Umami Finance Treasury Update — June 2022
By Wen Moon & Steven-T
What a brutal month it has been for the markets! Thankfully, Umami has been using this time to gear up to deliver some truly revolutionary products over the coming months. The release of our USDC vault will coincide with a time where more investors than ever are sitting on their stable stack and looking for sustainable and safe yield.
On that point, Umami reached an important milestone this month. We successfully completed the primary phase of our Audit with Zokyo, and the results came back with flying colours. The devs are addressing some final questions with Zokyo and the vault will be ready for prime time very soon!
Further exciting updates can be found in Grumpy’s community newsletter here! One important change was the onboarding of me, @0xWenMoon, as Treasury manager last week. I look forward to working closely with Steven-T & DeFi Alpha to guide Umami’s treasury and product strategy during the exciting months ahead!
Treasury value, excluding UMAMI and ARBIS tokens holdings:
- End of May, $5.41M
- End of June, $4.24M
In the month of June, there was a Net Treasury Loss of 1.17M (or 21.6%)
- The total crypto market cap on May 31st was $1.313T and $0.894T on June 30th, which is a net decrease of 31.9%.
- The price of Bitcoin on May 31st was $32,206.26 and $18,888.00 on June 30th, which is a net decrease of 41.4 %.
- The price of Ether on May 31st was $1,996.80 and $1025.00 on June 30th, which is a net decrease of 48.7%.
As you can see, the treasury performed quite a bit better relative to the overall market.
Gross Yield: $78,223.07 at time of writing, which constitutes to an APR of 22% for the Treasury this month!
- 49.69 ETH ($51,180.7)
- 44.28 wETH from GLP distributed to marinatoors
- 5.41 ETH from Uniswap kept for reinvestment
- 1056 esGMX ($15,835.80)
- 84103 TCR from staking ($2.6k)
- Uniswap V3 fees ($12.6K)
- 5.4 ETH
- 382 UMAMI
- 36040 TCR
- 4596 KROM
- 505 USDC
- Smaller amounts of FXS, and other alts
Net Yield was $32,614.67 using Gross Yield — Marinator Payout. This month, due to the brutal market conditions, we decided to pay out a little extra of the gross yield to marinators.
Expenses: Umami’s OpEx was $206,740 in June. The monthly USDC fixed OpEx was $140,550. It is worth noting that Umami underwent a signficant team restructuring this month in response to the market downturn. A number of business team roles were eliminated and two new devs were brought on Part Time. Umami pays a 1 to 2 month severance to all laid off team members, so the reduction in staffing costs will beging to flow through to OpEx in August.
Asset Appreciation for Umami’s treasury is a net depreciation of $1,380,040.99, using this formula:
Asset Appreciation = Net Treasury Gain — (Gross Yield — Expenses)
Treasury positions and changes:
Currently the breakdown of our treasury is:
- 67% GLP, GMX, esGMX
- 15% Uniswap Liquidity pools
- 7% Hedge Short positions
- 7% Stable coins
- 5% Alt coins
GLP & GMX
The APR offered by GLP in June continued to grow from last month, reaching almost 40% at one point. Some of this is attributable to more eyes being on Arbitrum due to Oddessy which has since been paused. The higher APR is also a function of recent, highly-volitile market conditions, which has caused traders on GMX to incur massive losses due to liquidations.
Another month of evidence suggests that, over long timeframes, the house always wins. And even in these volatile market conditions, this is still the case. This has been very good news for our treasury since a substantial portion of our portfolio has been in GLP. Additionally, this bodes well for the USDC vault product which is soon to be released, as it also uses this yield from GLP.
Tracer Perpetual Pools
Umami’s previously stated goal has been to hedge out ~50% of its treasuries’ market exposure. The data bears that out & affirms the value of Umami’s hedging strategy, which uses liquidation proof derivitives from TracerDAO.
Uniswap v3 LPs
Umami’s Uniswap liquidity pools continue to provide a unique opportunity to generate yield from UMAMI,TCR, KROM, L2DAO, ETH and USDC trading activity. On average, the active liquidity pools generated approximately 37.57% APY. The liquidity pool that generated this highest yield was TCR/ETH. Due to concentration of liquidity and volatility in the markets, the TCR/ETH liquidity pool’s accumulated rewards at a rate of 101% APY. Currently we have 363 ETH allocated as support in our LPs and during the month of June we were able to claim 5.4 ETH as rewards.(Approximatley 17.8% APR on ETH invested) We will continue to accumulate and support tokens of interest to enhance our treasury.
Due to week 1 of the Arbitrum Oddessy, there was a large increase in users bridging into Arbitrum. The highest volume of these bridges was Hop Protocol, which resulted in a high APR for LPing ETH on Hop. We took advantage of this by using our remaining ETH exposure to LP here during that week. We have since closed this position thanks to Oddessy pausing.
The main altcoin position is CVX which experienced another brutal month in terms of price action. However, this is locked (as vlCVX) and canoot be sold. To counteract this we have been hedging the exposure to it, meaning the hedges gained in value considerably even if the price of the locked CVX fell. It is also generating yield through bribes and could become a valuable liquidity incentivisation device for the protocol in the future.
As discussed, Umami has been aiming to have at least 50% exposure hedged for the entire treasury at all times. Although this has meant we considerably outperformed the market this month, we also realise in hindsight that more hedging would have been beneficial.
Since my term as Treasury Manager began, we have increased this to a new target of hedging 75% of Treasury Value. We expect that for the duration of this extremely rocky period in the market, Umami will be maintaining this target to preserve our runway & position us to come out of this downturn stronger than ever!
If there’s anything you’d like to see in the next update, please let us know! Feel free to come hang in the Umami community discord, and we welcome any feedback, suggestions, and questions from all.
Look forward to this next month and I’m sure you all will be excited to see product launches which will bring new revenue for mUMAMI stakers!