As many of us know, C.R.E.A.M. Staked ETH (CRETH2) has been trading at a discount to 1 ETH of about 10-20% (at time of writing, the discount is ~13% on SushiSwap). More significantly, by sampling C.R.E.A.M validators, the vast majority have already accumulated between 1.9 - 2.2 ETH in rewards, implying a real value of 1.06-1.07eth per CRETH2. I am proposing a structured buyback of CRETH2 with up to 100 ETH from the C.R.E.A.M. treasury for as long as CRETH2 trades below 1 ETH.
C.R.E.A.M. has already proven to be very effective at managing its treasury at its own discretion, and I believe this could be handled in a similar fashion. This will benefit C.R.E.A.M. in an efficient and sustainable manner, and the protocol will be rewarded for providing a service beneficial to CRETH2 holders.
I offer two models for this buyback based on different assumptions about approach and how the market responds. Both scenarios represent approximately a 15% gain over simply staking idle ETH. Accounting for accrued staking rewards from holding CRETH2 over a year following this action, this strategy could outperform idle ETH by 15% + [Staking Reward APY], which would mean about 21% at current figures.
CRETH2 Naturally Trends Towards a Discount
This model consists of a number of purchases, with a slightly decreasing discount over time resulting from our purchases. It would outperform staking 100 ETH over 1 year by ~15.3%.
Market Sustainably Closes Gap
1 buyback of ~43 ETH. This scenario would represent a ~14.8% gain over staking 43 ETH.
Upon sharing to Discord, I received many suggestions to model a plan where C.R.E.A.M. provides liquidity to a CRETH2/ETH Pool in addition to buying CRETH2. After review, my current take is that the following two options represent improvements from a profit standpoint, and are also much more effective at maintaining the peg: (1) adding liquidity to the CRETH2/ETH Pool on Sushi or (2) creating a pool on CRV similar to ankrETH/stETH.
(1) SushiSwap CRETH2/ETH
This involves buying a set amount of CRETH2 similar to the second buyback mechanism above, and then providing an equivalent amount of ETH to the already existing CRETH2/ETH pool. C.R.E.A.M. would profit from the initial purchase of tokens in the same manner as the second buyback mechanism, earn farming rewards on total LP deposit (~7% + swap fees), and by increasing the liquidity of the pool more effectively maintain the peg.
(2) CRV CRETH2/ETH
A more ambitious but higher upside plan would consist of the following steps:
- C.R.E.A.M. to create a CRV pool for the CRETH2/ETH pair
- C.R.E.A.M. to seed liquidity for that pool
- C.R.E.A.M. to purchase CVX → votes to incentivize more liquidity to pool to keep peg
- Bribe is net profitable if CVX retains value + CRV rewards from our pool.
I own CRETH2 and will continue to buy more as long as this discount to real value persists.