Being a long-term time holder, I know how you feel. After watching from the sidelines, I think I have to give my thoughts about current situation and the way forward, if we choose to continue as a DAO.
I’m a financial engineer, full-time crypto investor, and a CFA charterholder who has worked in investment banking and fintechs. I’m currently building my own reserve currency, focused on professional investment management and creating a whole financial ecosystem around it. I won’t link it here, because this post is not about me, but about Wonderland and how I can help it.
I want to focus on buybacks below backing here. Buybacks are good in almost every situation and I think a must here.
Let’s go through a simple example :
Current price : 50
Backing price : 100
Circulation supply : 1000
Treasury : 100 * 1000 = 100 000
If we buy 10% of the supply at 50 :
Circulating supply : 900
Treasury : 100 000 - 100*50 = 95 000
New backing : 95000/900 = 105.55
If we buy 50% of the supply at 50 :
Circulating supply : 500
Treasury : 100 000 - 500*50 = 75 000
New backing : 75000/500 = 150
Buybacks are a great way to give back value to holders and, I think, necessary to reward current holders.
The drawback of buybacks is the treasury bleeding. This is a bad thing if we plan to have professional management for the treasury aiming at long-term growth. However, we are currently making close to 100% profit on buybacks at current price. Allocating some of the treasury now to do buybacks to sell bonds in the future to raise more capital at a higher price is a very powerful and high-yielding strategy.
How much time will it take for the new team investing the treasury to make a 100% return on the funds?
When we look at buybacks done until now, the average price was around 30k because of the price impact. We bought huge sums just to get dumped on. It was still a net gain for the backing as we bought below it but this is really a sub-optimal way of doing things and it creates frustration among holders, who feel abused and may end up leaving the protocol, creating the infernal cycle we have been seeing over the past few days. We are giving free money to those who instantly dump, we could optimize our buybacks to prevent this from happening .
We need Smaller buyback : we need a lower price impact on the buybacks to create what we call a permanent market impact in the financial industry. Big buys shift the price but the market impact is temporary, as people instantly sell. By making smaller buybacks, we are more likely to shift and influence current price trend in a more healthy way.
Smaller buybacks will improve also our average buying price, giving back even more value to holders by increasing more the backing price.
We need a safe investment space. We need transparency, we need integrity, we need professionalism.
I believe Wonderland can be part of the space if we rebrand and start to leverage the frog nation’s talents to rebuild and come back even stronger.
Buybacks are good
Buy over time with a pre-allocated budget and in small sizes to improve buybacks’ efficiency and capture all the value instead of sharing it with front runners