TL;DR
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The LM set up of the pool has allowed it to diversify its return profile while delivering superior return for LPs.
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Elixir has been a big part of the growth in the pool, not only delivering onchain yield, but also Elixir points for Reya LPs. However, its spot markets have had liquidity constraints, which limit the possible stability and scalability of pool, a constraint that all the more relevant in view of the events on October 10.
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On the other hand, Amber and Selini have proven themselves reliable partners, both delivering larger returns to LPs as well as providing shorter operational feedback loop.
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This proposal aims to streamline and simplify the management of pool’s capital, while increasing the returns of the pool by rotating away of Elixir’s sdeUSD, and distributing the capital among Amber and Selini, initially with a 50/50 allocation with freedom to calibrate later. For completeness, the allocations to USDC for redemptions and Hedging LM will remain the same.
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There is value in having a liquid yield-bearing stablecoin as part of the LM mix, so this proposal doesn’t exclude the introduction of a new one in the future.
Context
Beyond the AMM mechanism, which functions entirely within Reya, the pool’s capital is currently allocated to three different investments: most of the capital has been used to buy and hold sdeUSD; while also allocating capital to two ’Liquidity Managers’.
Reya Liquidity Managers were introduced with RNIP2, introducing important partnerships with reference institutional partners:
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Selini Capital, a best-in-class trading firm focused on liquidity provisioning in the crypto ecosystem, who brought in their market neutral CEX arbitrage strategy;
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Amber Group, a leading Digital Asset Manager and institutional trading firm, who brought their market netrual CEX basis trade strategy.
These partners have proven crucial for the development of LP’ing on Reya, stabilizing and diversifying returns. They have also established close operational collaboration with Reya, therefore enabling greater control of the pool’s capital. All this has been essential for introducing srUSD with RNIP3, with that token being an important piece of Reya’s roadmap.
Performance update
The following table summarizes the performance, both all time and last quarter’s.
| allocation | all time | 2025Q3 | Sharpe ratio | |
|---|---|---|---|---|
| sdeUSD | ~60% | 6.65% | 7.14% | 1.45 |
| rSelini | ~17% | 8.64% | 7.49% | 2.18 |
| rAmber | ~17% | 11.47% | 17.28% | 2.28 |
All three allocations have contributed in a crucial way for the success and performance of the pool and srUSD. However, the numbers on the table also reveal a divergence between these allocations, with Selini and Amber delivering superior returns, especially when risk adjusted (Sharpe ratio).
Additionally, the nature of the agreements with Amber and Selini have also created a closer relationship that allows for greater control and operational flexibility in managing the pool’s capital, while providing strong assurances and safeguard to cover counterparty risk.
Liquidity constraints for deUSD
Looking forward, deUSD also presents somewhat of a challenge to the scalability of the pool. During the last year, deUSD’s spot markets have suffered from occasional suboptimal liquidity. These liquidity constraints have strongly influence deUSD’s price chart, which has created a second order effect on srUSD’s price itself.
These liquidity constraints, while manageable, are a drawback to the scalability of the pool moving forward.
Divesting from sdeUSD, updating the LM Allocations
The current proposal is to:
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completely remove sdeUSD’s stake of the pool;
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reallocate the freed capital to Amber and Selini, initially with a 50/50 split, but retaining freedom to calibrate that according to the evolving relationship with both;
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retain the policies around the liquidity buffer and HedgingLM allocation.
Note: There is value in having a liquid yield-bearing stablecoin as part of the LM mix, so this proposal doesn’t exclude the introduction of a new one in the future. However, as always, the DAO would have to vote in a new LM.