NFTX DAO considers spending idle treasury assets on liquidity

NFTX DAO appears to be open to the idea of channeling some of its idle treasury assets towards increasing buy-side liquidity for treasury-held collections on Uniswap V3.

Members of NFTX DAO are currently mulling over a proposal to use some of the group’s assets to increase liquidity. According to core team member 0xChop, the DAO has primarily used its treasury to supply liquidity for well-known NFT projects like CryptoPunks and to provide liquidity for its own governance token against ETH. As a result, a significant portion of its treasury is held in NFTX vault tokens. While this has gone a long way in keeping treasury management risk-averse, there are new types of liquidity pools in the DeFi space.

“Single-sided LPing on Uniswap V3 can be used to increase liquidity to the upside of these collections, lowering slippage significantly for buys and/or swaps through NFTX,” 0xChop noted in his proposal. He explained that there was an opportunity to generate fees from AMM trading, gather AMM performance data for the deployment of NFTX v3, and add buy-side liquidity for some of NFTXs’ treasury-held collections, such as CryptoPunks.

On the flip side, there is the risk of potential impermanent loss against holding PUNK due to volatile market swings, as well as additional protocol risk exposure from the decentralized exchanges the protocol provides liquidity on.

If approved, the DAO would “migrate PUNK/WETH from Sushi V2 towards a Uniswap V3 position at 0.3%, add a 25 PUNK single-sided CL position at 1%, add 6 GLYPH single-sided CL position, and divide 25 PUNKS over Balancer v2 & Kyber Elastic pools, to compare performance & aggregated volume against Uniswap V3.”

Voting at the forum stage is currently ongoing, and so far, all eight votes have been in support of the idea.

Update: The proposal was passed on January 11 after a Snapshot vote.

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