This makes no sense. If you are working in the best interest of the Treasury (the community pool), you absolutely must sell NTRN high and buy it low.
‘Buying low and selling high’ is not easy - if it was simple to time the market we’d all be richer. I also acknowledged that swapping into USDC would make more sense than buying ATOM doesn’t under Noam’s point. And Noam’s original point wasn’t about buying NTRN low and selling it high - his original point was to just sell it for ATOM (to induce short-term demand) or USDC (to cover bear market costs). I think defining an objective is important, which is why I said :
" if for example, it was instead going to fund a grants program to expand ATOM’s use cases on Neutron (e.g., an ATOM and stATOM backed stablecoin), I’d say you’re probably right that this doesn’t break the ‘no harm’ clause"
Because I think the objective is important to define before deciding to just spend the tokens. If the goal is to dampen the volatility of the community pool or buy back Neutron in the bear than there should be a proposal with that objective that outlines how exactly how it achieves that and why it’s helpful within the bounds of the original transfer agreement. Selling Neutron and committing to buy it back is an option, but to that point I tried to outline the risks in trading in size :
“There is considerable price impact on any trade in size so it’s likely that the execution of the trade itself would lose a lot of the Cosmos Hub’s value. This also relates to your point about NTRN outperforming ATOM because it has 'weaker distribution (~less liquidity). The less liquidity the asset has, the greater the price impact.”
My main point though was that the NTRN was not allocated to be spent in a vacuum. The original proposal outlines two clauses (quoted from the proposal):
- Cooperation: The Cosmos Hub, its governance and community pledge to use or deploy the NTRN tokens in ways that maximizes the benefits to both the Cosmos Hub and the Neutron network and DAO.
- Do no harm: The Cosmos Hub, its governance, and community pledge to only use or deploy the NTRN tokens in ways that do not harm the Neutron network or DAO.
In terms of “no harm”, the Cosmos treasury must first not harm ATOM stakeholders. Neutron stakeholders are a secondary consideration.
The point I’m trying to make is that this kind of thinking (without serious consideration to Neutron) could lead to breaking these clauses - for example if NTRN is just used to buy back ATOM or if it is sold for USDC to pay for bear market costs with no consideration to Neutron’s input. If the Cosmos Hub breaks these clauses I think it’d be reasonable to say that it risks developing a reputation as an unreliable partner which will do more harm in the long run than short term volatility in my opinion.
I also think it’s reasonable to come up with some mutually beneficial ways to use the NTRN. Some things that I think meet the clauses of ‘cooperation’ and ‘do no harm’ :
- Subsidizing Neutron validators for operating costs
- LPing it on Astroport in stATOM or ATOM pools
- Using it to fund a mutually beneficial grants program that builds ATOM-apps on Neutron (e.g., an ATOM and stATOM backed stablecoin)
But for each of these things, I think the objectives are clear and clauses are clearly met :
- Subsidizing validator costs strengthens Neutron’s relationship with it’s validators and improves the attractiveness of ICS to major Cosmos Hub stakeholders
- LPing it gets more trading and arbitrage on Neutron which are helpful in getting the ball rolling with lending markets, MEV and transaction fees
- Grants can build the developer ecosystem within the Neutron, the Cosmos Hub and broader AEZ
I just don’t think the same level of clarity can be said for buying back ATOM or selling to cover bear market costs with USDC or even selling NTRN now and trying to time when to buy it back.