Index Coop’s Ethereum Operations Account was created on the 25th July and didn’t become actively used 14th August when it received 1,750 ETH2x-FLI tokens for BED liquidity. Since then, we have come a long way including a few highlights here for the inaugural post:
One of the goals with the Operations account is to streamline payments activity to a core group, with an emphasis on strong controls and timely processing. We hope to continue to deliver on this element of the Operations Account, while continuing to improve transparency through reporting like this.
January marks the first monthly report for the investment account. In January, the investment account was funded with stables ($5M). Towards the end of the month, about half of those stables were deployed to productive strategies.
In February, the investment account maintained its allocation in the strategies employed in January. Later in March, the remaining stables were deployed to productive strategies making all of the $5M in stables deployed.
More transactional details are available upon request or by reviewing the Investment account Gnosis safe
At the end of March 2022, there was $5M of stables earning 10.75% in interest and this represents only 71% of the capital held with the Investment Account.
The BAL rewards being earned are to be deposited into veBAL and used to vote BAL rewards across Index Coop product pools on Balancer V2. These product pools are in the early design phases and the Investment Account has been position to support this short to medium growth ambitions. Products like LAYER1 which benefit for BAL Liquidity Mining incentives.
There is a delta neutral Protocol Owned Liquidity (POL) position, where ETH has been borrowed to provide icETH/ETH liquidity. Index Coop is earning low signal digits Return On Investment, yield > costs of capital, on the POL. This is the very first POL position where Index Coop does not have any price risk exposure to the assets held in the POL position. The change in the price of ETH has been successfully hedged.
We also expect future upside on this icETH/ETH liquidity strategy with $SPICE rewards from Arrakis DAO when the DAO launches later this year. We anticipate Index Coop to receive a $SPICE allocation as a partner who uses G-Uni pools and creates revenue for the Arrakis DAO. The $SPICE tokens Index Coop receive will then be locked (veSPICE) and used to vote $SPICE rewards across Index Coop INDEX/Product pools.
With Liquidity being a major financial outlay for IC the ability to use other protocol incentives for future products could drive significant cost savings. The Investment Account is being structured in such a way as it will help solve Index Coop second largest bottle neck, liquidity for our products/INDEX tokens.
As of the end of April, all 100% of the capital within the Investment Account is actively deployed. The Investment Account continues to provide Protocol Owned Liquidity (POL) for icETH without having any ETH price exposure. The POL position is generating an income for the DAO independent of market price movements.
The Investment Account holds $6.74m of capital earning 7.01% in BAL and TRIBE rewards. There is also swap fee income and income from the POL position which is not included in the 7.01% figure. We do expect the current allocation of capital to be viewed favourably when the Arrakis DAO launches their SPICE token. This potential upside is speculative and if it eventuates, will enable Index Coop to use the SPICE holding to vote Liquidity Mining across Index Coop product/INDEX pools. We expect this to lead to higher TVL and reduce the DAOs dependency on POL which has absorbed 100% of revenue generated since Index Coop launched on 06/10/2020.
The Balancer Strategy is predicting a yield of 20.92% APY to commence in 2 days time when the next BAL distribution period commences. Meanwhile, the TRIBE strategy is yielding around 17% APY and has been a solid double digit ROI strategy. In June we hope to be reporting an APY > 15% which represents a significant step change to the current ROI being generated.
The strategy for Balancer remains the same as previous months and in the near future we intend to request from the Balancer community the ability to deposit our BAL holding into the VotingEscrow contract to attain veBAL to boost our Balancer Boosted Pool yield APY in the interim whilst Index Coop continues to design a product to be built on Balancer v2.
Thanks for these reports as always. In terms of calculating runway, we may not want to count $INDEX as a cash equivalent due to its volatility and illiquidity. I am concerned we may have a false perception of runway if we are treating it as such.