Genegated on the prompt: “Female church minister takes control by her own hand”
The expansion of The Holy CyberChurch into new networks will result in the accumulation of new assets in The Church’s Treasury.
To address this, we require a comprehensive asset management strategy, encompassing both the overall Treasury and the individual assets in the portfolio.
Currently, the entire treasury comprises assets from the Bostrom Network: BOOT, H, A, and V. We have tasked MIA, our digital analyst, with devising a strategy for these assets.
The network natively uses a variety of assets:
|BOOT||Basic network token|
|Hydrogen (H)||LSD on the main network token|
|Amper (A)||Utility Token|
|Volt (V)||Utility Token|
Each asset has its own market and programmable network parameters:
|Yield from BOOT staking, APR||16.9%|
|BOOT token lock up||8 days|
|Yield from H staking, APR||8%|
|Price BOOT, H||6.6|
|Price A, H||3992916|
|Price V, H||37394057|
At the time of strategy development, the network lacks product-market fit, resulting in no organic demand for utility tokens. There are no tools in the ecosystem to open a short position on assets.
Develop a risk-free asset management strategy to maximize capital accumulation while maintaining liquidity (maximum funds lock-up period of 30 days).
Analysis of possibilities:
Maximizing Earnings. The Bostrom network team has implemented a model for maximizing online earnings. However, this model is not risk-free and relies on subjective expectations of the optimal price for each token.
Even if it includes insider information on target/expected values, we cannot use it due to the prohibition on taking additional risk.
Derivatives. LSD. An important criterion for assessing the potential of derivative assets and the financial health of an ecosystem is its creditworthiness score. The Bostrom network has a native LSD (H token), which is by design a liability of the network for the ability to take the underlying token out of the staking. Accordingly, its market price reflects the value of liquidity in the ecosystem and is calculated using the formula:
liquidity (H) = value of the staked asset (BOOT) + return on staking of the asset
Considering the short BOOT lockup (8 days) and the size of the annual return, a healthy measure of the Bostrom ecosystem can be considered H ≈ BOOT, where the difference in asset price reflects current financial activity. When evaluating economic activity based on the LSD token value, a simple rule can be followed: the higher LSD price relative to the staked asset, the greater the economic activity and capacity in the system, and vice versa.
The current BOOT price is 6.6 H, or H = 0.15 BOOT (fifteen cents per dollar bond). This suggests that the system is over-leveraged and lacks demand for liquidity.
This situation can be attributed to the project’s lack of product-market fit. As a result, the in-house market utilized margin leverage to support the network’s main token price in search of growth. However, this implies both an inflated valuation of the main token and an inability to sustain the price through internal leverage mechanisms in the near future.
Utility tokens. Due to the absence of utilitarian demand for network usage and the cost of obtaining them (8% p.a. for staking H token), tokens A and V have no investment value.
Based on the analysis above, the investor has three strategy options, the calculations of which are provided in the “Bostrom Revenue and Price Model” document:
- Stake BOOT → Buy BOOT with H → Stake BOOT x 3 times (resulting in a return of 20.9%).
- Stake BOOT → Invest H (return of 25%) - current strategy.
- Convert BOOT to H → Invest H (return of 47%).
The first strategy is not only the lowest-yielding, but it also introduces the additional risk of future H-price increases and the inability to withdraw BOOT tokens from the stake.
The second strategy yields an actual capital gain of 2-3% due to the continuously decreasing price of utility tokens.
The third strategy is not only the most profitable but also provides additional leverage in case H tokens return to their nominal value. The sole risk in the strategy is the opportunity cost arising from the potential growth of utility tokens. At present, there is no fundamental basis for their organic growth.
Hydrogen (H) in this case can be thought of as a no-delivery futures that the price will come to par with an upside to BOOT’s price.
The bottom line is that either the seller of H is misguided, or they possess inside knowledge and believe the buyer is uninformed, or, more likely, the artificial intelligence is unable to accurately calculate the tricky economics of a web3 project (unlikely). In the context of traditional finance and rational investment behavior, the current 85% discount for the right to withdraw the token from staking appears illogical and exceedingly unfavorable for the seller.
Under these conditions, the optimal strategy is as follows:
- Stake BOOT.
- If H price < BOOT price, allocate 50-100% of the yield from staking the BOOT token to purchase H.
- Stake H with a lockup of 7—30 days.
- Sell the earned tokens A and V from staking H in the market for H and BOOT in a 50/50 proportion.
It is important to understand that the return of the LSD price to its nominal value is unlikely to occur without additional liquidity from external markets. Without such liquidity, the deleveraging of the entire ecosystem may be necessary, resulting in a decrease in the price of the main BOOT token relative to external markets.
Consequently, there are limited profit opportunities within the ecosystem. Since there are no tools available to establish a short position on assets, short-term strategies are likely to be unprofitable unless there are external injections of liquidity.
Given the unprofitability of short-term strategies without external injections of liquidity, the most viable strategy for generating a profit is to raise external capital that is designed for long-term return on investment.
When seeking external financing, it is important to communicate to investors that the capital raised will be primarily used to deleverage the internal financial system. This means using the funds to reduce the level of indebtedness within the ecosystem and stabilize its financial position. Which in turn demonstrate the potential return on investment and the long-term benefits that can help attract new investors and increase the overall value of the ecosystem.
Considering these possibilities, the analysis be taken with caution, and investors should be mindful of the limitations of the AI-generated strategy. This analysis assumes constant token prices and staking yields. However, these factors may change over time, necessitating regular reevaluation of your investment strategy based on updated information. Regular reevaluation of the investment strategy and a thorough understanding of the project’s fundamentals are crucial to minimize risks and maximize returns.
The Treasurer of The Church has been directed to adhere to this strategy for the upcoming quarter and to provide a report on the experiment’s results.