As you mention yourself there’s nothing we can do to prevent OHM from becoming a large FXS holder since they could simply take their treasury OHM and use it to buy FXS on the open market if they wanted to. In what sense is doing a treasury to treasury swap giving it to them at a discount?
Your first point is essentially arguing risk-adjusted OHM is significantly overvalued relative to FXS or that having a large amount of OHM on the balance sheet poses significant risk. I actually sort of agree with this, as I mentioned I’m more skeptical of OHM I feel like than many, but I don’t think my confidence in this is high enough to believe the additional benefits of having a partnership make the swap -EV.
Also I think this is why we can discuss the size of the swap. The rough equation for if the swap is profitable looks like:
(Risk-adjusted value of OHM received) + (Value of OHM partnership) > (Risk-adjusted value of FXS swapped)
This is all maybe a little overly quantitative but the questions we’d have to answer to determine if this equation holds are:
- What is the difference in risk adjusted value between OHM and FXS?
- What is the relationship between the size of the swap and the value of the partnership?
I think it’s indisputable there’s value in having a strong partnership with OHM. I think the valuation of our respective tokens is more an open question. Personally I think OHM is overvalued relative to FXS but I would bet members of their community would possibly feel the opposite. I think reasonable people can disagree and arguments can be presented on both sides. What I think is more clear though is they’ve been good partners up to this point and have provided us with significant value by using Frax as one of their reserve assets.
If we could do a swap of $1 and significantly deepen our partnership and guarantee they’d use Frax as their stable coin of choice going forward it would be an obvious yes. If we have to swap our entire treasury with them to get that benefit then it would be a clear no. I personally think having a moderate swap that doesn’t expose us to large additional risk but still allows a good-faith showing of support for them and a deepening of the relationship is what we should strive for.
I think it is a fair point that whether you’re bearish or bullish on OHM that having too large a position in any other protocol on our balance sheet possibly exposes us to some unnecessary risk- we want to control our own destiny not have our future be possibly at risk due to OHM or any other protocol taking large losses.