This move, announced Friday, marks the launch of its Dash-to-gold rebalancing strategy before it is deployed to blockchain startups. The strategy aims to grow the value of the capital held by the DIF.
Dash to gold rebalancing strategy
The rebalancing strategy was devised by Demelza Hays, the DIF’s investment consultant and an alumna of Forbes 30 under 30. The goal is to accumulate more Dash and more gold through rebalancing the two uncorrelated assets.
“The main idea is to sell Dash for Gold when Dash breaches 50% of the portfolio and to sell Gold for Dash when Dash falls below 10% of the portfolio. This ensures a countercyclical trading strategy that sells assets high and buys assets low.”
The completion of this first buy order, from an initial tranche of six, marks the beginning of a long-term actively managed rebalancing strategy using buy and sell triggers.
Money to burn
However, the Foundation only invests capital into the rebalancing strategy when it would otherwise be sitting idle. The DIF allocates 10% of the Dash block rewards through the network’s self-governing treasury system, with a mandate to make money.
It has a further mandate to support the Dash network, so these funds are distributed to blockchain startups in the form of loans or investments. Any project can pitch for funding, which then goes through a two-stage process before being put to a final decision by masternodes.
While the capital is waiting to be deployed, the rebalancing strategy is supposed to ensure that it keeps growing. But the profits from either strategy or investment are put to the benefit of the network, as Hays said:
“Any money made on our investments can be used to buy Dash off of the open market, which we then burn. Burning Dash reduces the supply, and theoretically should increase the price of the Dash. This is one way the Foundation can give back to the community without having an ultimate beneficial owner.”
In a recent investor call, Dash announced that it had seen commercial payments more than double on the network with the help of new retail partnerships in Latin America. It also confirmed a first-quarter price increase of almost 60%, its best quarterly performance since the fourth quarter of 2017.