By Wen Moon and Steven-T
The month of August saw the return of volatility once again, but this time to the downside as a result of ETF news. We will likely see more volatility regarding this topic until an official ETF is finalised and approved, perhaps from Blackrock. Other than this though, the market was mostly silent with little other movement or news.
In news around Umami, the vaults have been performing exceptionally well even in this relative lack of volatility, with ALL vaults outperforming every other vault product on the market.
Despite this excellent performance, UMAMI token price has been falling this month, which the treasury has taken as a perfect opportunity to buy up the supply at these low valuations through LP.
Now, let’s dive into August’s numbers:
Overall Performance
Treasury value, excluding UMAMI token holdings:
- End of July, $4,647,258
- End of August, $3,904,302
In the month of August, there was a Net Treasury loss of $742,955.61 or 16%.
For comparison:
- The total crypto market cap was $1.141 on July 31st and $1.027 on August 31st, which is a net decrease of 10%.
- The price of Bitcoin was $29,221 on July 31st and $25,927 on August 31st, which is a net decrease of 11.2%.
- The price of Ether was $1,856 on July 31st and $1646 on August 31st, which is a net decrease of 11.3%.
The treasury performed in line with the market considering expenses and the accumulation of UMAMI tokens into the treasury. For the breakdown of treasury performance without the UMAMI buybacks, see Asset Appreciation
Gross Yield: $18,682.09 at the time of writing, which constitutes a 5.7% APR return for the whole treasury!
- 11.05 ETH ($18,188)
8.36 wETH from GLP, 5.37 wETH distributed to marinatoors
0.42 ETH from Liquidity pools
2.27 ETH from vaults profit - Liquidity pools($1,656)
ETH — $691 (.42)
UMAMI — $965 (144)
Net Yield was $9,843.07 using Gross Yield — Marinator Payout.
Expenses: Umami’s OpEx was $101,499 in August. The monthly USDC breakdown:
Fixed OpEx was $101,000
Variable Expenses $499
Asset Appreciation for Umami’s treasury is a net depreciation of $506,299 or 10.9%, using this formula:
Asset Appreciation = Net Treasury Gain — (Gross Yield — Expense Outflows — Marinate Payout) — Umami purchased from circulation
Treasury Breakdown
Currently, the breakdown of our treasury is as follows:
Liquid Runway: is $2,686,265.04 or 16.7 months (assuming monthly opex of $160k). This is the value of any blue-chip liquid treasury holdings. It constitutes our GLP position; treasury stables + ETH; GMX hedges and our Vendor positions. It does not include ARB.
GLP & GMX
GLP’s pool value continued to decline, moving from $472 million to $377 million. Despite this downturn, Umami’s vault share of GLP TVL has increased to $3.2 million (0.8% share). We’ll be closely watching Umami’s share of GLP AUM to gauge market demand for single-asset exposure.
With GMX experiencing a 37% drop this month, it’s evident that the treasuries’ esGMX value also suffered. Unfortunately, there’s limited scope for the treasury to hedge this exposure, but we maintain confidence that the Arbitrum altcoin cycle will eventually turn.
The treasury raised its allocation to Umami’s GLP vaults to 13% ($340k GLPUSDCb, $160k ETHUSDCb), proving to be a fruitful move as PPS rose over 2% this month.
Regarding GMX v2, we invested a small amount of our ARB allocation into the v2 pools. GMX v2 has shown strong returns, and we’ll keep monitoring its performance and associated risks to adjust our positions as needed. As of right now, it makes sense to continue increasing our v2 position as it grows.
UMAMI Liquidity Pools
UMAMI experienced a test of liquidity depth as its value dropped from $14.14 to $6.70. Consequently, the treasury adjusted allocations using Kromatika Fee Earning Liquidity Orders, market buys, and LP adjustments. A total of 12,806 UMAMI were moved from liquidity pools into the Umami treasury, aimed at reducing circulating supply and enhancing value for current holders. Another 6,124 UMAMI were accumulated into our liquidity pools as we added over 80 ETH to boost liquidity depth on 8/19. This ongoing process will gradually reduce the amount of UMAMI available on the market, potentially leading to increased market volatility and slippage as prices are determined.
ETH yield from liquidity pools for the treasury was lower than usual due to LP buy orders and fees earned being contributed towards the net purchase price. Lower LP fees also result from Kyberswap’s incentives, which channel more liquidity through their UMAMI/USDC farm.
Final Thoughts
That wraps up this month’s report. Looking into the future of this market, although this month saw a dump in all Crypto we expect this to reverse as the ETF saga completes. The positioning of the treasury overall is still quite market-forward which can be afforded thanks to our lengthy liquid runway. This allows us the luxury of being able to look past shorter-term moves, especially in a long-term ranging market.
As for UMAMI price and accumulation. We will continue to rebuy and take UMAMI out of circulation at these low valuations. An important accounting point to note here is that Asset Appreciation only counts the UMAMI bought and removed from circulation. With the nature of the treasuries POL, it is constantly buying UMAMI as price decreases, and we will continue to add more of this support side liquidity if that trend continues.
Finally, a key part of this reaccumulation strategy is getting the best possible execution price for the treasury. This means minimising slippage and preventing frontrunning by utilising tools such as Kromatica or Vendor, and even facilitating OTCs (interested parties on both sides can contact us). Our goal with such activities is to return as much value as possible to holders the longer we spend at these low valuations.
As always, feel free to reach out to us regarding any questions or feedback. See you next month!
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