cont. from the previous:
these tokens have been on my watchlist but slightly lower conviction / i havent done the DD to know whether they are actually interesting
Sadly I missed out on the OSMO and RUNE rallies of last few weeks where they outperformed the market (alongside LINK). So a bit frustrated I didn’t do this run down a few weeks ago (both have been on watchlist for ages)
OSMO
Market cap = $330mn, #125 among tokens
OSMO is the native chain to osmosis. my core bullish thesis for this is the idea that while ATOM is struggling to realize its potential as the cosmos hub token, OSMO is a proxy in the sense that it will experience the tailwinds of being a sovereign protocol that has hub interoperability. its metrics were sorely impacted by the collapse of Terra - pre terra tvl was $1.3bn… now its $120mn… and its been a flat line since that event. So this is a very binary trade. either the market has moved on to ethereum based development and no one cares about osmosis again, or some new protocol or liquidity seeks out cosmos and its a huge success.
i think the fact that dydx is moving to cosmos will be a huge forcing function for Osmosis liquidity. i also think there are strong tailwinds from ATOM 2.0 economics. cosmos also has zero sales team which i think is really impressive in context of their marketing ‘reach’/name brand
Also just a point on their inflation - issuance is subject to “thirdening'“ which began in 2021 at 300mn (this issuance is spread into a daily inflation which is what plays into token yield), followed by 200mn second year, 133mn, etc. total max supply is 1bn
Decision: this is super binary so i think i will just buy smalls. also because ATOM and DYDX are already on this list where economics could be quite redundant
LDO
Market cap = $2.6bn, #32 among tokens
LDO is the governance token for Lido. it is just for governance. there was hype around LDO turning on the fee switch (i.e. returning some of the protocols revenues to token holders) but this was never substantiated by the Lido team. My guess would be that they are already the most competitive in terms of their cut for the staked rate that they pass through to the end user, so they likely have the thinnest margins. on this basis, i dont think they would turn the fee switch on. i think this team will view their primary value add to the ecosystem as providing great liquid staked eth. if they are going to give up revenue, it would be by trimming their cut of the staked yield even more - not my reallocating some revenue to tokenholders.
the only caveat to this is the idea that they have come under pressure from the ecosystem recently for having control over ~1/3rd of all staked eth… which is not very decentralized… i get this argument, but its super controversial (as a lot of the ecosystem loves Lido and has gotten rich off LDO). my upside argument is that there could be a proposal made that Lido has a … fiduciary duty?… to turn on the fee switch, to incentivize more USERS of Lido to be TOKENHOLDERS to ensure a more decentralized governance structure. Without the fee switch, one could argue, regular users have no incentive to participate in governance / no need to hold LDO which will impact decentralization. i could see this happening…
Decision: not buying for now, but monitor the fee switch / Lido centralization debate and reconsider buying if it continues to heat up
MNT
Market cap = $1.5bn, #40 among tokens
Mantle is an L2 that breaks apart execution, DA, and transaction finality - allowing all of these to be individually adated to the latest innovations. They are using Eigenlayer for data availability and settlement, meaning restaking is embedded into the operations of the chain
MNT is used for gas fees and governance. the FDV is 3.5bn and the circulating market cap is 3bn, so there is economic optimism in that the supply of the token will only mildly increase to reach full issuance - this is pretty constrainted relative to most token economics.
i dont really think there is market demand for another L2 and it seems like Mantle lacks interoperability features. I cant say i am super bullish on this, but also recognize that the fact that it is DAO led and integrates Eigenlayer will probs provide a great pump
The TVL is only 77mn. I think TVL vs. token market cap is a decent metric to look at. $77mn is like the book value of a token. the market cap is the stock price
BVPS - book value per share. there a tradfi use case for stock price/book value.
Mantles is 19.5Teslas is 16.5Apples is 4.00Amazon is 17.7I think this does a good job of demonstrating real value (TVL - people on the platform) vs price of the asset. only problem now is that TVL is a rigged data point!Decision: Hold off on MNT… monitor noise and try to capture pump (It doesnt trade on US exchanges anyways i realized)
ATOM
Market cap = $3.7bn, #27 among tokens
Cosmos is unique because it was around for previous cycles, dominated the app chain narrative (whereas others like polkadot and even polygon have died) and it holds firm today. ATOM the token is unique because until recently, there was no economic value other than proxy / governance. ATOM token did not perform function that intermediates any of Cosmos chain’s or Cosmos hubs utility.
That is until ATOM 2.0 was produced which suggested economics stemming from 1) interchain scheduler (cosmos hub / ATOM acting as sequencer agent) and interchain security (cosmos hub / ATOM serving as security agent across chains)
However this proposal was rejected and a new proposal has not yet been made. i think the tokenomics of ATOM are critical and currently a disaster. However, it seems that the governance is super focused on figuring this out as a top priority. not to mention, they have been successful in building a community, without any marketing or a valuable token… this says something.
**Update on news based events - the ATOM governance voted to cut inflation in half, which caused a rally 8%, then the conservative founder (Jae Kwon) proposed a split, which would make cosmos much more innovative if it went thru = net bullish news
Decision: Buy opportunistically for a better tokenomic future - monitor that situation carefully
RUNE
Market cap = $1.8bn, #37
Rune is interesting because it has been around for quite a long time - since nearly Uniswap - but has not caught fire. Feels like only recently have some begin talking about it. Rune is the token of THORChain, which is the worst name ive ever heard. Thorchain is a cross-chain DEX, but it is very significant because it requires no bridging - by running validators across a variety of chains, THORchain allows users to swap BTC for ERC 20 tokens without a bridge. I am still working out how this technically is possible, but i understand that the AMM relies on LP pools that include the two swapping tokens in a pair, plus RUNE. The RUNE is supposed to counterbalance the two pair tokens and ensure sufficient liquidity.
I am bullish on the use case because its one of the rare examples of innovation. Eigenlayer, liquid staking, decentralized sequencers are all genuinely innovative buying opportunities and the first two have panned out extraordinarily well
oh wow, it was also built using Cosmos SDK. this makes some more sense
Decision: Buy, do more discovery on technicals
DIVA
Market cap = 330k
Obviously a standout for how early stage it is. I tried to use it myself, but this requires a non US VPN which i stopped doing out of fear of repercussions. DiVa is a liquid staking protocol that will leverage distributed validator technology (like Obol? tbh i dont know enough about this tech other than what is intuitive). Point is that people will be enabled to liquid stake on a distributed validator basis, natively and decentralized(ly..). unlike lido which is quite centralized. shocks me that anyone in crypto tries to pretend otherwise.
Anyways, DIVA is planning to vampire attack Lido, which i think is a great idea. This will accrue to their TVL, so that is what i am primarily bullish on- will it effect DIVA?
TBD. DIVA token value and purpose seems still too early to tell. there was already an airdrop, the token has max 1bn supply, the purpose is allowing early people who care to play a role in token design. maybe eventually they have a fee switch turned on, but clearly this has not been the way of Lido, so we’ll see. i think worth a buy just given the size - i spotted it early and i think DVT could have a run in this next cycle
https://docs.divastaking.com/distribution/#the-purpose
Decision: buy, because of early opportunity adn view on vamp attack/DVT surge
FXS
Market Cap = $500mn, #81
Frax has long been a token i have been curious about because the yield is often generous and the project has been around for long enough / seen a fair number of market events and endured.
I have not actually used Frax yet. i have been meaning to, but never have. feel like my main driver to use it is the high yield associated, but that is fleeting, insecure, and a no-moat business for a defi protocol…
FXS is used to mint and redeem against FRAX stable, meaning it is highly subject to death spiral attack - like Terra - redeem Frax by FXS, sell FXS, move on… seen this before
Decision: I will try the protocol before killing it in my mind forever, but i think death spiral risk and no moat business more broadly calls for a no buy here
UNI
Market cap = $3.6bn, #23
OK uni is the governance token for uniswap. uniswap is huge and dominating the dex space as it has for a while. i find it hard to imagine any reason for significant price deterioration - the main upside case being the possibility that they turn the fee switch on (i.e. send transaction fees into the token treasury aka pay out transaction fees to demonstrate cash flows accruing to token holders). right now transaction fees fund operations and pay the LPs contributing liquidity. i can see this happening one day
also the broader development of the Uniswap protocol (X, v4) demontrate that there could arise use cases we cant even forsee based on the existing use case and business operations.
inflation rate is 2% perpetual
Decision: buy for the growth of the ecosystem and hence the growth of Uniswap as a protocol, hold long term view that token switch could come on
XRP
Market cap = $33bn, #5
XRP / Ripple i have some sympathy for as a project / company. They are solving for remittances currently, integrated with large cross currency providers. this is a genuine and durable use case for blockchain.
The less certain component is whether ripple is best placed to solve for it. Ripple is independent technology from other blockchains, a walled garden that cannot easily interoperate with other use cases.
for this reason, any growth of the ecosystem will be corporate driven by Ripple labs. there will be very little crypto/blockchain community interest i fear, since there is no easy synergy to the rest of crypto/blockchain, and if you dont have a remittance need, it is probably a waste of resources to bridge in and spend time/cost on the XRP opportunity
tokenomics have deflation because part of transaction fees are burned, but 55bn XRP total supply is gradually coming out from either founders or ecrowed wallets
https://onxrp.com/tokenomics-of-xrp/
Decision: no buy, i will keep watching, but i already see this more like a stock than a token. i am sure they have an IPO on their roadmap if the SEC drama ever clears into the background
MKR
Market cap = $1.4bn, #43
Maker DAO is a unique one because it has a long history, it was the first DAO, it was an early stablecoin - and perhaps the first algorithmic - and today it has characteristics of an asset manager (RWA pools) and a bank (DAI, DSR, Spark for savings/risk free rate, etc). i cannot say there is are many (any?) protocols quite like it.
upside case is that they continue to grow and build and attract value to the MKR ecosystem (grow DAI, grow returns and size of asset manager business). this would positively impact MKR
downside case is the fact that Maker is a DAO and daos are historically a tragedy. i am not super confident in the sustainability. there is shadiness at the best, but really serious concerns at the worst. The co-founder was murdered last year - early 20s guy - and this was very hush hush at the time. strange behavior that i cannot really explain, but can imagine
The token itself is used to stabilize the DAI stablecoin, pay transaction fees in Maker, vote in governance, and use for DeFi. this is the main token where i feel governance has actual value associated
Decision: i might buy but TBD. i see this as a LP stake in a fund almost. they are blue chip, but there may be some opportunity cost here
SNX
Market cap = $1bn, #53
i have always been very confused about the value prop of synthetix. its not a chain or infra, its not a dapp either really, its not a stablecoin (?) yet somehow it has amassed significant market recognition.
Synthetix allows users to stake their SNX, the native yield/governance token, to borrow sUSD against it. then sUSD has a lot of integrations across Defi where you can leverage the token therein. I guess the value play is that sUSD concentrated DeFi liquidity to a standardized asset across protocols/chains - so perhaps your SNX appreciates while you leverage sUSD which is theoretically liquid secure and higher yielding than USDC or USDT.
There is something about a stablecoin that is backed by a single, somewhat arbitrary token that just rubs me the wrong way. I am thinking about this like - if Bank A said we will take any collateral and give you dollars which you can use for financial utility. these Bank A dollars are very liquid and secure, but because the market that produces them is fair/efficient, the yield is also fair/efficient and therefore low. Bank B says we will give you dollar loans too, but only against our equity. but, with our dollars, since there is some incentive at play, you can achieve higher roi on your dollars and hey, ideally the bank equity goes up too. its not that it doesnt make sense, it just doesnt seem economically optimal.
SNX value play is that demand to leverage sUSD in defi increases. i dont really think the market for this is all that robust.
Decision: hold off, i think SNX will underperform
INJ
Market cap = $1.4bn, #45
This one just rubs me a bit the wrong way. They claim to be the fastest and cheapest L1 and made for DeFi specifically. The token is for staking to secure the network and governance. just feels like a weird model.
Of course, it is up to $20 currently from $1.60 back in May, so its worth keeping these little guys that havent been around for the last bull cycle in mind
Decision: wait and dont catch fomo for vaporware
CAKE
Market cap = $500mn, #82
I started liking CAKE a year ago ish for two reasons
highest transaction count in defi (kinda think this is rigged but its BNB chain based, so possibly real)
pancake swap turned on their fee switch - i.e. they are now sending accrued fees, in some part, to tokenholder value.
I think CAKE has convexity to bull market because it is more heavily retail used and somewhat unrestrained given its asia based and on BNB.
from a fee switch perspective, its interesting - i see now CAKE is earning roughly 1/5th of its transaction fees (based on defi llama)
i should highlight that - if i am going to look at protocols and give them credence based on revs or revs/fees metrics, you have to look at the whole picture. CAKE is #11 on fees in terms of 24hr notional amount. disregarding chains (eth, btc, tron) the other protocols beating out CAKE are some tokens that i have been mid bullish on (MKR, LDO, DYDX, SNX -- in that order). these fees come from the protocol taking a cut of the fees users pay to use their services, rather than sequencing/MEV or burning their token, which would be more of a chain/infra revenue generating tactic.
i should do a separate piece on the different ways protocols make revenue.
Decision: Asia and BNB somewhat rub me wrong way, but i think smalls in CAKE could be a more convex UNI play. would invest smalls but on the fence for now