The (9,9) Strategy (a , primer)
The (9,9) is a leverage strategy applicable to the Olympus ecosystem. Using sOHM as collateral, you’re able to borrow against your sOHM and purchase more OHM with it. This allows you to get a higher return from rebases as you are exposed to more sOHM. The higher the utilization rate, the stronger the effect is.
OHM & SOHM
“Olympus is a decentralized reserve currency protocol based on the OHM token. Each OHM token is backed by a basket of assets (e.g. DAI, FRAX) in the Olympus treasury, giving it an intrinsic value that it cannot fall below. Olympus also introduces unique economic and game-theoretic dynamics into the market through staking and bonding. Read more about the game theory aspect of Olympus in one of our blog posts.”
OHM, when staked, (sOHM) generates yield (see below).
Unlike other NFT protocols, where you simply buy the NFT for the art, or to speculate on the future price of the asset, incooom will allocate a portion of the sale into a 9,9 vault. This provides immediate benefits to the NFT holders:
- Exposure to sOHM: Unlike other NFT’s, which aren’t backed by any asset, INCOOOM assets are backed by a certain amount of sOHM, which are staked in perpetuity.
- Exposure to 9,9: in addition to the base 3,3 rate, the 9,9 rate allows you to obtain rebases on the leveraged sOHM, essentially increasing your yield per sOHM.
- Scale: The 9,9 strategy restricts certain people, especially the smaller players. This is due to the 1 ETH minimum that fuse imposes on users, as well as the gas prices in order to lever on abracadabra. Pooling together sOHM allows the 1 time gas fees to be spread out between everyone, reducing the burden of gas fees.
One risk to the 9,9 strategy is a risk of liquidation, where the collateral used to borrow is taken to pay for the loan. In addition with the fee given to the liquidator, this causes a huge loss in the collateral. In order to mitigate liquidations (while still providing the benefits of 9,9), we’ve developed the following guidelines:
- Incooom will utilize a net long sOHM strategy: As the team is comprised of long-term ohmies, we believe that OHM will achieve its goals as the decentralized central bank of DeFi. Our core strategy and performance gauges on utilizing .
- Incooom will employ a conservative borrowing limit: In order to mitigate risk, Incooom will limit the amount of leveraged used to a percent of total holdings. Preservation and risk mitigation are a crucial component of performance. Thresholds will be established, and we will de-leverage as needed.
- Incooom will target a % limit based on the health of Olympus: Metrics such as RFV/OHM, MV/OHM, %MV backing, and %RFV backing will be used to determine the % borrow limit. While we’ll be always leveraged to some degree, protocol indicators and macro market conditions will determine the timing and sizing of . An example of a indicator metric that is considered:
Like all assets, OHM is cyclical in nature. The goal is to mitigate risk on the downside, and increase risk on the upside for the great profit potential. Easy to say, much harder to execute. Using these metrics will give us an overall state on what market cycle Olympus is on, and how to capture the greatest return.
TEN-ONE ➞ 10X
As we approach October we will be publishing more details and updates to both strategy and roadmap. October we serve as our go-live of the 9,9 strategy. To kick off the month, we would like to invite you to join us in discord October 1st for a roadmap office hours and q&a as we prepare for an alfa filled 10X October.
To read up more specifically on RARI FUSE integration, check out our friends at the Agora Dispatch that covered the launch of 9,9 in JUNE.