IIP-43: Deprecation of the $CGI Product

IIP: 43
Title: Deprecation of the $CGI Product
Status: Proposed
Author: Michael Petch (@mcgpetch)
Created: May 17, 2021

Simple Summary

CoinShares proposes the deprecation of the $CGI due to the inability to support the resources to scale the product and the lack of product market fit.

Abstract

Over the past few months since launch the $CGI has struggled to capture significant inflows into the product. This can be attributed to a few reasons, notably, the inability to support enough liquidity in the gold stablecoin constituent which has ultimately deterred the ability to attract large size and trust from investors. Additionally, the $CGI investment strategy which is designed to be a conservative strategy by reducing risk and volatility lacked product market fit during this period in the market. Investors are currently driven by risk-on strategies while the $CGI is a conservative, wealth-preserving play. The $CGI is therefore struggling to generate demand from investors.

Motivation

Index Coop products should be reviewed on a continued basis to determine if they are achieving their goals and maintaining appropriate standards. Currently, the $CGI is unable to generate enough liquidity to support the product effectively and is lacking product market fit. CoinShares, as the methodologist, suggests for the product to be deprecated.

Copyright

Copyright and related rights waived via CC0.

6 Likes

Bummed by the realities leading to this and hopeful that you will continue to contribute to the Coop when possible! You’ve been a great help :muscle:

3 Likes

@mcgpetch awesome work on the $CGI index! I know you worked super hard on this and we really appreciate the effort. This was the second index we launched as a community - we learned so much from the entire process.

Huge shoutout for making this happen - I have a feeling that the next Index Coinshares launches with IC will be a massive success :rocket: :rocket: :rocket: :rocket: :rocket:

6 Likes

$CGI is a great product! I would not be surprised if this index product will be revived when the market reverses.

4 Likes

A sorry day to see a product depreciated.

For me I think the key learnings are about PMF and whether DeFi natives want exposure to gold at the moment and the need for sufficient liquidity for rebalancing.

A standard xy = K (Uniswap v2) pool sustained by a market maker for monthly rebalances isn’t cost effective. Uni v3 should make it more capital efficient but I think we need to ensure that underlying tokens have liquidity and trading volume.

2 Likes

A sad day indeed. Would have been really interesting to observe the performance over the long run had it not been for the liquidity issues and dynamics of the current cycle. Great initiative, who knows what the next cycle will bring.

@mcgpetch thanks for your hard work and commitment on CGI and the community as a whole. Above and beyond every time.

1 Like

It is a bummer to see this deprecated and a shame we didn’t see performance over the longrun.

Laugh if you like at this question - won’t the coins and the pool just live on, albeit in a withered state?

I think the most likely course si that it will be removed form the coop website, but still available as a token set.

I would expect that we stop rebalancing, so it just becomes a frozen set at a specific split. Then the holders can redeem as and when they wish. There is no liquidity on uniswap.

DeFi is permissionless, so we can’t force anyone to do anything [I suppose we could rebalance to 100% ETH to make redemption cheaper…]

1 Like