Popular decentralized finance project Sushi is now aiming to attract institutional investors, a growing trend in the DeFi sector as seen with Compound Finance’s fixed 4% interest rate feature and Aave launching Aave Pro.
But Sushi thrives in drama, and after a controversial beginning this summer, we have yet another spectacle.
“To onboard institutional investors,” a new proposal called “Sushi Phantom Troupe – Strategic Raise” has been introduced that offers to use a portion of 51 million SUSHI, currently worth $357 million.
Following an “insane” month in terms of volume and an “attractive pipeline of upcoming releases,” the distribution as part of the broader Treasury Diversification plan has proposed up to $60 million, 25% of Developer Treasury to VCs with 10 million allocated to community members.
“SushiSwap has been a DeFi Community darling since inception, and at this juncture, we feel that it’s ready to welcome established crypto funds and cement SushiSwap as a household DeFi blue chip,” reads the proposal.
Let’s make $SUSHI even more inclusive.
— Future Fund (@FUTURE_FUND_) July 16, 2021
Sushi aims to raise capital and deploy it into productive assets via safe yield solutions, including Yearn vault, seed liquidity in key Kashi markets, and LP in a stable pool on Sushi to generate liquidity.
The fresh capital will be raised by selling its $60 million worth of tokens (SUSHI) to VCs, which will be converted into xSushi and receive xSushi yield whilst vesting for a “6-month cliff followed by 18-month linear vesting.”
These SUSHI tokens are proposed to be offered at a 20% to 30% discount to 30-Day TWAP.
The proposal has mentioned a “confirmed strategic Investor list,” which includes the likes of Spartan, Dragonfly Capital, Polychain, Blockchain.com, Pantera Capital, Jump, 3AC, Zee Prime, CMS Holding, DeFiance Capital, and others.
“Most interested parties already have stakes in SUSHI, and voting through this capital raise via governance should be a formality,” it added.
Results from anonymous VC Ranking Vote👇 (and some takeaways)
291 Responses in ~ 24 hours! pic.twitter.com/AJQwjCypm9
— Darren Lau (@Darrenlautf) July 16, 2021
What seems to be in anticipation of buying back at low prices, some funds are speculated to have sold their SUSHI sending the price of the token crashing by over 25% to $6.39 in about the last nine days when the proposal was first introduced.
Most crypto VCs are chasing 100x returns, “generally focus on private market where their perceived edge is stronger,” said Arthur Cheong, founder of DeFiance Capital, noting while institutions have arrived, they are not venturing beyond Bitcoin.
Unlike the traditional market, crypto doesn’t have mutual/passive index funds to smoothen the volatility, and “the buying pressure of all VC unlocked bags almost 100% go to retails, with occasional trading in and out by the crypto hedge funds and prop trading firms.”
11/ So almost inevitably, all VCs exit becomes dumping on retails until we have a newer crop of institutional market participants that are active in the crypto public market.
— Arthur🐃 (@Arthur_0x) July 17, 2021
The proposal, however, is receiving some flak with Jeff Dorman, CIO at Arca, the digital asset management company that holds 7.51% of the xSUSHI circulating supply, saying it is “value-destroying,” and has made a counter-proposal.
“Sushiswap does not need money… We agree that there is merit to diversifying the Treasury, but not at current depressed prices,” wrote Dorman, who advocates for a diversified community of many smaller investors than a concentrated group of large passive investors.
Instead of a discount, Arca actually proposes to buy at a higher price with a minimum purchase of $10mm at the first offering price of $7.04. SUSHI is currently trading at $7, down 70% from its all-time high of $23.38 four months back.
The discount and short lock-up are “not indicative of a vibrant growth project like SUSHI,” and Dorman believes SUHSI is currently trading at a massive discount to its fair value.
“Now is absolutely not the time to be selling,” he added.