1/ Hi all - w/ the rapidly rising popularity of t-backed coins (re: OHM forks), I attempt to model out near-term price action and long-term longevity looking at $OHM, $TIME, $IN, $SB and $SDOG (in my view the 5 most popular / highly traded) to find value
docs.google.com/spreadsheets/d…
docs.google.com/spreadsheets/d…
2/ My background is in finance/economics; formerly an investment banker in NY. Currently on the buy-side full-time. My thesis is that there is value in taking contemporary concepts (EM hypothesis, etc) and applying them when possible to the rapidly growing field that is crypto
3/ To me, this becomes more true as more long-dated, "smarter" sources of capital (namely: institutional investors) invest and knock off current whales (re: retail investors: high net-worth individuals) in dominating a large share of free float of any given coin
4/ I also caveat that crypto is still inherently a very inefficient market with highly innovative / esoteric concepts that even everyday crypto traders fail to truly understand. There is large info asymmetry that exists, especially btwn seed capital and retail. I AM NOT AN EXPERT
5/ Therefore, any quantitative analysis (as I attempt to model here) I recommend must be recognized as being secondary to that which is qualitative (eg. momentum, user base, marketing) and should only be seen as context / narrative
6/ Let's start. Firstly, most crypto coins don't generate ongoing cash flow, other than liquidity-providers that kickback a portion of fees to staked-coins (eg. $SPELL). Therefore, cash-flow based analysis (most commonly used in modern finance) is out the door
7/ Multiples-based analysis (using some industry metric to benchmark avrg/median performance) is therefore the most reliable as it pertains to predicting future price movement. However, there simply aren't many relevant metrics that actually drive value in most coin categories
8/ The most common metric I've observed on CT in extrapolating growth is using "MCAP as a % of X Coin", which is nice in its simplicity & uniformity. However, I believe that this often over-estimates growth, as it assumes price is purely a function of free float supply & demand
9/ This may be true in a vacuum (eg. complete fair launch, slow PoW, 1:1 deflationary) but ultimately doesn't account for variables such as changes in circulating supply
10/ Therefore, I believe that the strongest use case of contemporary finance is with t-backed coins - an algorithmic adaptation on a a stablecoin that theoretically over the very long-term should result in being near ~1x Treasury Backing / Coin as something backed by its reserves
11/ I write my observations and conclusion in my Google Sheet but the key points I want to hit and make clear are:
12/ a) MCAP as a % of X coin should be adjusted for the ecosystem the coin presides on - an investor is not mutually exclusive between having flexible capital on any given chain but there is a small moat per L1 in the form of gas fees & existing familiarity as "switching costs"
13/ b1) Although staking (3,3) PRESERVES existing invested capital, I believe future growth is DRIVEN by underlying reserves. For example, if TIME holds 10% of its reserves in $JOE, and JOE's MCAP 2x during this timeframe, the FMV of JOE in TIME's treasury doubles as well
14/ ...b2) TIME's price should reflect said appreciation in JOE. Therefore a t-backed coin's reserve-choice critical to price stability, which gives us the following conclusion: that beta (co-variance w/ the broader crypto market) goes up with non-stablecoin reserves
15/ ...b3) An investor that seeks diversification away from other coins may therefore seek a t-backed coin that holds mostly stablecoin reserves, as we would expect such an investment to "hedge" against the market's overarching price volatility
16/ ...b4) A pragmatic depiction of this is $TIME's explosive growth since inception. I believe this can be stemmed largely to its non-stablecoin holdings - over 60% of its treasury is in AVAX either in an LP pairing or just AVAX
17/ ...b5) Therefore any shrinkage in AVAX's use case as an L1 would therefore lower TIME's value as well. Note that having stable vs non-stable reserves is not necessarily a good or bad thing - just depends on what type of exposure / risk-reward you seek
18/ c1) I believe that many of these coins, other than TIME, does not account for the recursive influence of holding its own coin vis-a-vis LP pairing in its reserves
19/ ...c2) Example: If Coin A holds $100 in USDC as treasury, and Coin B holds $100 in LP(Coin B:USDC), which is more volatile to price movement? The answer is B, as FMV of treasury changes alongside, thereby further exacerbating price impact
20/ ...c3) Price elasticity is therefore larger in t-backed coins w/ proportionally larger LP holdings. Again, volatility is not necessarily a good or bad thing, but accounting for it helps us benchmark relative performance and potentially something that is over/under-valued
21/ In conclusion, I have 2 take-aways:
1) There is still significant room for growth in all t-backed coins - if it is supposed to be juxtaposed as a "bond" to contrast a pure-play "equity" (ex. L1, memecoins), lots of room is to be had before runway for growth compresses
1) There is still significant room for growth in all t-backed coins - if it is supposed to be juxtaposed as a "bond" to contrast a pure-play "equity" (ex. L1, memecoins), lots of room is to be had before runway for growth compresses
22/
2a) $IN is by FAR the most undervalued. Its position as a function of MCAP vs. $SOL system is the smallest of its peers, and they've done this w/ ZERO % of its reserves in non-stable instruments. There is significant growth to be had in adding a fuller suite of SOL products
2a) $IN is by FAR the most undervalued. Its position as a function of MCAP vs. $SOL system is the smallest of its peers, and they've done this w/ ZERO % of its reserves in non-stable instruments. There is significant growth to be had in adding a fuller suite of SOL products
23/
2b) Qualitatively, $IN has a larger competitive moat relative to its peers as being the sole t-backed coin on SOL. It's much harder to replicate given the dev team had to code in RUST vs. SOLIDITY, the latter being what is common and replicable in other L1s
2b) Qualitatively, $IN has a larger competitive moat relative to its peers as being the sole t-backed coin on SOL. It's much harder to replicate given the dev team had to code in RUST vs. SOLIDITY, the latter being what is common and replicable in other L1s
24/
...2c) $IN's dynamic rebasing is also extremely attractive & differentiated, where market participants opting to (1,-1) in "timing" a sell post-rebase are dis-incentivized in doing so as there isn't a clean window to execute. This should insulate vs. downward price pressure
...2c) $IN's dynamic rebasing is also extremely attractive & differentiated, where market participants opting to (1,-1) in "timing" a sell post-rebase are dis-incentivized in doing so as there isn't a clean window to execute. This should insulate vs. downward price pressure
25/
Based on the findings of my analysis, I am putting my money where my mouth is and have ~$25K+ in $IN at a DCA of ~$600 USD. I own most of the other t-backed coins as well for diversification purposes, but $IN alone represents >25% of my existing crypto portfolio
Based on the findings of my analysis, I am putting my money where my mouth is and have ~$25K+ in $IN at a DCA of ~$600 USD. I own most of the other t-backed coins as well for diversification purposes, but $IN alone represents >25% of my existing crypto portfolio
26/ (11/20 Post)
Digression -
Upon some reflection, I think there are many modes for innovation beyond vanilla DAO strategy which is quickly becoming a redundant business model.
Digression -
Upon some reflection, I think there are many modes for innovation beyond vanilla DAO strategy which is quickly becoming a redundant business model.
27/ (11/20 Post)
As investors get smarter and the space becomes more commoditized, they will recognize that growth at the expense of dilution (hidden tax observed via consistent negative bond discounts) is unfavorable as wealth is merely maintained, not created (ponzi rearing)
As investors get smarter and the space becomes more commoditized, they will recognize that growth at the expense of dilution (hidden tax observed via consistent negative bond discounts) is unfavorable as wealth is merely maintained, not created (ponzi rearing)
28/ (11/20 Post)
As investors get smarter and recognize that upfront yield is mostly a marketing mechanism rather than true value driver, I expect consolidation to occur around the tested DAOs that have a proven business model. This makes me more bullish on OHM, TIME, IN, SB..
As investors get smarter and recognize that upfront yield is mostly a marketing mechanism rather than true value driver, I expect consolidation to occur around the tested DAOs that have a proven business model. This makes me more bullish on OHM, TIME, IN, SB..
29/ (11/20 Post)
However, until//if that exists, and we hit FANG-levels of a "Big 4", there will be room for differentiation/innovation in lesser-known players, either building on a use case beyond pure-play cumulative growth or adding unique financial attributes to products
However, until//if that exists, and we hit FANG-levels of a "Big 4", there will be room for differentiation/innovation in lesser-known players, either building on a use case beyond pure-play cumulative growth or adding unique financial attributes to products
30/ (11/20 Post)
Regarding the former, I will do more diligence and model how @KlimaDAO seeks to disrupt (and has already been very successful in doing so) current collateralization strategies. Capitalizing on real-life tailwinds in decarbonization shows...
Regarding the former, I will do more diligence and model how @KlimaDAO seeks to disrupt (and has already been very successful in doing so) current collateralization strategies. Capitalizing on real-life tailwinds in decarbonization shows...
31/ ... deferred thinking on long-term longevity (and not being a one hit pump and dump wonder), such as a physical manifestation of a product, or tying together a story for investors. Crypto is much more like seed-stage investing in VC rather than PE - so narratives are vital
32/ (11/20 Post)
Regarding the latter, I have been exposed to some very interesting products such as @0xO2DAO which has opened my eyes to future steps for innovation amongst treasury products
Regarding the latter, I have been exposed to some very interesting products such as @0xO2DAO which has opened my eyes to future steps for innovation amongst treasury products
33/ (11/20 Post)
And that makes me think - who will be the first to tie in together re-hypothecation (looping leverage) along with a treasury product? If O2Dao holds a staked treasury product in its own treasury, that's one degree of leverage in un-correlated products
And that makes me think - who will be the first to tie in together re-hypothecation (looping leverage) along with a treasury product? If O2Dao holds a staked treasury product in its own treasury, that's one degree of leverage in un-correlated products
33/ (11/20 Post)
But what if you tie together something like @MarinadeFinance (for SOL) or @MIM_Spell 's Abracadabra in formatting something like a CDO squared (reference to MBS from '08)?
But what if you tie together something like @MarinadeFinance (for SOL) or @MIM_Spell 's Abracadabra in formatting something like a CDO squared (reference to MBS from '08)?
34/ (11/20 Post)
Imagine for $IN -
1. $sIN is created by marinade.finance, similar to how mSOL and MEMO are interoperable tokens that can be further either LP pool'd by aggregators or leveraged against
Imagine for $IN -
1. $sIN is created by marinade.finance, similar to how mSOL and MEMO are interoperable tokens that can be further either LP pool'd by aggregators or leveraged against
35/ (11/20 Post)
2. $IN becomes the first toekn to hold its own LP pairing in its treasury. No stable-coin or L1 half. Just sIN:IN. How crazy would that be?
2. $IN becomes the first toekn to hold its own LP pairing in its treasury. No stable-coin or L1 half. Just sIN:IN. How crazy would that be?
36/ (11/20 Post)
Stochastic effects will occur - exciting to think about. Will products that prioritize growth or internal stability outperform? Who are you betting on? Let me know in your comments. What I do know is that differentiation must become a point of parity...
Stochastic effects will occur - exciting to think about. Will products that prioritize growth or internal stability outperform? Who are you betting on? Let me know in your comments. What I do know is that differentiation must become a point of parity...
37/ (11/20 Post)
And tokens with existing user bases and familiarity have a massive head start. I'm ALL $IN.
And tokens with existing user bases and familiarity have a massive head start. I'm ALL $IN.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
