In the midst of a bear market, OlympusDAO is continuing its long-term plan to revive its project.
The company’s native OHM token has been on a steady decline since March 2022, when it reached a high of $1,300 per token. The price has since fallen by 98%, trading near $20; meanwhile, OlympusDAO’s staking rewards have shrunk from 6% in the first months after its launch to 2% now.
The company’s stakers are growing increasingly frustrated with what they see as a lack of transparency from OlympusDAO leadership about their long-term plans for the platform. Investors and analysts alike are concerned about whether OlympusDAO will be able to continue operating as it currently does without finding a way to attract new users or increase its staking rewards back up above 5%.
Inverse Bonds
The community is voting on whether to deploy the project’s Protocol-Owned Liquidity for its new Inverse Bonds product. If the proposal passes, the protocol will offer inverse bonds for up to 90 days.
Inverse bonds will be discontinued once a 120-day moving average has been reached.
Inverse bonds features:
- They buy your OHM in exchange for a backing asset from the treasury.
- They buy your OHM at a premium (slightly above market price) and then burn it.
- They buy your OHM at a slight discount to the backing per OHM, increasing the backing per remaining OHM.
- They have no vesting, meaning that the asset exchange is instant.
- They are only available while the OHM market price is below the backing per OHM.
- They are launched by the policy team.
- Their price is determined by the market.
As part of its new feature, OHM that is removed from liquidity will also be burned. This means that users will get more value for their OHM compared to selling on the open market.
OlympusDAO states that the introduction of inverse bonds would mean the protocol will “effectively buy OHM at a premium” and that users will get more value for their OHM compared to selling on the open market.
“The purpose of this change is to show how the protocol is in a unique position to deploy the treasury to guide the growth of the network,” Olympus tweeted. It added that the strategy is intended to reduce short-term OHM holders, mobilize its treasury assets toward sophisticated market operations, and drive buying pressure in the OHM markets.
Backing per $OHM
What backs Ohm?
OHM is not pegged and instead has a backing. Although not tied to the USD, one OHM is equivalent to one dollar’s value of assets held in the Treasury. When the price of OHM falls below $1, the protocol calls for it to be bought back and burned. This is due to the fact that the Treasury backs each OHM with at least $1. The result of this is that the price of OHM has increased back to $1.
A backed currency is one that comes with the assurance that it may always be exchanged for a certain quantity of another asset. This guarantee is given in the form of a backed currency. For instance, a currency that is supported by gold can come with a guarantee that 100 of its units can be exchanged for one troy ounce of precious metal.
OHM is backed, not pegged. Although not connected to the USD, one OHM equals one dollar in Treasury holdings. When OHM goes below $1, it must be burnt. Treasury backs each OHM with $1. OHM now costs $1.
A backed currency is a type of money that can always be exchanged for a certain amount of another asset. For example, a currency backed by gold might guarantee that 100 units of the currency can be exchanged for one ounce of gold.
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