Revised initial Morpho allocation

Summary

Deposit 1% of OETH's collateral to the Morpho Aave strategy and the remaining unallocated WETH to the Convex OETH AMO strategy.

Background

On June 2, a proposal was unanimously approved to allocate 660 WETH to Morpho Aave after the strategy was launched with an allocation of 57.2 WETH. On the following day, the Morpho team announced that they had paused the deposit function on their contracts due to a potential issue with their interest rate model. As a result, all OETH funds were withdrawn from the Morpho Aave strategy as a precaution. Based on continued discussions with the Morpho team, we have reason to believe that the vulnerability has been addressed and there is no clear and present risk to any new deposits.

Changing circumstances

Since the prior Morpho Aave allocation proposal was created, OETH's TVL has grown by 67% and the AMO strategy's share of the Convex pool has fallen to 78%. This means that the strategy is earning a smaller portion of the rewards generated for this pool. Meanwhile, the pool is still earning an APY of 11.01% as of today, which is significantly higher than what the Morpho Aave strategy is likely to generate anytime soon. The takeaway is that any WETH allocated to our Convex strategy will be more productive than it would be if allocated to Morpho unless the LP participation in Convex falls significantly.

Recommendation

I'm suggesting that we resume the Morpho Aave strategy by depositing 1% of OETH's total collateral (roughly 100 WETH) and then depositing all remaining unallocated collateral (currently 933 ETH) to the Convex OETH AMO strategy. If implemented today, this would result in the following balance of allocations for OETH:

• Convex: 42.65%
• Lido: 7.93%
• Rocket Pool: 27.92%
• Frax: 20.50%
• Morpho: 1.00%