Treasury Management in DeFi: Low Liquidity Asset Diversification - inkymaze

Among the various strategies available on Aera, low-liquidity asset diversification is notable for its ability to diversify a treasury’s assets with minimal slippage and price impact. In an environment characterized by dynamic market shifts and the burgeoning prominence of DeFi treasuries, thoughtful and deliberate treasury management becomes increasingly crucial, particularly for low-liquidity assets.

Treasuries that deposit into an Aera vault have a unique opportunity to use Aera’s custom execution strategies onchain. A sophisticated Aera Guardian submits allocation solutions in line with the vault strategy and will always have specific role-based permissions built into any Aera vault.

How low liquidity-asset diversification works on Aera.

Step 1: Aera vault owner defines a goal. For example, a vault owner requests $10M of their native token to be diversified into stablecoins and ETH within a designated time period.

Step 2: The vault owner deploys the tokens to the vault.

Step 3: An Aera Guardian begins preparing recommended transaction sets that would diversify a treasury’s assets out of native tokens based on pre-defined slippage criteria.

Step 4: Once the treasury is successfully diversified, funds are ready for use in other Aera strategies or for other treasury needs.

Diversification strategy basics

Aera’s non-custodial and autonomous design allows a vault owner to efficiently swap out of native tokens and into stablecoins or higher-liquidity tokens to protect a treasury’s long-term value. The low-liquidity diversification strategy is comprised of three main pillars:

Smaller order sizes: Large orders can be fractionalized into smaller ones to establish minimal price impact and slippage.
Time-based execution: Orders can be executed over time to ensure native tokens retain their value as a treasury diversifies to ensure longevity and protect against market volatility.
Flexibility: Updates to order sizes and execution timing of trades can be made continuously.

Why use Aera’s low-liquidity diversification strategy?

Minimized market impact: By breaking large orders into smaller components, the strategy reduces the impact of trades on market prices, resulting in more favorable execution prices over time.

Enhanced price discovery: Capturing the average market price of an asset over time fosters transparency and provides a risk-adjusted approach to trade execution. Aera’s diversification strategy efficiently manages large orders and mitigates risks associated with volatile markets.

Over the coming months, we will outline various other Aera strategies, including levered ETH staking, volatility targeting, and protocol-owned liquidity (POL). Each of these strategies can be combined or layered, offering vault owners a high degree of flexibility in their approach to treasury management.

If you want to learn more about how Aera can support your treasury management goals, we invite you to DM us on X.