I am proposing to divest Instadapp’s $MORPHO position and use the proceeds to buyback $FLUID.
Context
As a heavy and early user of Morpho via the DeFi Smart Layer (DSA) product, Instadapp has farmed a sizable $MORPHO position over the years which recently became tradeable with the $MORPHO unlock event.
To sustain Fluid’s strong momentum we propose that the entirety of the proceeds of the sale of $MORPHO tokens be used to buyback $FLUID via a 30d TWAP.
A higher $FLUID price helps attract more deposits into Fluid. Fluid is experiencing fast growth and must continue to attract capital into its protocol amidst a very competitive marketplace with numerous competitors splashing around high incentives. Low borrow rates are especially important to bootstrap the Fluid DEX. Lastly, as a newer protocol, it’s crucial Fluid continues to attract new users to familiarize themselves with the unique mechanics of the protocol.
Specification
I propose the sale is executed through Wintermutes OTC desk which Fluid already has a relationship with. Wintermute has an excellent reputation and guarantees swift execution.However, if the team finds other options to divest the tokens to be cheaper, they are free to explore those options.
The $MOPRHO tokens would be sent to a team multi-sig and the Fluid team will execute the rest of the transaction.
Interesting. In short, I will be in support for this proposal if this doesn’t create any sudden issue to Morpho.
Fluid governance holds about ~0.14% of MORPHO tokens, which is not very significant to have any influence over Morpho protocol so imo it’s more like an investment for Fluid’s governance.
When 100% of treasury is kept in own tokens it never ends well. As far as I understand right now 99% of Instadapp treasury is in FLUID tokens and most of the protocol revenue is converted to stablecoins to incentivize lending on Fluid. What’s the point to buy more FLUID? To let mercenary traders to frontrun and profit from this transaction? Bad idea. It’s better to keep MORPHO in treasury or convert it into other tokens (bluechips and/or stablecoins) to diversify and strengthen Instadapp treasury.
As a FLUID holder, it’s important to highlight that Morpho operates as a governance-less protocol with immutable vaults, taking a “Uniswap-like” approach. This model relies on creating the perception among investors that they might eventually activate a fee switch to generate revenue. This is unsurprising, given that both Morpho and Uniswap share a common lead investor, a16z.
The issue with both Uniswap and Morpho is that any fee switch would directly reduce LP revenue and in Morpho’s case, it would also cut into the revenue of their risk curators, who currently claim 100% of the protocol’s earnings. This dynamic creates a high risk of forks, as curators may fork the protocol to avoid sharing revenue with the platform.
Additionally, Morpho’s business license makes their protocol open-source if a fee switch is activated, further exposing them to the risk of being forked by their primary risk curators. This makes the activation of a fee-switch extremely unlikely. As a result, there’s a low chance the Fluid DAO will see any yield from these tokens.
Moreover, Morpho is not a true DAO, and there is no significant avenue for participation in their governance, so the option of keeping these tokens for participating in governance makes little sense.
Given these considerations, and the fact that the Instadapp DAO already holds a large amount of FLUID tokens, we support the idea of building cash reserves by selling these tokens for USDC/GHO and using them to LP directly in FLUID to generate yield.
This strategy ensures that the DAO generates yield and provides funds that could be invaluable in the next bear market.
Support selling MORPHO but also don’t think it makes sense to buy back FLUID. That money would be much better used if swapped into BTC or USDC and put into Fluid by the treasury like a protocol owned liquidity.
Buybacks are good short term against sell pressure but it turns the treasury essentially into exit liquidity for whoever has a big bag and can be selling, this includes risk of getting exploited by market makers who recently took token loans from treasury.
I agree with this but in this case i think it’s okay to sell for $FLUID for two reasons:
to sustain the price while liquidity mining rewards are being issued - a higher $FLUID price has a positive effect on TVL and therefore Fluid’s revenue
Fluid is already building up a treasury via Fluid TVL and Lite TVL close to 9m annualized atm.
That said if there is significant disagreement on this I am also happy if this is sold for $USDC or $ETH.
Do you think that - in principle - Fluid should use their treasury funds to support the $FLUID price through discretionary buy backs on the open market?
I don’t think a $5M TWAP on FLUID is really going to move FLUID’s price tbh and moreover this is just a short term effect. We should be thinking about the long-term and acquiring USDC/GHO/ETH etc. is much more valuable
The reason we have been incentive users with $FLUID is because of the lack of lenders due to competition, right? Let’s figure out whether $USDC, $ETH, $BTC, or $GHO have the highest liquidity issue. We can liquidate $MORPH and provide the liquidity to that pool. That would help with the protocol’s growth and earning.
Yes, this is the most popular way for projects to let value flow back to the token.
The better question is when is the right time to do it.
I am not in a rush to see it happen for Fluid as it’s such a young protocol and can spend the revenue on more value accretive things…
But as this is quite literally an airdrop fallen from the sky, I think it would be a nice signal to token holders that the Team is supportive of these buybacks.
IMO, the DAO’s Treasury funds should be primarily used to drive protocol growth. Distributing funds to token holders, including via buybacks, should only be considered once all high-impact growth initiatives have been exhausted.
The $MORPHO tokens are part of the treasury. Just because they were farmed doesn’t mean they should be treated differently from other holdings — that would be a form of mental accounting bias. Treasury assets should be viewed holistically, with the overarching goal of maximising long-term value creation for the protocol.
The proposed buyback may provide short-term price support for $FLUID, but does not contribute to Fluid’s long-term competitiveness. It’s essential that we maintain focus on deploying treasury funds to initiatives that can increase protocol adoption and generate sustainable value.
@DMH and @samyak have already proposed a buyback mechanic. Let’s prioritise reaching those trigger points through growth-focused initiatives rather than depleting treasury reserves for immediate short-term price support.
Buying $FLUID as originally proposed can also be good considering $FLUID is also being distributed as rewards for growth.
Buying ETH or stables can also be good as we use stables as rewards as well and it’ll build more liquid treasury.
Seeing the conversation here from community it seems everyone is more inclined towards building up more liquid treasury so we can go ahead with that. If needed in near future, governance can anytime do a buyback of $FLUID from liquid treasury, specially with the buyback program coming soon once Fluid hits consistent $10M in yearly revenue.
