Thanks for putting this proposal together!
I appreciate the positive signaling a buyback program creates, especially as we struggle with a difficult market environment for the INDEX token at the moment.
I would like to caution, however, against a manual buyback process for the following reasons:
- Overall Treasury Diversification - Index Coop has been actively working on initiatives to increase treasury diversification for the sake of long-term sustainability. However, we have yet to actually raise more stablecoins outside of what was generated from the OTC sales. This feels like a step backwards in this initiative if we begin deploying this capital back into the INDEX token.
- Market Timing - I would agree with some of the other comments here that it is difficult to ascertain a fair market valuation and accordingly purchase or sell INDEX around that metric. Market timing is inherently difficult even for the most sophisticated traders, and crypto is arguably even more difficult given its rampant volatility. I do not think it is suitable for the Finance Nest / Wise Owls to become active traders as this will take away time from more important initiatives.
- Principal-Agent Problem / Transparency - I understand the need to avoid broadcasting large purchases or sales before executing, but I do believe we will have a tough time ensuring transparency and avoiding informational asymmetry in a manual process. For example, how would we ensure a contributor aware of a pending purchase or sale is not trading ahead of the event. The temptation would be great and it unfairly disadvantages those not active in the decision-making process.
- Short-termism - Finally, I tend to side with the idea that buybacks are a product of short term thinking. While this may alleviate the sell pressure in the near-term, a buyback does nothing for the long-term growth prospects of the DAO. Instead, a better use of the capital might include funding ecosystem development initiatives or otherwise reinvesting back into the Coop. Buybacks are typically performed by mature organizations with few positive NPV projects available to them. I do not think this is the case with the Coop, which feels much more like a start-up.
Instead, if we want to pursue a buyback program, I think we should revisit the smart Balancer pools (not sure why that initiative was shelved) or utilize a UNI V3 liquidity strategy with the help of an active manager like Visor. These methods are more automatic and transparent in their execution, and they avoid the issues of information asymmetry and market timing.