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Bitcoin has once again smashed ATHs, and the markets feels as alive as ever. While celebrating is warranted, taking profits along the way never hurt anyone, but we're sure you already did that... Right?
Before we get into this week's newsletter, we want to thank everyone that showed up to LebThree's Bitcoin Pizza Party. It was a blast meeting so many of you in person (And eating delicious pizza). Many more fun events are on the way, so stay tuned.
On the menu today, a breakdown of the InfoFi craze that is taking over the crypto space; Kaito is no longer the only platform where you can be rewarded for your X activity. After that, we will take a deep-dive into the world of yield trading, could it be the next addition to your portfolio?
A couple months ago, all of twitter was going crazy over the latest opportunity in crypto: KaitoAI. A platform that rewards users in yaps & tokens just for being active and getting engagement on twitter? Sounds perfect.
Kaito saw tremendous success, and when there's success, there's copycats. Since then, platforms like Fantasy and Cookie3 have all launched their own InfoFi reward systems, but instead of yaps, they reward users with clout and cookies.
Kaito holds the biggest marketshare by far in the InfoFi landscape. It is definitely worth looking into, especially if you aspire to grow your personal brand, and enjoy creating content about various projects.
At the moment, the focus point is project incentives. While yaps do matter, they are hard to earn and very inconsistent. On the other hand, projects that get listed on Kaito have "Mindshare Leaderboards" which reward their loudest community members.
If you have a small account, it could be a good strategy to find your niche, and create content about it. Those leaderboards have proven to reward users very generously, as we recently saw with SEI and HUMA.
As we said there are many other platforms, but the two we believe could succeed are Fantasy and Cookie3.
Fantasy's Clout system is a gamified way of doing things. Users can earn Clout points through insightful, humorous, or viral content, whatever it may be. These points determine their ranking within the Fantasy ecosystem.
The Clout algorithm adjusts scores based on account size, aiming to provide smaller accounts a fair opportunity to compete with larger ones. At the end of each season, top users are rewarded in $ETH and points.
Cookie3 is more similar to Kaito, where you earn points by posting viral crypto related content. At the moment, the app is invite-only, which is just annoying. Cookie3 brands itself as a decentralized marketing platform.
Just like Kaito and Fantasy, those points may become tradable or grant access to airdrops in the future.
With so many apps trying to achieve the same thing, it's starting to look the way memecoin launchpads have become. One very successful platform (Pumpfun/Kaito) and tons of alternatives that try to gain marketshare, but ultimately struggle.
If you do decide to go the InfoFi way, Kaito should remain your main focus, but it doesn't hurt to try and farm the other ones too.
Rate trading is no new concept; it has been a very important part of Ethereum's DeFi ecosystem through Pendle. As Solana's own DeFi landscape grows, rate trading is becoming more common and user friendly, thanks to dApps like RateX and Exponent Finance.
We will focus on the farming side of yield trading, as I believe it's the most interesting part for risk-on portfolios, especially with opportunities to farm big upcoming airdrops like Huma, Fragmetrics, and Kyros.
This guide is a little lengthy, but I believe it can bring a lot of value, so give it a shot!
The basic concept is simple: Exchange your tokens, for the yield (And points!) of multiple tokens.
For instance here; You can exchange 1 fragSOL for the yield of 49.6 fragSOL. Your fragSOL is effectively turned into YT-fragSOL, which stands for "Yield Token", giving you the staking yield + point exposure of 49.6 tokens instead of 1.
This is obviously a big advantage, as some projects can be very capital intensive to farm. This brings you an alternative to that capital thanks to leverage (50x in the example) but here, the risk isn't in the leverage; it's in the maturity date.
Every yield trading market, wether on RateX or Exponent, have maturity dates, and the closer those maturity dates get, the lower the price of the YT token will be, because there will be less time to accrue yield (And make your money back).
This means that as time passes, all YT asset prices will trend to 0. This is called time decay. Here is an example of time decay on a kySOL market, where over time, the YT asset price slowly but surely trend to 0.
So why would you want to hold YT-Tokens if they go to 0? That would be because you believe exposure to the yield and points will bring you greater returns, here is how you can calculate what the exposure will bring you. Let's use the fragSOL market.
So as we saw earlier, 1 fragSOL = 49.6 YT-fragSOL. Additionally, you can see on the picture above, that the maturity date for this market is 10JUL25, so in 46 days at the time of writing.
Now, let's shift our attention to the "Overview" section.
Implied APY is what the market is currently pricing the YT at: 17.08% APY
Underlying APY is the actual yield that fragSOL currently brings: 7.89% APY
So here, we can see that the market puts a 9.19% premium on fragSOL yield exposure; why would that be?
Points and extra rewards.
Here we can see that holding YT-fragSOL not only yields you 7.89% APY, it also yields you a 4x point boost for Fragmetric's airdrop, as well as $SWITCH reward. All of that on 47.29x leverage.
This effectively means that investing 1 fragSOL on Exponent market will give you the same point exposure as holding 189 fragSOL (Leverage X Point Multiplier). This point exposure is the trade-off to the price trending to 0 as maturity approaches.
But keep in mind, this won't mean you burn 100% of your principle, since the underlying yield still gets payed to you in real time, to calculate how much of our initial capital we will recoup till maturity, we can simply calculate it:
(YT÷100) x Underlying Yield = T
(T÷365) x Days till maturity= Recouped Capital
So for this example we would do:
(49.6÷100) x 7.89 = 3.91 Then (3.91÷365) x 46 = 0.49
That would mean that of the 1 fragSOL invested, you will exchange 0.51 fragSOL for points and rewards.
SO there it is, the full reasoning behind a YT leveraged purchase. At the end of the day, the decision should come from your own risk analysis of the specific project your are buying the yield of. If the intangible rewards outweighs the capital being traded: It's a good buy.
Two important notes to keep in mind:
1-) The same way markets sometimes underprice YT tokens, they also often overprice them. When you think a yield is overpriced, don't fomo and wait it out, because it's not worth your capital.
2-) There is extra bonuses when trading on RateX and Exponent which is their very own airdrops. We don't have any specifics yet, but they will come, and they will be big. Pendle's governance token went to $2B in mcap, so we could see big valuations for Solana protocols as well.
[All topics are meant to be educational only. None of it is financial advice, please do your own research.]
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