Thread by @jdorman81

We believe $SUSHI is now the most undervalued token in digital assets.

A thread on valuation, upcoming catalysts, and why the recent downward price action will be short-lived Down pointing backhand index 👇

2/ $SUSHI has underperformed both $UNI and the broader DEX market since the beginning of the year.

This is most apparent with the 50% peak-to-trough decline in March and April (still down ~30% from ATH’s)

3/ Why? 3 Overhangs:

1) rolling 6-mo vesting unlock from initial Sushi yield farming
2) PancakeSwap growth
3) Uniswap V3 hype

Let's break each of these down -- none of which have any actual impact on $SUSHI valuation and its core business.

4/ #1 Impact from Vested Supply

Just as yield farming can create traction for a new project overnight, dilution from yield farming can be just as painful when an asset is out of favor.

We saw this with the $CRV launch and with $UNI during their short yield farming stint.

5/ At current prices (and assuming the unlock would’ve been gradual):

204m in inflation in April
175m in inflation in May
150m in inflation in June
etc

6/ Does supply overhang matter? Yes, absolutely - see $SUSHI price action in April.

Sushi started Nov 2020 at $0.60. Yield farmers made a killing waiting out the 6-month vesting period, & unloaded after their massive gains vested. The market had to swallow the supply.

7/ But from a value investing perspective, overhangs create interesting opportunities. $SUSHI is now clearly mispriced even on a FDV basis after factoring in inflation.

8/ And some of that inflation may be mitigated. An ongoing proposal would lock up add'l $SUSHI into oSushi, similar to veCRV model, where voting power over distribution of pool rewards is based on amount of time a holder locks up tokens.

forum.sushi.com/t/sushinomics-…

9/ If this proposal passes, $SUSHI tokens will be locked for up to 3 years, offsetting some level of dilution.

97% of the community currently supports this proposal.

10/ #2 Impact from Uniswap V3

The hype surrounding $UNI V3 likely led to some of the $SUSHI underperformance.

But, Sushi & Uni are moving in different directions.

a) Uni is narrowing in on spot trading; Sushi is expanding vertically w/ Kashi & other future Bentobox products.

11/ b) $SUSHI CF’s flow directly through to xSushi holders; $UNI's fee switch is still yet to be discussed in governance.

They are competitors, but it is not winner take all. Each is strong; growing in unique directions.

(Disclosure: Arca is long $UNI & $SUSHI)

12/ c) Again, the V3 overhang has yet to have any impact on SushiSwap trading volumes or CF’s to xSushi holders - metrics that actually matter when valuing $SUSHI.

https://twitter.com/FrenSushi/status/1392560967632838656

13/ #3 Impact from growth of PancakeSwap

Sushi is referred to as the DEX of the people since there was no VC funding, but it's not. It's the DEX of #DeFi power users, yield farmers, & users capable of interacting with multiple dApps and multiple chains with size.

14/ This can be seen looking at unique traders & volume/unique weekly trader - clearly, $SUSHI user's are whales.

This is similar to $FTT vs $BNB / $COIN - FTX caters to a few, big customers while BNB / CB cater to tons of smaller customers.

$FTT has crushed it w/ this approach

15/ $SUSHI's biggest competition is likely $CAKE, not $UNI

High gas fees turned $CAKE into a viable DEX which is why we saw flat TVL on SushiSwap (w/ underlying prices up) & lower volumes in March / April, as users paid nothing in gas and earned higher LM rewards on Pancake.

16/ But with TVL and Trading volumes both on the rise again from mid-April to today, and BSC likely not a long term solution for $SUSHI's user demographic, this overhang does not likely have a long term impact on CF’s.

17/ Conclusion: These three overhangs have all impacted $SUSHI's price, but have done very little to impact Sushi’s core business and growth.

Volumes, and thus CF’s to xSushi holders, have grown at 22% CMGR since the DEX went live.

18/ Meanwhile, $SUSHI has continued to expand, offering optionality of further CF’s to xSushi holders if they are successful.

They have launched cross-chain and are seeing traction.

i.e. $MATIC: $400M in TVL (Avg ~$40M/day in about a week)

(Source: analytics-polygon.sushi.com)

19/ And there is an ongoing Treasury Diversification Proposal which would diversify the $SUSHI-only treasury into a basket of blue chip #DeFi tokens, de-risking & strengthening the balance sheet.

snapshot.org/#/sushi/propos…

20/ Overhangs that do not impact core businesses create opportunities to buy growing projects at depressed multiples.

Using any observable metric, $SUSHI is cheap. Really cheap.

https://twitter.com/block49capital/status/1392583778795720707?s=21

21/ This optionality creates further upside:
- limiting the dilution via oSushi
- TVL / Volume growth from Polygon, add'l CF’s via Bentobox & Kashi business lines
- The diversified Treasury Proposal
- SUSHI IDO platform

https://twitter.com/SushiSwap/status/1392615574212018177

22/ As investors rotate back to into #DeFi (and they are), these are the opportunities to look for.

https://twitter.com/mrjasonchoi/status/1392918475983638528

23/ We get a lot wrong investing in this asset class too, but all of our recent public calls (See past threads on $UNI, $LEO, $WNXM, $EOS) have been extremely profitable because they share a common theme:

Identifying value & picking up cheap upside optionality