold out of our CVX position completely. The reason for this is simple, although it provided some nice yield, there was simply no strategic justification for us to remain exposed to the asset at this time. Especially considering that Umami has no need for liquidity incentivization as of right now, thanks to our Protocol Owned Liquidity approach. This does not mean that we will never hold CVX again, if we ever find ourselves in need of incentivising deep stablecoin liquidity (e.g. for our vault tokens) I still think this is one of the best methods to do so.
The same goes for our L2DAO position. We entered an incentivized agreement with time-locked tokens in exchange for providing liquidity support for the L2DAO token. Since then the token price has performed exponentially, as well as the liquidity for the token, plus time-lock has expired. With our overall strategy in mind we have taken some profits on this position this month. However, we still plan to continue providing liquidity support for the L2DAO/ETH Uniswap pair on Arbitrum.
Final Thoughts
Overall, I truly think this has been a excellent month for the treasury and a true stress-test, our strategy proved effective when tested against the market. Despite the setbacks, our runway is looking lengthy, our yield is evolving in the right direction, our strategy is more focused and higher yielding overall and we had the chance to reduce the circulating supply of Umami for our holders. Going forward, we plan on continuing to accumulate more Umami if possible at these undervalued levels via these buybacks to increase value for remaining holders, especially on unlock days.
As for the protocol, we are in full development mode for the v2 vaults now. I am delighted to share that I will be leading Product Management for this implementation of the strategy. I have developed what I believe is a very novel and cost effective hedging strategy. I am looking forward to sharing it over the next months as I continue to model it in detail. I will definitely be taking many of the lessons from the v1 vaults onboard to truly create something innovative here.
As for Treasury Strategy going into September, without predicting the movement of the markets, I expect us to be taking yet more profits on our hedges if we continue to move lower. If we see a reversal, of course that will provide an excellent opportunity to add more hedges to protect more value and rebalance our overall hedging ratio. As for binary events, of course the scheduled Eth POS Merge will definitely be something to watch, we may want to hedge adverse movements going into that or even take advantage of the higher expected volatility. Overall though, I think the best strategy will continue to be one with minimized complexity.
As always, I am happy to listen to any feedback and answer any questions about our treasury strategy, so feel free to ping me on twitter or discord.
See you next month!
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