SDGP-008: Treasury Management

As per SDIP-40, this is a Governance Proposal and has a Quorum to Pass of 250 SquiggleDAO NFTs and a Minimum Participation of 10 voters.

Abstract

After the successful execution of “SDIP-41 Treasury Management 2023”, “SDGP-004: Treasury Management 2024” authorized the Treasury multi-sig holders up to $1M equivalent for treasury management activities until December 31st, 2024. This included swapping from USDC to other Treasury Assets (including our own token, be it the ERC-20 or the ERC-721) and vice versa, swapping from other assets to USDC, including yield generating activities such as staking ETH, and to obtain financing up to a debt-to-equity ratio of 10% (at inception) and swap those funds into Treasury Assets in order to maintain the health of our Treasury during changing market conditions.

This proposal has 2 objectives: 1) to report on the use of funds under SDGP-004 and 2) to authorize the Treasury multi-sig holders for treasury management activities, including yield-generating strategies and potentially new Treasury Assets such as cbBTC, with no predefined monetary limit or end date.

The Treasury multi-sig holders will have discretion over the terms at which to swap any assets and to select the protocols and conditions for yield generation. All transactions executed will be transparently reported to the DAO.

#### Treasury Assets across the different DAO-owned wallets (as at December 3rd, 2024): 335 Squiggles (est. 2,736 ETH or 9.8M USDC) 1.2M USDC 671 ETH (2.4M USDC equivalent) 6,740 SquiggleDAO NFTs (6.7M SQUIG token equivalent)

Use of funds under SDGP-004

We swapped a total of 1.25M USDC for 440 ETH (at an average price of 2,843 $/ETH). An unrealized profit of $243k as of this writing.

We acquired 6 Squiggles:

• Blacked Out #8361 for 12 ETH, sent to our Permanent Collection.
• Slinky CS10 #9452 for 3 ETH, sold for 4.5 ETH, a 1.51 ETH profit after royalties and fees.
• Normal #6676 for 3.8 ETH, sold for 4.5 ETH, a 1.26 ETH profit after royalties and fees.
• Slinky #2384 for 3.3 ETH, sold for 4.1 ETH, a 0.84 ETH profit after royalties and fees.
• Normal #5932 for 3.7 ETH, sold for 4.4 ETH, a 0.72 ETH profit after royalties and fees.
• Fuzzy #2138 for 7 ETH, currently used as collateral.

Using a bundle of Squiggles as collateral, we obtained 1M USDC in financing at a 12% pro rata interest for 1 year (with potential extensions if needed). A 7.1% debt-to-equity ratio (at inception), now 8.3% including accrued interest.

We repurchased 275 SquiggleDAO NFTs for 100 ETH (average price of 0.36 ETH per SquiggleDAO NFT). The vast majority of these buybacks were conducted OTC and all of them without impacting the floor price of our NFT to allow any potential member a favorable entry price into the DAO.

We deployed a total of $1.7M into Treasury Assets. The current estimated value -applying our Treasury Valuation Metrics for Squiggles, NAV for the SquiggleDAO NFTs and Marking-to-market ETH- is $2.7M.

Motivation

Having funds readily available is crucial for responding swiftly to opportunities as they arise. This could include acquiring Squiggles at attractive prices, hedging future ETH uses (such as purchasing Squiggles), repurchasing our token at a significant discount to NAV, converting ETH to USDC, or deploying ETH or USDC into yield-generating activities.

As we move into the next phase of the market cycle, it is essential to remove the $1M limit on Treasury Management activities to allow for larger transactions. The goal of having no $1M cap is twofold, 1) in the upcoming part of the cycle, our current $2.4M in ETH might increase substantially and to preserve the long-term health of the Treasury we might need to sell some (or most) of it and 2) to deploy those funds into yield generating strategies. This decision is underscored by the successful execution of this strategy over the past two years, even amid volatile and challenging market conditions.

The risk profile of our Treasury should remain unchanged. In fact, we are requesting approval to remove this limit in order to adopt a more conservative Treasury allocation. That being said, we may choose to increase the funds deployed for yield generation, which would elevate the smart contract risk. However, we are only considering the most battle-tested protocols.

It is important to note that having these funds pre-approved does not mean they will be used indiscriminately. Actions will only be taken when attractive opportunities arise that align with the DAO's mission, with a steadfast focus on ensuring long-term sustainability.

APPROVE this proposal to authorize the Treasury multi-sig holders for treasury management activities, including yield-generating strategies, with no predefined monetary limit or end date.