This proposal authorizes the Odos team to actively manage and rebalance $ODOS liquidity on Aerodrome to optimize token liquidity, fee generation and protocol revenue. The goal is to reduce idle capital, restore on-chain liquidity depth, and support sustainable DAO revenue without causing undue market impact. This proposal result will be evergreen, allowing for continuous, incremental rebalancing in alignment with market conditions. However, any significant deviations from this plan (e.g. larger reallocations of greater than 10% of the liquidity pool at once or strategy shifts involving increasing the pace / reducing the pace of rebalancing) will still require separate DAO approval.
Motivation
The Odos DAO currently has ~$100K of protocol-owned liquidity deployed on Aerodrome. At present, the position is entirely out of range, meaning it is not earning any trading fees or yield. With an APR of 4,717%, the DAO stands to lose approximately ~$10,000 per month by not actively managing this position. A simple, dynamic model highlighting calculation this can be shown here.
Additionally, because the liquidity is out of bounds, on-chain liquidity for $ODOS is significantly reduced, which negatively impacts user trading experience and protocol perception.
Without rebalancing:
The DAO forfeits a meaningful source of revenue
Capital efficiency is significantly reduced
On-chain liquidity becomes artificially shallow, increasing slippage for traders
$ODOS token holders indirectly bear the opportunity cost of idle treasury assets
Rebalancing Strategy
Timing: Will target daily, but may skip certain days based on volatility, to reduce price impact
Sizing: Rebalance incrementally, up to $1–2K USD per day (but often less based on market dynamic)
Mechanism: Adjust the liquidity range to ensure active fee capture
Execution: All rebalancing will be done transparently via onchain transactions, with weekly summary reporting provided by the DAO made available in a Dune dashboard
This approach ensures:
Minimal sell pressure on $ODOS
Sustained on-range liquidity for efficient trading
Ongoing passive revenue through fees and yield
Revenue & Liquidity Impact
Based on our modeling, APR conditions will likely drop after the liquidity is fully migrated. However, the DAO can still expect to recover $5K–$10K per month in otherwise lost revenue. This income can be used to:
I agree that supporting liquidity is important, but it’s also a reflection of how the project’s value is being signaled. Thin liquidity goes both ways, it enables faster price recovery but also accelerates declines as folks reduce exposure.
Currently, it seems this setup primarily benefits those exiting vesting or loyalty reward positions, especially if the token is indeed undervalued. This comes at the potential cost of impermanent loss to the DAO.
Separately, the expected return assumptions seems misaligned with actual outcomes:
Modeling expected returns on tail assets is difficult but I suggest we be more conservative on expectations.
I have a few knee jerk questions after reading this proposal:
Are rewards expected via gauge voting? If so, does Odos currently hold a veNFT or plan to acquire one (or purchase votes)?
How tight will the liquidity tranches be? Do you have specific ticks in mind? Is there an objective function guiding these bounds or will they adjust based on sentiment, price, or volume?
If the market recovers and the position pushes out of range, is there a plan to rebalance upward, remove liquidity, or maintain base tranches until a new vote?
Thanks @Pull did you play with the model I posted? This shows the range of outcomes based on different APY ranges and deployment capital amounts so you can see how the numbers are being calculated. The average daily trading volume numbers I used are pretty reflective of long term average I’d say; maybe even on the conservative side when looking at our current pool.
This is a very good point, we currently do not hold a veNFT or plan to acquire one. The Aerodrome NFT is currently not staked, because we’re currently generating quite a bit from the liquidity pool rewards alone, and I believe this is a good way to continuously accumulate both $ODOS tokens as well as stables. The alternative is to stake and earn the yield in $AERO → I wouldn’t want to lock this up though as the DAO treasury doesn’t have 1 year of runway at the moment. The focus for the treasury is to build up to 1 year’s worth of runway before experimenting with rewards in such a way.
We would be simply rebalancing into the existing liquidity pool that we have on Aerodrome, which is the CL100 pool.
Yes, so I didn’t do the calculation top-down based on the yield. I built it bottom up. Therefore, it was calculated based on the fees, the average trading volume of the pool, and what percent of the pool we comprised. So I’m not running any calculations on displayed yield, but the actual fees that are being generated.
If you stake, you don’t get the ODOS / cash rewards though. But you are right in that staking typically generates more APR. And we can sell the AERO on a daily basis into the split.
Please consider, instead of creating minimal selling pressure, creating no selling pressure at all. The treasury might use the portion of revenue denominated in USDC to rebalance its position.
The rebalance will affect the ARP. Liquidity will become deeper, the price will be less volatile, and there will be fewer speculative swaps, resulting in less generated fees.
