I will share some thoughts below, but I am generally supportive of this proposal.
Having already experienced two bear markets I definitely think that bear markets are a) the time to build and b) the time to invest.
During bear markets noise and distraction are a lot lower and people that lack conviction panic sell their assets or either leave the industry completely. The same happens to both contributors and investors. While I previously suffered with this phenomenon, I eventually got to accept it and embrace it, as in my opinion it brings together people that share the same views of the future and it creates opportunities to build, partner, hire and invest more easily, especially if you are prepared for it.
A question that logically emerges is the following: is this bear market different to the ones before? In my opinion yes and no. Yes, as I expect everything that I write above to play out again the same way. No, as its the first crypto bear market that takes place within a broader economic bear market ( inflation, war, energy and supply chain crisis etc.). Also no, as in my opinion it’s the first bear market where many crypto projects have already found ‘product market fit’ and the crypto industry is proven and in explosive macro growth (with defi, NFTs, DAOs being the three categories with the most growth).
So, on the one side we have a lot more economic uncertainty than before and need to be prepared for a longer bear market, on the other side we have an industry and platform (Ethereum / ETH) with proven product market fit, proven demand and macro growth.
With regards to the specific proposal, I absolutely think that the RadicleDAO needs to be diversifying it’s treasury and getting more exposure to other speculative and productive assets that can outperform the dollar in the next few years. But first some numbers.
At the moment the DAO holds around 21m in USDC and I think another 2m USDC are provided as liquidity to Uniswap. The DAO also holds around 51m RAD which I personally wouldn’t touch, given the low RAD price and our desire for those tokens to be used for community incentivization.
In addition all contributors (currently 38 if I am not mistaken) are expected to transition from the Radicle Foundation to the DAO by February 2023 and as a result to be paid directly from the treasury. The expected burn rate for the Radicle Foundation in year 2022 is around 4.5m USD, and the current monthly burn rate is around ~350k USD.
Taking all of the above into account, I personally think that it’s a great idea to move a portion of our stablecoins towards a more productive asset that has the potential to outperform USD in the next few years, rather than certainly losing money every year because of inflation.
While there are thousands of ways to approach diversification and investment, the way I would like us to approach it is the following:
Agree on a timeframe where we think it’s wise to have stablecoins to cover expenses, without engaging in any fundraising activity. Usually start-ups operate on a 18 month timeframe, but given current conditions I would assume a prolonged bear market so I would double that to be prepared for the worse (36 months).
After we do that, I would calculate projected expenses for that period for each team and add some buffer to that.
What’s left, I would move off stablecoins and into a different asset. For that I think ETH is the way to go. The reasons are:
- proven product market fit and significant demand and growth
- unquestionable market leader at a high growth industry, in my opinion unlikely to be challenged from another layer 1, given the amount of projects and devs building on it
- proven economics
- major event ahead (merge) that is introducing risk but also improved economics (likely a catalyst for even more growth)
- productive asset (4% yearly staking return today using Lido or simply staking after the merge)
- currently likely ‘oversold’ as the market is in panic mode (imo you want to be investing after an asset has corrected in price, not the other way round)
- crypto native, meaning that we don’t need to use any intermediary to get exposure. This is something I value highly and I personally would be against investing in non-crypto native assets for reasons I would be more than happy to elaborate on.
- Radicle is building on it, so interests are aligned