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10 Sep, 3 tweets, 1 min read
If anyone wants to understand what is going on with Luna, read these two threads.

#TerraAutumn is coming, tons of development on Terra driving UST utility and demand.
Disclosure: I am long Luna, Delphi is heavily involved in the Terra ecosystem.

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More from @FloodCapital

Flood Capital Profile picture
16 Aug
1/ Crypto native interest rates 👇

In my opinion the “Fed Funds Rate” of crypto will be derived from the Ethereum / top L1 staking rates.

It's a futuristic take but an interesting thought experiment, lets build a better financial system with crypto native interest rates.
2/ The ETH staking rate will derive yield from two sources:

1) Block Rewards
2) Network Fees

Let’s dive into these and how we can relate them back to our current economic system.
3/ Source 1: Block Rewards

Block rewards are inflation needed to secure the underlying network and can be thought of as a base rate.

This is very interesting because inflation of Ethereum (money supply) and the staking rate (interest rate) will be tied together at the hip.
Read 13 tweets
Flood Capital Profile picture
13 Aug
1/ Thread on DeFi Options👇

This thread will focus on some of the big issues relating to these protocols today:

Pricing, liquidity and capital efficiency – all of these are intertwined so I will do my best to break it down.
2/ Implied volatility (IV) represents the expected volatility of the underlying asset over the life of the option and is a main driver behind option pricing.

IV is influenced by supply and demand of the option thus can be difficult to determine without proper liquidity/volume.
3/ If a protocol were to use data from a centralized source like Deribit to determine pricing this can be expensive to update in real time on layer 1.

If you do not have proper pricing it is difficult to have liquidity as users won’t want to buy mispriced options.
Read 14 tweets
Flood Capital Profile picture
12 Jul
1/ Algorithmic stable coins need *unique/exclusive* utility to work. Over the long term few users will take an incremental risk to use an algorithmic stable coin if they do not have an incentive to do so.

This is why so many algo stables on ETH have & are likely to fail.
2/ If you can either use xyz algo stable or USDT/USDC to interact with the same platform most users will opt for the centralized version.

There is no added benefit to use an algo stable just incremental risk to the end user especially if users don't care about decentralization.
3/ UST solves this by sourcing utility and demand unique to itself.

Any application using the Terra ecosystem uses UST, not providing a choice for a more centralized stable coin that can put the entire ecosystem at risk, this is the vision for a true and antifragile DeFi.
Read 4 tweets
Flood Capital Profile picture
9 Jul
1/ Luna has the most interesting and potentially profitable value accrual out of all L1s.

When UST is created Luna is burned forcing prices up over time. UST is cryptos top algorithmic & decentralized stable coin. Algo stables have recently come under fire -🧵on Luna & UST.
2/ As a quick summary of the Luna/UST mechanics:

When demand for UST is increasing it causes a burning of Luna thus reducing the supply – bullish Luna.

When demand for UST is falling it causes the minting of Luna thus increasing supply – bearish Luna.
3/ If the mechanism between UST and Luna is working properly and demand is growing this can fuel burning of Luna and rapid price appreciation.

We saw this clearly when UST increased its market cap by $1.7bn from Feb-May and Luna ran from $1.94 and peaked at $22.
Read 22 tweets
Flood Capital Profile picture
17 Jun
1/ Thread on Galaxy Digital (TSX: $GLXY)

We believe Galaxy Digital is a diversified bet on the success of crypto.

Galaxy aims to encompass all facets of the digital asset market, providing various avenues of service & infrastructure for both retail and institutional clients.
2/@novogratz is the CEO, he has taken his experience from Goldman and Fortress to create an institutional bridge into crypto.

All stats in this thread are in USD and based on $GLXY Q1 2021 numbers.

Let's go through Galaxy's 5 main business lines!
3/ #1 Asset Management

Galaxy has ~$1.6bn AUM across BTC & ETH ETFs in Canada + private funds focusing on DeFi, Web 3, NFT’s, and Gaming.

Galaxy provides exposure beyond BTC and ETH, offering institutions a full range of products covering the entire crypto space.
Read 25 tweets
Flood Capital Profile picture
9 Jun
1/ Lido Finance Investment Thesis Update:

@LidoFinance continues to impress me. The creation of liquid staking derivatives across top layer 1’s and dApps is a massive untapped market.

Recently a proposal for $SOL was passed and one for $AAVE is in the works!
2/ Since our last thread (40 days ago) ETH in Lido has increased from 250,000 to 460,000! Growing stETH by 75% in May alone.

If stETH were to grow at even 1/4th this pace (19% MoM) for the rest of the year, we would see ~1.3m stETH by December which is ~1.2% of all ETH.
3/ Currently there are proposals on AAVE and Maker to integrate stETH as collateral.

If integrated this would increase stETH flows significantly. Assuming the stETH/ETH peg can maintain itself then stETH is simply a better form of collateral.
Read 22 tweets

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