Hello,
This is a proposal to adjust the liquidity positions held by the protocol as part of its Arrakis PALM market making program.
Context
In August last year, it was voted to start a program to bootstrap ANGLE liquidity on the ANGLE-ETH pool on UniswapV3 on Ethereum.
This significantly increased the ANGLE liquidity onchain, but after 9 months, it may be time to reevaluate the position.
To track the evolutions of the position, and how it performed, you may check this dashboard.
While the vault started with a 80% position in ANGLE and 20% in ETH, its composition is now 20% ANGLE and 80% in ETH.
At one point it even went down to 97% in ETH - 3% ANGLE.
In effect, as it stands when the ANGLE price is decreasing, the vault is effectively buying back some ANGLE tokens it had sold at a potentially higher price than the selling price, and when the ANGLE price is increasing, the vault is getting dry in terms of ANGLE liquidity.
While the ANGLE token is live on many sidechains and L2s, including Polygon, most of the liquidity remains on Ethereum. This means that it’s getting hard for small buyers to access and buy the token. The token is listed on Gate.io but liquidity remains limited. Gate.io is however connected to the ANGLE Polygon deployment, this means that any movement of ANGLE on Gate or on Polygon, is arb-ed on the other platform.
For instance, someone buying ANGLE on Polygon should lead someone to buy ANGLE on Gate. Going further the liquidity on Polygon can be easily replicated on Gate. Technically if I post a market order on Gate, it’ll be filled as soon as the price of ANGLE on Polygon hits the threshold. In a way, having the ANGLE token liquid on Polygon is a way to improve ANGLE liquidity on the Gate CEX.
Proposal
The proposal is to adjust the position of the PALM vault on Ethereum by pulling ETH so that the composition of the ANGLE-ETH vault on Ethereum becomes 50% ANGLE - 50% ETH, bridge the recovered ETH on Polygon and start a new PALM vault on a Polygon Uniswap V3 ANGLE-wETH (1%) pool with 50% ETH and 50% ANGLE.
Implementation
ANGLE to add to the position would be taken from the ANGLE tokens held on the DAO treasury on Ethereum, and the protocol PALM position on Polygon would be managed by the protocol emergency multisig on Polygon.
Value to the protocol
This proposal brings several advantages:
- it makes the ANGLE token liquid on a sidechain and thereby available to more small players
- doing so, it facilitates arbitrages with the largest CEX on which ANGLE is available: Gate
- it does not require bringing more capital in for the protocol as it just leverages the ETH that got accumulated from the PALM position on Ethereum which in a way sold ANGLE tokens against ETH
Also, since on Ethereum it just pulls ETH, it doesn’t deteriorate the liquidity for people looking to buy the ANGLE token on Ethereum and spreads the ETH liquidity for people that are selling between Ethereum and Polygon.
Next steps
While Polygon is not the most active chain currently, there is some value in going there due to the connexion with Gate.io. We could envision in the short term extending this on other chains like Base.
In any case, this proposal would be of course a first step in improving the liquidity of the ANGLE token and at Angle Labs we’ve been actively working on listing the ANGLE token on more centralized exchanges recently.
.