Wintermute <> INST/FLUID Liquidity Provision Proposal

Governance
1

Summary

Wintermute is requesting a loan of 700k INST/FLUID tokens from the DAO’s Treasury to provide liquidity across various decentralised and centralised exchanges. The 700k INST/FLUID tokens will be transferred from the DAO Treasury to the Instadapp Team’s multisig and then transferred to Wintermute’s wallet.

Context

The recently published “Rebranding and Growth Plan for Fluid Protocol” proposal outlined various goals, growth plans, and a vision for Fluid Protocol. To achieve these goals, the Instadapp/Fluid Team outlined a strategic allocation using 12% of the DAO’s Treasury Funds which included a 2% allocation to Market Making initiatives.

Currently, the only way to acquire a sizeable amount of INST is through decentralised channels which at times has had insufficient liquidity due to the increased demand for the token. While the Instadapp/Fluid Team has been working to improve this situation, only having decentralised channels to acquire INST/FLUID makes it inaccessible to a lot of users and institutions.

Through our partnership, we aim to make INST/FLUID more accessible to gas-sensitive users, institutions, high-net-worth individuals, and potential investors through centralised and decentralised channels.

Proposal

Wintermute’s Basic Background:

Wintermute Trading is a leading crypto-native algorithmic trading firm, specialising in creating efficient markets across centralised and decentralised exchanges. Wintermute was founded in July 2017 by three Optiver veterans. Evgeny Gaevoy, founder and CEO, was previously head of ETFs (screen and OTC) at Optiver Europe, one of the largest ETF market-making desks. Since our inception, we have traded over $5.4T USD in volume and expanded our presence across 80+ (de)centralised exchanges and various (non)EVM chains, continuously supporting the ecosystem for our partners and their communities.

Alongside our trading arm, Wintermute Ventures and Wintermute Governance support and work with leading crypto projects with the goal of truly adding value, enabling partnerships, and helping shape a positive outcome for the ecosystem. Importantly, we do not target large ownership stakes; decentralised ownership is an important prerequisite to transitioning to a robust future.

Specification

Our Ask:

Wintermute is requesting a loan of 700k INST/FLUID for 1 year from the InstadappDAO Treasury for liquidity provision purposes.

Wintermute’s INST/FLUID Loan Plans:

  • Proactively guide discussions and support listings of INST/FLUID on key exchanges on day one and going forward.
  • Provide liquid markets across major centralised exchanges (once listed).
  • Provide liquidity across DeFi aggregators such as CoW Swap, UniswapX, 1inch, Bebop, Airswap, and Hashflow.
  • Be the go-to liquidity provider for any OTC & Institutional flow, providing competitive prices for tickets $100k+.
  • Borrowed INST/FLUID will be used exclusively for liquidity provision purposes. No farming, lending, governance, etc.

Loan Return:

Wintermute Trading will return the full 700k INST/FLUID loan amount at the end of the 1-year loan term to the Instadapp Team’s multisig OR exercise the repayment option below.

Repayment Option:

The repayment option allows Wintermute Trading to purchase INST/FLUID from the loan amount on the respective loan expiry date at the strike prices specified below.

Loan Strike Prices:

  • 700k INST/FLUID @ $10

Should Wintermute Trading choose to exercise our repayment option, the value of the loan at the strike price will be returned to the Instadapp Team’s multisig in the form of USDT or USDC assuming a USDC/USDT price of $1.

Implementation Plan

Assuming the Rebranding and Growth Plan for Fluid Protocol proposal is successful and the Instadapp Team receives funds from the DAO Treasury as outlined in the proposal. The Instadapp Team will then facilitate the transfer of 700k INST/FLUID from the Team’s multisig to Wintermute, pending approval of this proposal.

Voting Options

For: Approve Wintermute’s Liquidity Provision Partnership

Against: Reject Wintermute’s Liquidity Provision Partnership

11 Likes
2

I am in favour.

Although I don’t see a big value-add in increasing liquidity on-chain as it’s already well addressed with Fluid’s recent POL proposal - I do think that Wintermute is an excellent partner for OTC/CEX liquidity of $FLUID.

The strike price in the repayment option is also reasonable!

6 Likes
3

+1 and doesn’t the team already working with t1 exchange for potential listing?

1 Like
4

that’s not mutually exclusive i think

typically CEX’s decide to list and then ask the team if they have an anchor MM that will provide liquidity on their orderbook - if the answer is no it’s most likely a deal breaker for the exchange

2 Likes
5

The strike price seems quite low.

4 Likes
6

This proposal doesnt make sense and provides little value for Fluid.
Here’s good overview of MM models: x.com
Industry standard for Loan & Call option model:
“To calculate a strike price, the industry standard is to use the TWAP (time-weighted average price) of your token over the first 3 to 14 days post-listing. Then, add a premium of 30% to 200% on top of that. 24/38”
Do we expect that FLUID TWAP price after listing on tier-1 exchange will be $3.3 - $7.7? Really?
POL is deployed now on Uniswap in $7-$50 range that is much better estimate of FLUID fair value.
Finally we can use 2025 goals in term of TVL and volume to estimate fair value of FLUID token. I think it’ll be $50+ depending on ratios.
Actually it’s much better to implement retainer model for market making of FLUID and keep potential upside for DAO.

7 Likes
7

Wintermute is one of the most respected MM companies in crypto and working together is a positive signal to the market.

It’s true that INST/FLUID lacked liquidity on chain but the team is partially addressing it with the new proposal by adding LP at the $7-50 USD range.

It’s also true, as @litocoen said, that CEXs need an anchor MM and Wintermute recent partnership with COW worked out well (COW listed on Binance).

Yet $10 strike price is low. It either comes from lack of conviction in Fluid’s future or a low ball bet to start the negotiation.

I’d love to have this partnership started, but is $10 the best the DAO can get?

8 Likes
9

I agree with everyone else on the strike price being too low.
While i think that this partnership is a win-win, i see it more of a win from Wintermute´s side than Fluid´s.
It´s true that liquidity has been a topic for quite some time, since inception i would say, and it´s nice to see this finally being addressed after getting PMF, but i think Fluid would be underselling at this strike price.
I think a more fair strike place would be on the range of $25-30.

2 Likes
10

Partnering with wintermute is for sure beneficial but $10 strike price would not be in the best interest of DAO.
The Strike price must be much higher than this.

11

Supportive of this proposal!

I understand the others’ concerns about the strike price, but it’s kinda weird that there was basically no pushback when we sold 1% of the token supply to Aave at a $350M FDV lol? I know dynamics are a little different here, but still

Personally, I think the strike price is fine. The DAO is ultimately paying for a service and from what I’ve seen wintermute does a great job

12

Hi everyone,

Thanks for all the comments!

We’d like to reiterate that this partnership is more than just liquidity provision and is the start of a deeper collaboration between the DAO and Wintermute.

As part of this partnership, we will be integrating Fluid DEX into our trading systems which should likely begin driving significant volume to current and future Fluid pools. This means more volume, more fees, better yield for users, and a quicker path to reaching Fluid’s $10M annualised revenue target and beyond.

This is just the beginning and we look forward to working closely with the DAO and the Fluid Team on future initiatives!

3 Likes
13

Thank you everyone for the comments

We see our collaboration with Wintermute as something bigger than just a market-making deal. One of the most important parts of it will be Fluid DEX integration into the WM trading strategies which will significantly improve the performance of the current pools, increase their attractiveness for the users, and as @WintermuteGovernance mentioned, increase Fluid revenue.

Furthermore, Wintermute might play an important role in all our future protocols including uncollateralized borrowing protocol, DEX v2 and others.

I am supportive of this proposal as it is will bring a lot of benefits to Fluid irrelevant of the strike price.

7 Likes
14

I think overall a strike price of $15-20 would be more appropriate given market conditions.

This would:

• Still protect Wintermute from significant downside
• Give the DAO better upside participation
• Better reflect the growth potential over 12 months
• Maintain sufficient incentive for Wintermute to provide quality liquidity

However, I feel like onboarding a market maker asap is probably more important than haggling over strike price for ages, so I probably would vote in favour.

6 Likes
15

Totally in support for this proposal. While strike price might be low, I’m more excited about the integration of Fluid DEX on Wintermute trading.

Currently, Fluid is deeply integrated with most of the major DEX aggregators but is lacking on CEX <> DEX arbitragers integration like Wintermute. With Wintermute being the biggest player in the industry it can bring significant amount of volumes to Fluid DEX once the integration goes live.

Currently, Fluid DEX can have 2-3x more volumes if it’s supported everywhere in the industry. This will be a great start towards achieving that and making Fluid 2nd biggest DEX on mainnet & L2s over next 2 months and hopefully biggest DEX by the end of 2025 with DEX v2.

9 Likes
16

I believe this partnership is a significant win for the Instadapp community. Combining liquidity provision with the integration of Wintermute’s trading system in a single proposal creates a valuable synergy.

That said, I would like to raise a concern regarding the suggested Loan Strike Price proposed. In my opinion, the Expected Value of Fluid protocol is strong enough to justify pushing back on this price. As it stands, the proposed terms seem to favor Wintermute, creating what feels like a risk-free bet for them—allowing them to capitalize on the upside while assuming minimal risk on their side of the agreement.

I encourage the community to discuss and consider negotiating a better balance in the terms to ensure a more equitable deal.

1 Like
17

CEX <> DEX arbitragers will invest their own money to integrate with Fluid because Fluid will provide better quotes than other dexes → higher arbitrage profits. Actually Wintermute should pay to Fluid, not vice versa )

3 Likes
18

I agree with dknugo, Wintermute benefits from the integration not the other way around. A simple black scholes shows the value of the option at $2 mio, do we think its worth it?

3 Likes
19

Wintermute Trading is a great name to partner with in the MM space.

I do feel the terms in the Loan Plan are quite high-level:

  1. Proactively guide discussions and support listings of INST/FLUID on key exchanges on day one and going forward.
  2. Provide liquid markets across major centralised exchanges (once listed).
  3. Provide liquidity across DeFi aggregators such as CoW Swap, UniswapX, 1inch, Bebop, Airswap, and Hashflow.
  4. Be the go-to liquidity provider for any OTC & Institutional flow, providing competitive prices for tickets $100k+.
  5. Borrowed INST/FLUID will be used exclusively for liquidity provision purposes. No farming, lending, governance, etc.

Question to Wintermute:
a. Can you explain what you mean by “proactively guide discussions”? Which exchanges do you consider “key exchanges” for Fluid and why?
b. Can you operationalise what you mean with “liquid markets” under #2 with a set of KPIs?
c. Can you operationalise what you mean exactly with “provide liquidity” under #3 in terms of key metrics?

No comments on #4 and 5.

The terms as they are currently described it is hard to judge the value that Wintermute will bring. If Wintermute clarifies the terms, the strike price might be warranted. Tightening up the wording would help with evaluating the proposal.

2 Likes
20

I was about to write something but then I have seen dknugo doing a better job than what I would have written.

This strike price show low confidence from the team in what Fluid will achieve in a year from now. It’s Wintermute that has to pay FLUID and not viceversa.

2 Likes
21

Agreed that the cost/benefit of this deal doesn’t make sense. Negotiate for a better strike price.

4 Likes