OIP-94: Interim Ranged Stability Policy Levers

abipup
     
2 days ago

Summary:

Grant Policy Authority to:

Use inverse bonds above backing 

Remove liquidity to facilitate efficient market operations

Add liquidity to reduce volatility as market cap grows

Burn OHM removed from liquidity 

Background

A few months ago, Policy released OIP-76 : Create Inverse Bond Policy Lever as a tool to be used in situations where OHM would be trading below liquid backing price on a per circulating supply basis. Recently, Zeus shared a new paper detailing how Olympus Treasury would be used to facilitate ranged-bound stability.

Range-based stability is based on a historical moving average where the 120-day MA is around $102 as of 20 April 2022. Range-based guidance intends to use inverse bonds in the lower cushion, which we are certainly at right now.

Motivation

It is in the interest of the Olympus ecosystem to start using its Treasury to conduct market operations, such as inverse bonds and adjusting liquidity, to encourage healthy market behavior.

The current situation presents a good opportunity to introduce one of the key components in the ranged-bound stability paper, inverse bonds, with the hope of having a full roll out of this new system in the medium term. That system is planned to operate around a long term moving average of price. In preparation for that system, the Treasury should act to meet a long term moving average now. We propose to use a 120 day moving average to start, which aligns with the proposed stability system.

Rather than simply using inverse bonds to support liquid backing, inverse bonds could be deployed to encourage the market price to meet the 120-day moving average. This would make the target price somewhere between the 120-day moving average and the current market price.

With a liquidity to market cap ratio currently above our target of 20%, there is room to pull this liquidity in order to reduce the capacity of inverse bonds needed.

Implementation Details

A target to meet the 120-day moving average

A limit of 90 days for running inverse bonds pending the implementation of range-based guidance 

A capacity for inverse bonds with the goal of reaching the target price within 90 days

Target a liquidity to market cap ratio of 0.2  

Burning OHM that has been permanently removed from liquidity

Turn off inverse bonds once 120 day MA has been reached

Note that these parameters will be monitored regularly by Policy and could change upon discovery of new data points.

Proposal

Authorize the Policy team to :

Run inverse bonds above liquid backing price 

Remove and add liquidity to meet targeted ratios 

Burn remaining OHM after removing liquidity