By Wen Moon and Steven-T
What an exciting month it’s been for both Umami and the Treasury! Umami has taken it’s very first step on a long road to success. With the release of our first flagship product, the USDC vault. With caps raising and filling up rapidly, and even more products along the way, it will be thrilling to see the new revenue sources this will bring to both the treasury and UMAMI stakers.
Overall Performance
Treasury value, excluding UMAMI token holdings:
- End of June, $4.24M
- End of July, $6.16M
In the month of July, there was a Net Treasury Gain of $1.92M or 45.3%.
For comparison:
- The total crypto market cap was $0.894T on June 30th and 1.128T on July 31st, which is a net increase of 26.2%.
- The price of Bitcoin was $18,888.00 on June 30th and $23,288 on July 31st, which is a net increase of 23.3%.
- The price of Ether was $1025.00 on June 30th and $1677 on July 31st, which is a net increase of 63.6%.
As you can see, the treasury performed relatively in line with the market, but in a hedged way.
Gross Yield: $119,278.14 at time of writing, which constitues a 23.2% APR return for the whole treasury!
- 48.6505 ETH (57,463.47)
38.1712 wETH from GLP, (29.4612 wETH) distributed to marinatoors
10.4793 ETH from Uniswap kept for reinvestment - 766 esGMX ($30,731.91)
- 114,908 TCR from staking ($5,285.76)
- Uniswap V3 fees ($33,986.78 Inc. UMAMI)
10.47935 ETH
272.975 UMAMI
52,742 TCR
17754 KROM
4685 USDC
29000 L2DAO - Smaller amounts of FXS, and other alts
Net Yield was $49,406.43 using Gross Yield — Marinator Payout.
Expenses: Umami’s OpEx was $223,855 in July. The monthly USDC fixed OpEx was $183,455.
Asset Appreciation for Umami’s treasury is a net appreciation of $2.02M, using this formula:
Asset Appreciation = Net Treasury Gain — (Gross Yield — Expenses)
Treasury positions and changes:
Currently the breakdown of our treasury is:
- 65% GLP, GMX, esGMX
- 12% Uniswap Liquidity pools
- 6% ETH
- 4.5% Hedge Short positions
- 4.5% Stablecoins
- 8% Alt coins
GLP & GMX
This month GMX crossed a number of important milestones. With total volume exceeding $50B and fees on Arbitrum exceeding $50M, it’s no wonder the hedged GLP position is still one of our largest holdings. It’s outperformance relative to the rest of the market is holding strong this month.
In addition, GMX is also a large holding in the treasury. Both in the form of regular GMX and esGMX. This month it has seen an impressive level of outperformance.
Tracer Perpetual Pools
This month, we closed the majority of our short positions on Tracer. This was both in order to make way for our vault so it can have a better liquidity runway and to have more flexibility on our hedges.
No need to panic though. We are still hedging the treasury, as always. To do this, we experimented with using GMX this month. We are pleased to say that, despite minor hitches with sl/tp not executing due to Arbitrum slow execution at times, this has been working very well.
Of course, there are pros and cons to the switch. One con would be the added liquidation risk, thankfully we have been placing positions strategically to limit the capital at risk and increase overall capital efficiency of hedges by a factor of 3x. The non-path dependency of GMX hedges has made it much easier to project treasury growth and hedging costs, as well as to more actively limit overall drawdown.
All of this is not to say the treasury will never be using Tracer perps again. In fact, we are currently gearing up to use the treasury to take advantage of profitable skew-farming opportunities on Tracer, which will be a likely result of subsequent USDC vault cap increases. You can find out more on this strategy here.
Uniswap v3 LPs
It’s been an active month for Umami’s Uniswap liquidity positions. The UMAMI/ETH pair had its highest monthly transaction volume ever, with over $2,382,000 traded! This translated into higher Uniswap fee rewards ($33.0k) compared to June ($12.6k).
We’ve also seen an uptick in volume and price from TCR KROM and L2DAO LPs as they continue to perform well. Due to liquidity optimization and the increasing value of our positions, our allocation to non-UMAMI/ETH liquidity has grown from $105,109.00 to $121,881.00.
As we continue to maximize yield, we also look for new ways Uniswap can create capital efficiency for our treasury. By utilizing ETH/USDC liquidity pools we can balance the treasuries exposure to ETH volatility by distributing ETH for USDC as prices move higher. This is one way to raise funds for OPEX while also stabilizing our hedging strategy, all while generating yield.
While we move towards allocating more capital to Uniswap positions it’s important to track real performance of each position, including divergence loss and total return on investment. This is why we have developed an internal in-house model that will calculate detailed information of performance on a rolling basis. We are also looking into various on-chain methods in hedging out these risks.
Altcoin Positions
There were several positive events with our Altcoin’s including a 530% increase from our partner L2DAO’s token. The acquisition of L2DAO tokens were a result of a partnership to build liquidity for their trading pair on Uniswap. We plan on continuing to LP the tokens and collect trading rewards.
Convex (CVX) also had a nice rally increasing its value in our treasury by over $76k. It is to be noted that our locked vlCVX holdings have now fully unlocked. As of right now, we have no plans to relock, in order to remain moveable. Since we have no curve liquidity to incentivize, the opportunity cost of not relocking is only the added yield from bribes (~30% APY). We will continue to monitor its performance and decide if the rewards generated are advantageous.
Final Thoughts
This has definitely been an interesting month for the overall markets. Despite the US officially entering a recession with record high inflation numbers, the market has been rallying possibly due to the yield curve moving lower and market positioning being short risk. As always, we aim to take no view on the market with our treasury. Instead, we aim to systematically add and remove hedges to gear ourselves best for new product launches.
For the start of this month, we maintained a 75% hedge ratio during the uncertain times. As the market grew stronger at the lower levels, we relaxed this to 60% where we maintain it today by adding hedges as price increased this month. Due to the rally, we can start to again aim for a higher hedge ratio to protect more against the potential downside.
We also experimented with a strategy this month of increasing hedges on binary events such as FOMC and GDP data, just to add extra protection to the treasury value at these more uncertain times. We plan to continue experimenting with this strategy going forward.
Now, a big question on most of the communities mind right now will inevitably be “Do we plan on putting a portion of the treasury in the vault?”. This would make the act of actively hedging the treasuries existing GLP positions much easier, so we are definitely interested in doing this. However, we have agreed that for now it may be a bit unfair to take up large amounts of the vault caps with our own treasury. So we plan on holding off on doing so until we can increase the vault caps more freely so the community isn’t left out.
Overall, this has been a great month for the treasury and we are happy to see this unexpected turn in the markets. I also look forward to seeing the new revenue stream for both the treasury and mUMAMI stakers, which should begin to roll in August. Also, quick shoutout to Clonescody who made a Treasury Tracking bot on our Discord this month. Keep in mind, it may not always be accurate because of issues with Zapper. The most accurate data with regards to the treasury will always be from these monthly updates.
See you next month!
