Have no fear my fellow Ohmies — inverse bonds are (almost) here.
OlympusDAO's Ohm has dropped a staggering 97.8 percent from its all time high to trade at a few quarters over $30 at press time. The self-proclaimed reserve currency of DeFi has maintained a slow but steady decline since mid Feb. 2022. And with the current doldrums of the overall cryptocurrency market, its difficult to see what, if anything, could stop Ohm's march towards $1.
OlympusDAO's Ohm price chart. Screenshot from coinmarketcap.com 2022-03-08.
The situation is certainly dire for investors who bought Ohm anytime before the past several weeks, let alone near the all-time-high. I'm still cautiously optimistic however that Ohm will stabilize somewhere in the mid $20's to low $30's because of a novel mechanism that has yet to debut — inverse bonds.
OlympusDAO's inverse bonds
OlympusDAO made a large part of its multi-million dollar treasury by selling bonds. Users may buy Ohm via the market, or purchase Ohm directly from the DAO at a discount by trading in a stablecoin like DAI.
Inverse bonds accomplish this same method in reverse — investors can effectively sell their Ohm to the DAO in exchange for an asset held by the treasury. The DAO will offer inverse bonds whenever the Ohm price drops below its liquid asset treasury backing. The inverse bond policy passed a DAO vote Jan. 25, 2022 via OIP-76. OIP-76's snapshot is available , and its forum comments are available
OIP-76 illustrates how inverse bonds may work with the following example:
OHM price is at $100, Backing is at $120. You see that the inverse bond price has ticked up to a 5% premium. That means you will be able to sell your OHM at $105 to the treasury, instead of $100 to the market. The inverse bond price would not be able to exceed $120, because at that point it's a net drain on the treasury.
OlympusDAO hopes OIP-76 will remove sell pressure from the market and increase the DAO treasury's backing per Ohm at the same time, if the Ohm price drops below its liquid backing. This situation has not happened yet. But the Ohm price's slow but steady drop has brought it within a few US dollars of its liquid backing. At press time each Ohm had a liquid backing of just under $26, and a market price of about $30.
OlympusDAO's dune.xyz dashboard. Screenshot taken at 2022-03-09:01:30:00 UTC.
Final thoughts
I think the smart move is to assume Ohm's liquid backing price will drop to its liquid backing value sometime in the near future. This is a pretty difficult assumption for me to make. My average Ohm purchase price is around $250/Ohm — in other words, I've effectively accepted a 90 percent loss as inevitable if the liquid backing price remains around $25/Ohm.
Its also very important to remember OlympusDAO is in uncharted territory — both as a financial engine, and in inverse bonds. There's a very real chance that inverse bonds do not catch the price fall as intended.
Despite these negative sentiments, I'm actually still cautiously optimistic. Ohm's floating APY remains locked between 500 and 1000 percent, and seems to be averaging between 800 and 900 percent recently. Combine this with even a modest price surge, and I could get back into profit within a few months.
At least that's what my optimistic side tells me. For other Ohmies out there, good luck! To everyone else, I'll continue to update y'all. I hope its entertaining!
Thumbnail photo by Hans ReniersUnsplash.
