Transfer 8,500 ETH from the Treasury to ATMC’s ETH Treasury Strategies

[TodayInDeFi]

Hi this is Brook from TiD Research, and we are supportive of this proposal.

While the projected yields from deploying 8,500 ETH may appear modest compared to passive staking, we feel the lower return is reasonable given the broader ecosystem benefits — especially in connection with the ongoing DRIP program.

As we highlighted in our earlier comment on DRIP, the lack of sufficient swap liquidity has been the biggest blocker to TVL growth from leveraged yield-bearing stablecoin and ETH LST/LRT loops. Volatile slippage and meaningful price impact (e.g., >2% to unwind $100k positions) discourage larger users and weaken the amplifying effect of efficient capital use. With deeper liquidity, every $1 of inflow could potentially scale into $10 of TVL through loops — but this requires users to move in and out efficiently. Deploying treasury ETH into liquidity-supportive strategies directly addresses this bottleneck.

@TodayInDeFi

That said, one thing we’ve noticed is that since LP activity isn’t directly incentivized, most trades still route through existing liquidity (mainly Uniswap and Fluid). Liquidity is growing, but not always fast enough to keep up with demand for leverage. In practice, swaps up to ~$100k–200k are fine, but around ~$300k we start seeing noticeable price impact, and at ~$500k execution can sometimes become difficult. For example, a trader farming with ~$10k at 10x leverage can comfortably enter and exit positions, but bigger strategies quickly run into constraints. We see a similar pattern across some stables and ETH LRTs.

It’s also worth remembering that, as outlined in the original Treasury Management V1.2 mandate, the treasury was never designed to chase the highest possible yield. The objectives are to (1) generate low-risk yield on otherwise idle ETH and (2) spur ecosystem growth. From that perspective, even modest returns are justified if the deployment helps strengthen market structure and unlock DRIP’s full potential.

@Entropy

As highlighted in the original Treasury Management V1.2 proposal, the purpose of the Growth Management Committee (GMC) was to provide a path for the Arbitrum Foundation to deploy 7,500 ETH from the DAO’s treasury to achieve 2 things:

1. Generate low-risk yield on otherwise idle ETH
2. Spur ecosystem growth

Moreover, given this is the DAO’s first tranche of funds, we really wanted to ensure the DAO starts with a really strong and stable foundation, while securing key partnerships from the very beginning. Thus, we focused on selecting extremely high quality partners with low risk strategies that allowed the DAO’s funds to maximize its reach and impact within the Arbitrum ecosystem.

We’re glad to see Entropy take into account some of the suggestions we’ve shared both on GRC and in private discussions — particularly around aligning Treasury management with DRIP by providing protocol-owned liquidity. This approach helps achieve sustainable, low-risk yield for the treasury while also improving DEX liquidity on target assets.

Given that DRIP is already underway, we believe ensuring its success is especially important at this stage. It may not be realistic for the DAO to launch another incentive program of this scale in the near future, and the timing now feels critical: both stablecoin and ETH DeFi markets are booming, and Arbitrum has a unique opportunity to capture market share. The yield difference between strategies may only be 2–3%, but the upside in TVL growth and ecosystem stickiness from a successful DRIP could be much more significant.

We believe this is less about giving up yield or losing money, but more about recognizing that sacrificing a few percentage points in yield to support DRIP and lay a solid foundation for ecosystem growth can be the right priority for the DAO. In this sense, the proposal is well-aligned with the treasury’s mandate: it preserves capital, generates sustainable ETH-denominated returns, and, importantly, helps address the liquidity constraint that currently limits DRIP’s impact.