My head is spinning trying to figure out what the $yveCRV market will look like π€―
Here's where I'm at π
Here's where I'm at π
A popular theory is that since yveCRV is the interest earning version of $CRV, it must be worth more. This isn't true.
If yveCRV is priced higher than CRV, there's an arb op to deposit CRV for yveCRV, and sell for CRV at a profit back to 1:1
If yveCRV is priced higher than CRV, there's an arb op to deposit CRV for yveCRV, and sell for CRV at a profit back to 1:1
The next conundrum is that, while yveCRV cannot be priced higher than CRV, this doesnt mean it will trade at parity. In fact, it's possible that it trades at a substantial discount.
The reason for the discount is another arb op that optimizes for the best possible boosties
The reason for the discount is another arb op that optimizes for the best possible boosties
yearn has significant deposits and you can see in the top left quadrant, this causes them to miss out on a lot of yield potential. Hence the veCRV vault, which is meant to help all yearn vaults get that dank 2.5x boost 
It's in the interest of every vault making use of a Curve strategy to pump those veCRV numbers. In addition to attracting CRV to the veCRV vault, there's an opportunity to use the yveCRV/CRV market dynamic to leverage deposits into the vault
If yveCRV trades at parity with CRV, you can simply deposit CRV, sell yveCRV, deposit more CRV ad nauseam. You would do this because it directly boosts your yield, and you do this until either the world ends or you lock the entire CRV supply :/
OK, yveCRV can't trade at parity
OK, yveCRV can't trade at parity
Even for a price less that 1 CRV, you can do some serious leverage. At .9 CRV/yveCRV you can deposit 10 CRV for every 1 CRV you own, a 10x leverage. At .5 you get to deposit 2 CRV. Still pretty substantial, even with the steep discount.
This arbing will continue until either the price of yveCRV falls too much, or the vault boosts rise enough to make the arb unattractive. I'm not enough of a data guy to tell you what makes sense as an equilibrium point π€·ββοΈ
I can tell you, hold off on depositing in the yearn veCRV vault until we better understand this new market. Most deposits direct to the vault will probably be existing vault LPs amplifying their boost. You should see much better deals on the secondary market
On the other hand, yearn veCRV vault is the CRV black hole. Everyone's been complaining about CRV inflation, well, you get what you ask for. Soon enough you wont be able to find the damn thing anywhere, all gobbled up by our new owners
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