MATIC\USDC LP DeFi Strategy

Hey, guys.

As you can see from the title of the topic. I would like to suggest placing a small portion of DAO Treasury into a potentially profitable DeFi strategy.

Amount to place: $500k

Anticipate your questions.
What is this for? And why into these assets?

To start with, the allocation will be placed in the Polygon network. In which all smart contracts of the Aavegotchi project are placed. At the moment DAO Treasury does not generate the yield to repel RF and various investments in the development of the Aavegotchi project. Which in my mind is completely wrong our overall objective is to bring Aavegotchi and DAO Treasury to self-sustainability. By doing so we will attract large investors to the project and increase the rewards within the game. Which again will launch a flywheel to attract new players and investors.

It’s always nice to get a reward of x2-x3 above the current one for RF or other activities (but for it we need to make few DeFi strategies, not only this).

The whole strategy will be built on maximizing profit with minimal risks (as much as possible).

Now to the specifics.
Liquidity will be placed in blue chip protocol - Uniswap v3. Which is already proven by time and reliability of the team repeatedly.

LP pair MATIC\USDC.
Going through each token.

MATIC (aka POL) is the native token of the entire Polygon ecosystem. A solid team, huge investments and a huge number of partnerships makes it no doubt that the token won’t disappear in a couple months. Also, let’s not forget that the ecosystem will be developing even more actively in the near future (Aavegotchi sub-chains, etc.).

USDC - I think most people have no doubts about the reliability of stablecoin either. Moreover, we already hold more than $1m in it in DAO Treasury.

Now the most interesting thing is potential yield:
According to DeFiLlama’s statistics, the average yield is about 40%-50% Fees APY (the yield constantly dances from 15% to 300%).

APY is influenced by several factors: price range, volume, TVL LP.
Only price range and TVL we can influence. Placing 500k should not significantly reduce APY by yield.

Price range:
-55% to +55% (of course this will reduce the average yield from 40%-50% Fees APY to 20% - 25%), but it will allow us to keep with some reserve price range and not worry that it will go out of bounds and stop generating income.

2 scenarios if the price does go out of the price range:
1. Bad.
We will go completely into MATIC (for the last year the minimum price for MATIC was about $0.4). Given that MATIC is a fairly reliable token, there is no criticality (at some point we will just wait for the price range to return or use it in activities).
2. Good.
We will go fully into USDC. This is a positive scenario, because in addition to Fees APY we will get a good return from MAITC growth and growth of our USDC position in LP. The overall APY will be much higher than 25%)

Everything above is not a theoretical calculation but a practical example as I am an analyst in a VC fund. We actively use LPs in our business.
And for example on MATIC\ETH position was made around 10% for 130 days. Annual, as you understand around 30% (I can back it up with screenshots if needed).

I will be happy to answer questions.

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Edited:
APY by LP position MATIC\ETH was taken from memory. Then I rechecked, MATIC went down during that time and now it’s about 10% for 130 days. Which in any case is also an excellent indicator.

I want to add that this is just the beginning of the whole global strategy I want to offer for Aavegotchi. Placing some LPs in the right positions with good APY. We can use some of the profits to reward Gotchi, Parcels, Wearebles and GHST holders.
Below are the statistics on the yield of LPs GHST\USDC or GHST\ETH. Where everyone can see that it is small and will not bring enough profit to the treasury. Obviously, the main idea was to make more liquidity for the GHST token.

Also if you look at the Dune analytics on DAO Treasury you will see that the returns from all activities in Aavegotchi brought in around 50k GHST.
https://dune.com/eitri/aavegotchi-dao-treasury


Considering that there have been at least 2 RFs and about 3m GHST spent during this year (this does not take into account the various costs associated with funding proposals).

The sooner we start generating additional revenue in DAO Treasury the sooner we can reach self-sustainability and even potentially increase rewards for holders.

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I used to be in other projects that puts their treasury to work on LPs and other yeld protocols, and every time that’s not goes well.

imo Aavegotchi still holding its treasury because a good tokenomics and strategy, that are grow it by doing Aavegotchi actions and tasks, and not using LPs.

Think about how DAO grow it, and do it again and again, because giving away 500k to generate 100k assuming the risk of loosing, is not such a good idea for a Treasury, maybe is a good idea for some short term investments of a very little % of your portfolio, the Treasury I think should be protected and used only for 100% Aavegtochi actions for a good and scientific proven ROI.

My suggestion is based on my personal example and experience. I am not proposing LPs in obscure tokens.
DAO is already discussing buying other assets (BTC, ETH, MATIC, etc).

This can lie idle and generate nothing, or it can be a source of additional income in DAO at any market movement (bullish or bearish). Lots of examples of LPs that generate good returns for more than 1 year. In addition I important point that in a negative scenario DAO will be on hand with Bluechip tokens (which are already being discussed for purchase).

In any case, if you leave it as it is, in a few years there will be nothing left of DAO Treasury - too much activity costs and little inflow.