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Olympus DAO has argued that POL would solve this problem because it controls liquidity by allowing the protocol to own most of the liquidity. However, in the end, the price itself is determined by the market, and the price of OHM is very unstable. Olympus DAO has inflation risk if token issuance is continued due to high APY, and there is also a risk of price decline due to unstaking if APY is lowered.
Olympus DAO started to provide inverse bonds introduced in OIP-76 from March 2022. An inverse bond is a bond in which OHM holders can sell their OHM back to the Treasury for slightly more than the market price if the OHM market price falls below the backing price.
Olympus DAO explains that through these inverse bonds, the Treasury absorbs OHM and reduces the market circulation, thereby increasing the backing price. However, the market price of OHM still has continued to decline since the adoption of inverse bonds. Until now the effect of inverse bonds is not yet visible, and it remains questionable whether it will be helpful in defending price.
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IEEE/ICACT20230040 Slide.15
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