First Mover Asia: BitDAO’s $100M Token Buyback Plan Gets Mixed Reviews
Good morning. Here’s what’s happening:
Prices: As the end of the year approaches, there's growing speculation that more digital-asset investors might eschew altcoins in favor of major currencies like bitcoin and ether, rotating toward a defensive allocation.
Insights: BitDAO's proposed token buyback plan gets mixed reviews.
With bitcoin listless, crypto investors look ahead to 2023
By Bradley Keoun
There's neither energy nor much enthusiasm in crypto markets as traders head toward the end of 2022.
Bitcoin (BTC), the largest cryptocurrency, was softening a touch into the early Asia trading day, though was still up 0.6% over the past 24 hours. Ether (ETH), the native cryptocurrency of the Ethereum blockchain and the second-largest overall, was up 1.4%.
Gloom pervades digital-asset markets as the crypto industry recovers from this year's stunning collapse of Sam Bankman-Fried's FTX exchange, while the Federal Reserve, Bank of Japan and other central banks are continuing to ratchet monetary conditions tighter, even as signs mount that the U.S. economy might be heading into a recession next year. (ICYMI here is CoinDesk's fourth-quarter Market Outlook published Tuesday, spotlighting the performance of the CoinDesk Market Index and sectors.)
"Bitcoin’s rally is somewhat unimpressive as crypto traders continue to remain in wait-and-see mode over what will be the next big crypto domino to fall or if we get any clearer guidance over the regulatory front," Edward Moya, senior market analyst at the foreign-exchange broker Oanda, wrote Tuesday.
Jeff Dorman, chief investment officer at the digital-asset manager Arca Funds, wrote in his newsletter this week that "while I do think the bottom is in, I don't know what sends us higher."
There's growing speculation that the biggest cryptocurrencies – bitcoin and ether, mainly – might benefit from the market malaise, as investors rotate toward defensive positions.
"We expect digital asset selection will transition towards higher quality names like bitcoin and ether based on factors like sustainable tokenomics, the maturity of respective ecosystems and relative market liquidity," Coinbase Institutional Head of Research David Duong wrote Tuesday in a report. "We think investors’ willingness to accumulate altcoins has been severely impacted by the deleveraging in 2022 and may take many months to fully recuperate."
BitDAO’s $100M token buyback proposal spurs community concerns
By Shaurya Malwa
Community members of BitDAO, a decentralized autonomous organization (DAO) focused on driving adoption of its native BIT token ecosystem, this week proposed to set its Target Daily Purchase Amount (TDPA) at 2 million USDT per day for 50 days starting Jan. 1, 2023.
The purchase amounts to a total purchase of 100 million USDT of BIT. BitDAO is styled as an open platform for proposals that are voted on by BIT token holders, and is agnostic to chains and projects, as per technical documents.
According to the proposal, the recommended priorities for BitDAO capital deployment include high priority for BIT-related products and low priority for swaps and investments, as well as yield strategies.
The DAO's treasury currently holds 300 million in USDT and USD Coin (USDC), and 270,000 ether (ETH), valued at approximately $345 million, which is expected to be sufficient to cover at least five years of BIT product development.
BitDAO community members said that the original strategy for the collective was to grow the treasury via direct investments and the creation of BitDAO-like entities (sub-DAOs / autonomous entities) and investments.
However, that strategy had a “questionable impact” on driving outcomes for BIT. “The most performant DAOs (Lido, Aave, Uni) have been centered on underlying core products that have large addressable markets and longevity,” the proposal stated, calling for higher priorities on “core products” related to BitDAO instead.
One such core product is the upcoming Ethereum layer 2 network Mantle, the proposal said. The initial development of Mantle has been bootstrapped by Bybit, one of BitDAO’s key backers, with the next phase being a DAO proposal and budget cycles for expanded development and go-to-market activities.
The proposal also recommended against pursuing complex financial derivatives such as swaps and investments that do not have strategic outcomes for BIT. The lack of flexibility for DAOs to negotiate competitive deals and limited options for post-investment legal and governance involvement once funds have been transferred were listed as key reasons for such a dissuasive move.
Additionally, the proposal advised against participating in yield strategies due to the high systemic risk in the crypto market and the difficulty in calculating fair prices and slippage for altcoins. The risks associated with capital deployment and liquidity constraints when unwinding positions are also cited as reasons for caution.
What is the community saying
Responses on the currently live proposal remained mixed as of Wednesday morning.
“It is not a good idea to buyback at this price level,” one community member said, citing BIT’s token prices remaining above the net asset value of a basket of underlying ether, USDT, and USDC.
“I’m afraid I have to disagree,” another poster said. “We should constantly buy back and burn. BIT tokens still don’t have demand, if we don’t buy back and burn BIT tokens will go to zero. Buyback and burn at least 2024 because every month 180 million tokens will release (sic).”
Some community members pointed out crypto exchange Bybit’s upcoming token incentive program as a cause for concern. “I have reservations about this repurchase,” wrote one member. “Bybit is about to issue a year-end bonus of 92 million BIT. At this time, BitDAO proposed to repurchase it, giving people the feeling that the treasury will pay for the year-end bonus.”
3:00 p.m. HKT/SGT(7:00 UTC) Germany Gfk Consumer Confidence Survey (Jan)
9:30 p.m. HKT/SGT(13:30 UTC) Bank of Canada Consumer Price Index Core (YoY/Nov)
11:00 p.m. HKT/SGT(15:00 UTC) United States Consumer Confidence (Dec)
In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:
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