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Investor Strategies and Possible Outcomes
By design, the $PRO token exposes investors to a curated asset portfolio that is actively managed to hedge against the market risks.
Peak Finance has three primary states that dictate what options are available to investors at any given point in time. Investor strategies depend upon the protocol’s condition determined by the following factors.
During an uptrend, risks to Peak Finance and Prometheus treasury are minimal. New liquidity entering an ecosystem tends to bring elements of temporary stability. $PRO stakers will likely print $PEAK during this time and diversify their take profit strategies according to their risk profile.
During a downtrend, Peak Finance and Prometheus treasury risks are indeed more profound, as is the case with all DAO treasury arrangements. The primary point of difference is during this time. Aeacus Capital will actively seek to risk-off assets, down-trade the market, and manage reentry into favorable positions ‘when a bottom is in’. Hedging into stable coins and commodities is likely but is not a given during this period. During significant exit liquidity events, particular asset classes may still often outperform the market.
$PEAK TWAP is greater than 1.05. $PEAK printer on. Expansion Epoch.
When TWAP of the $PEAK peg is greater than 1.05, the value of $METIS, the $PEAK printer gets switched on for $PRO stakers. During this time, investors have several strategies they can implement. An optimal process for ensuring sustainability would involve $PRO stakers printing $PEAK to sell half into $METIS. From here, investors can LP stake the remaining $PEAK with acquired $METIS to increase the depth of the liquidity pool and receive emissions of $PRO.
When TWAP of the $PEAK peg is between 1 and 1.05, the $PEAK printer gets switched off for $PRO stakers, but emissions continue for the treasury. All $PEAK acquired during this time will be made available for future bond redemption.
When TWAP of the $PEAK peg is less than 1, the $PEAK printer gets turned off, and bonds ($PONDS) are available for purchase. $PONDS can only be obtained with $PEAK in a closed market with a fixed 1:1 ratio. For example, if the peg of $PEAK drops to 0.90, the value of $METIS, investors can purchase $PEAK at a discount and use it to obtain $PONDS. These $PEAK get burned from circulation. Once the peg is back above 1.05, investors may realize a 15% gain of $PEAK upon Bond redemption. The longer bonds are held, and the further the peg goes above 1.05, the more $PEAK received from redemption.
$PRO will have utility beyond $TSHARE and the numerous forked projects. The utility is realized through exposure to an actively managed portfolio that ensures stability and increases the floor price of $PRO. Bonds are a low-risk yield opportunity, and $PRO stakers that accumulate $PEAK without aggressively cashing out of the ecosystem are at a particular advantage through the acquisition and redemption of $PONDS.
There is plenty of incentive to stake $PRO to print $PEAK, and the risks present themselves when the protocol goes below the peg. If we use Tomb Finance as a reference point, it is common for users to take their $TOMB emissions to purchase $TSHARE. However, $TSHARE loses its utility with $TOMB going below peg. When this occurs, investors that do not have enough $TOMB to purchase $TBONDS will likely sell some of their $TSHARE. Regardless of these activities, printed $TOMB is often used to buy $TSHARE while above peg, and the seigniorage proceeds from Bond redemptions may also purchase $TSHARE.
As mentioned above, $PONDS primary function is to remove excess $PEAK from circulation. There are sustainable strategies whereby investors can realize profits by printing $PEAK and leveraging bonds when the peg is lost.
Keeping a reserve of $PEAK available, or purchasing from the market, allows the investor and Prometheus treasury to obtain $PONDS at a rate below the $PEAK peg. Once peg has been reestablished and is greater than 1.05, they can compound their previous $PEAK printing activities by $PEAK redemption from $PONDS.
Aeacus Capital is a responsible asset manager that ensures Peak Finance can sustain seigniorage operations. However, Aeacus Capital is also outward-looking. Suppose the market conditions are unfavorable for higher-risk investments, as seen by the seemingly countless market-wide corrections. In that case, Prometheus treasury will shift non-native holdings to risk-off assets and $PRO. Once the market stabilizes and at the discretion of Aeacus Capital, previously closed positions may be reopened. Some risk-off treasury assets may also be used to apply to buy pressure to $PRO. These hedging activities will not be disclosed until the monthly treasury report is published to prevent front-running.
One of the most exciting unique selling propositions of Aeacus Capital is achieving mutual exposure to DAO Treasury assets. While Prometheus treasury may, at Aeacus Capital’s discretion, invest into external DAO treasury tokens for exposure to their portfolios, DAO treasuries can also allocate their capital for Aeacus Capital to manage on their behalf. This AUM-as-service model and Prometheus portfolio investing into these DAO treasuries effectively lay the groundwork for $PRO to operate as an index fund for DAO treasuries. A bet on $PRO is a bet on the success of DAO Treasuries going into the future.