What’s Up with FATExDAO’s PAXG?
FATEx’s PAXG recent strategy (not the theory behind why the DAO uses it) & how it helps members -2.28.22
****Please note the disclaimer at the end — NONE of this should be taken as professional investment/financial advice — please do your own research to make independent decisions, the contents are the opinion of the author only***
FATExDAO is the first DAO/DApp — DeFi liquidity pool capital contribution platform to offer PAXG… This isn’t going to explain why (we’ll get into that in another piece soon because it’s very important) this will discuss what the title implies.
Why is the price so high?:
To encourage members to bridge it!!! (Bridging costs, if you catch the right time have been fairly low — the past 5x the author bridged PAXG it cost approximately $20 in ETH) but if it is a little high… All good? Yup. So … Why do we keep the price so high…? à
- Not to sell it (and if you want to buy it… even if the price is +2x the general market price…. it’s totally fine…) — but to stake it with FATE. Why…?
Sure you can sell it and try and take advantage of the higher price, but until there is enough liquidity — you’re just going to hurt yourself if you’re a holder of FATE. (At the moment, the DAO Treasury strategy is not to provide liquidity for PAXG… It complements the current point, amongst others) Plus, gold is a good thing to have (its tokenization makes it quite easy to hold it — but we won’t go down that theme in this piece — just the facts — forget the theory for now) It’s especially good for the DeFi liquidity pool schema when the current conditions exist: the other coin (FATE) has a super low price (quick fact: buying $300 of FATE increases the price approx. +5–10% recently — not necessarily a great thing — but we’re gonna fix that together…)
This may seem obvious to the advanced DeFi users out there — but a little LP 101 (when combined with the rest of the statements below we hope you’ll feel as good as we do about the way we’ve used it…):
I.L. aka impertinent loss — can work in your favor, if the right conditions are in place AND those conditions will result in what you want to obtain because they have been designed to do so.
If a member pairs PAXG at $3800/PAXG w/ FATE (esp. at prices over the past 1–3 months aka buying a lot of FATE doesn’t cost a lot)
The following are potential outcomes of a FATE:PAXG LP stake that can occur based on the price changes of FATE and/or PAXG:
- PAXG price goes down (at $3800 this is statistically likely and there are numerous examples of this already occurring) — if FATE price stays the same — you will have an increase of the amount of PAXG in your LP (equal to the percent its price decreased).
- FATE price goes up… So long as PAXG doesn’t go up… You will have more PAXG in your LP (equal to the percent increase of FATE)
- If FATE price goes down or PAXG goes up — the opposite happens. (No..!!!) However, the probability that PAXG will go up from a price above $4000 is low. (Treasury works hard to make it so — but be wary — there is only so much that we can do — especially as more memebrs bridge PAXG)
How can we avoid number 3?
- Don’t use FATE to buy PAXG — let DAO treasury do that… PAXG is only paired with FATE (essentially) — any purchase of PAXG with anything except FATE will help FATE and PAXG temporarily.
- Don’t sell too much PAXG — it will decrease FATE price at least equally, likely more than it will benefit your LP dynamic/upside. (Although with all that extra PAXG for those already staking — you can afford it… 😉
- Buy FATE (if you need more) — but stake as much FATE as you can first.
- You can leave some of your PAXG to sell (but note that for anything except a transaction that will have the trade route through $ONE — that transaction will decrease the price of FATE more than anything else — we will get to why in a moment. Also, selling PAXG for FATE defeats the purpose ;)
- If you are going to buy PAXG or FATE — ONE is probably your best bet… Although anything will work…
- Use the proceeds of the sale to do what DAO treasury does: buy FATE…If you do this — you get more PAXG, if you are staked, because FATE price goes up, so you get even more PAXG (and FATE — which you’ll want more of before we move to MATIC — which will not migrate your FATE holdings but use a value transfer calculation — which we’ll get into and vote on in a few days)
Those loyal DAO members — want to get more PAXG and help the DAO? Bridge PAXG… Buy some FATE… BUT…. DO NOT sell PAXG or FATE in any way that will produce a transaction that has ONE in it…. Both FATE and PAXG will go down in price — likely FATE more than PAXG.
Here is why:
How has the DAO been using PAXG?
- What determines the price of any asset on a “dex?” when built on certain blockchains (FATEx is not a dex ;) but it works like one for now) At least on Harmony One — it’s $ONE… It’s essentially hardwired into the code for multiple reasons.
- This turns out to be amazing for DAO treasury if we use this to our advantage….
We’ve been able to use the above strategy to sell FATE (when necessary…. our doxxed vaults/wallets will show we haven’t sold that much at all…) to buy PAXG and this doesn’t impact the price of FATE! WHY?! PAXG is essentially paired to FATE. It doesn’t directly touch ONE — so the DAO can do alot with this dynamic. For many reasons, but at minimum, to now lower the price of FATE -which we know from the above isn’t the best thing for any of us — and when you have an intentionally inflated FATE-PAXG pair) So long as the transaction doesn’t route through ONE, the price impact will be less. If it is FATE for PAXG — it won’t impact the price at all…. (If you haven’t done the math PAXG isn’t just 2x the price — but FATe is about 2x more than it should cost) — — which is totally fine.
The DAO Treasury has been able to produce enough CapEx without selling FATE in a way that has had a price impact since we introduced PAXG pools. (In fact this strategy has been one of many — but the others have been ended as we “wind-down” the Harmony FATExDEX for the MATIC FATExFi.) And… it produces the conditions described above….
- Bridge PAXG and pair it with FATE, follow steps above…
Standby for much more info regarding the DAO — we’re just getting started and we need all of you to help make sure we make it happen.
SIDE NOTE: Snapshot may be down while we move to the main snapshot system (Harmony is terminating their conduit for this service as of today for those ecosystem partners that use it i.e. FATExDAO)