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Managing Inflation From Token Vesting

Challenge

Design a structured strategy to provide a project facing prolonged price declines with an effective way to counteract inflation/vesting sell pressure.

Solution

H20 designed two strategies, an auction-based DCA and single-sided dynamic spread, to liquidate project tokens and then use the proceeds to market-make by buying the project's token back below prior liquidation baselines.

Result

Despite challenging market conditions, H20 delivered a meta-strategy that increased a project's token inventory by 6.2k using just over 50% of the liquidation proceeds, with zero slippage and no gas costs.

Liquidation Strategy:

  • 40 trades executed in a declining market

  • 10k TKN liquidated

  • 547 USDC acquired

  • Completed in just 6 days with optimal execution

Market-making Strategy:

  • Used 275 USDC (50% of liquidation proceeds)

  • 65+ trades executed with zero slippage

  • Volume: 110.31k TKN and 537.14 USDC

  • Increased token holdings from 9.8k to 16k TKN

  • All within a 15-day period while maintaining appropriate spreads for market conditions

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