The DeFi story of 2021 was arguably Olympus DAO bursting onto the scene and kicking off the DeFi 2.0 craze. “OHM Fork Season” has been in full effect since October of 2021 and the question on everyone’s mind is- Will the craze continue into 2022 or is this just a flash in the pan? What other trends can we expect in 2022? While I don’t pretend to have a functional crystal ball, I do have some predictions to make just for fun. Plus my current analysis on my Top 15 rebase tokens. As always, nothing here is financial advice.
“The candle that burns twice as bright burns half as long.”
I predict we will see more and more rebase tokens that debut with massive APY, huge bonding discounts, exploding treasuries, and then an epic collapse where the market cap falls significantly below the treasury value and never recovers. Bonding halts, the treasury never grows, enthusiasm dies. In my eyes these are basically pop-up casinos and we are already seeing this happen now. Even for tokens that kick off with lower APYs, we see the same thing playing out just over a longer period of time. Treasury growth tends to stop after a couple weeks and then bonding/minting does not become enticing. I believe that most new rebase tokens will sputter out unless they KYC, have a fair launch, and create something unique and innovative like $BTRFLY, $ROME, and $SQUID have done. Things like gamification, NFTs, and encompassing the latest trends in DeFi will be the only way some of these rebase tokens will succeed in the long term. We’re already at the point where people are burnt out aping into these new projects, so if the projects don’t innovate right from the start they’ll be left behind.
Giza DAO paved the way as an honorable group of folks who took advantage of the soured market conditions and decided to airdrop the treasury to their loyal stakers, which created an enticing arbitrage opportunity. The more that this happens, the more that floors based on treasury values will start becoming a thing. A little predictability and stability in the rebase token market would surely be welcome.
I have done some rather complex worst-case scenario analysis and have come to the conclusion that the $1 backing that most rebase tokens talk about is not only false, but not necessary and maybe even harmful to the projects’ growth potential. I think we will see some rebase tokens drop this wordage and also become very transparent with the inflationary effects of minting. Once treasuries ditch the $1 backing meme, they’ll take more risks investing the stablecoins into yield-bearing or growth assets, like we are seeing with $OHM $TIME $SQUID and $BTRFLY.
With increasing regulatory scrutiny surrounding stablecoins pegged to the US dollar and the dark cloud that looms over $USDT, the demand for widespread decentralized stablecoins may reach new heights. $DAI, $MIM, $UST, $FEI, $FRAX, etc. will face off to see who will reign as the champion. While $DAI had the first-mover advantage, it’s tough to deny the innovations that have occurred surrounding $UST and $MIM. With SushiSwap likely being added to the frog nation arsenal, we may see more LP pairs prefer $MIM over $USDC/$USDT, but institutions will likely be more initially attracted to the proven yields in Terra Luna’s Anchor protocol. Will another stablecoin innovate on the EVM chains to give Anchor protocol a run for their money? Will the brains behind the frog nation even attempt to leverage abilities within Popsicle Finance, SushiSwap, and Abracadabra.Money as a competitor to Curve, or, dare I say, Anchor protocol itself? Lest we forget about the billion dollar treasury within the Wonderful Memories ($TIME) that grows ever faster looking to deploy its reserves… 2022 could be the year of the Frog. Don’t fade it.
With a potential tripling of money flowing into the crypto space in 2022, we can unfortunately expect to see more sophisticated hacks and attacks. Just when you think a new project must be totally safe based on a doxxed team and the high quality of their marketing materials, you will be left surprised again aping in and then holding the bag as you watch your money evaporate into the tornado washing machine. Don’t let your search for 100x gains cloud your judgement. Look for tokens with a reputation and proven track record that trade at a discount.
In 2021 we saw some pretty scary wick downs and whale manipulation not only with Bitcoin, but with altcoins as well. Lending protocols such as Aave, Maker, and Abracadabra.money will continue to grow in popularity and as more institutional money enters this space, they’ll be licking their chops at the 0–1% annual interest on collateralizing their coins. Collateralizing loans at even 50% loan-to-value on almost any asset may leave you soured, so use leverage cautiously. One thing we all need to be intently careful about are the brief moments where stablecoins will lose their peg by more than 10 cents, something that is completely possible with the right black swan event or protocol bug, so be careful where you tune your $UST Anchor looping. Then there’s also the fact of all the $ETH that will be unleashed into the market once “The Merge” goes live which will cause unpredictability in $ETH price action. All of this being said, while we can expect varying degrees of volatility in the market, I do believe that the crypto market cap will end the year higher than it started. (Not Financial Advice).
NFT gaming is really picking up, and in 2022 we may actually see some decent playable games. The anticipation is palpable behind games like Star Atlas, Ember Sword, Guild of Guardians, Illuvium, Aurory, and more. Even the more basic browser-based games like Aavegotchi and Crypto Raiders will likely continue to see immense success and stability in 2022. Like traditional games though, unless they are fun, they will fail. Games that are fun, engaging, and keep building will do well even in bear markets while games that take too long, are buggy, and not fun will have their corresponding tokens crash and burn. The highest potential for gains and highest potential for losses will both be in the metaverse space. A huge portion of my gains since the second half of 2021 were surrounding Ember Sword land sales and Crypto Raiders LPs, so I will start sprinkling in some GameFi articles soon as well to try and identify those gems.
See below for my analysis on a few select rebase tokens. I also started including a snapshot of the price performance of each token over the last week. Remember that due to the autocompounding and dilution of rebase awards, depending on the APY of each of these projects you can reasonably add another 10–15% on these weekly gains.
Fantohm. Fantohm has been a token I’ve been saying was severely undervalued for a while and also has some of the more innovative features when compared to their peers. It didn’t take long for the market to realize this after last week’s article and my video with Cruising on Crypto. 142% gains in one week for a rebase token that’s been around for a while is absolutely astounding. Now that they have gained so much and they are trading well above their treasury, their valuation metrics are not nearly as attractive and therefore they have fallen a few spots in my rankings. Kudos to the folks at Fantohm for a great week!
Squid. Squid DAO is still trading at an attractive valuation and has the treasury with potentially the highest growth prospects on the list. It’s funny when you compare $SQUID and $BTRFLY. They’re both on Ethereum, they both invest in similar assets, both have relationships with Olympus DAO, yet $SQUID is trading at nearly a 25% discount on the MC/TV ratio compared to $BTRFLY, and arguably $BTRFLY is a decent deal right now too.
Wonderland. I could write my own separate article with everything that is going on with $TIME right now (And I’ll be sure to cover a lot of what’s going on here with Cruising on Crypto on Youtube tomorrow). I always mentioned that their price action would be volatile due to their high valuation ratio, and we are seeing that with their week-over-week performance. However my conviction with $TIME may be as strong as ever. There simply isn’t any group of minds and developers that are shaking things up more in cross-chain DeFi than the folks behind $TIME. There has been a lot of talk today regarding taking $wMEMO on the road and increasing liquidity depth cross-chain, with Fantom being the next chain to expand to after Avalanche. Due to $TIME being associated with the other suite of Frog nation apps, they have dibs on some of the most sought-after DeFi strategies around. For one they have dedicated a large portion of the treasury to the popular Degenbox/UST looping strategy that currently provides a “relatively safe” ~100% APR. Secondly they negotiated an OTC trade for a huge amount of $SPELL at a massive discount to its current valuation. There are also talks of potential airdrops for loyal stakers, as well as halting the minting process completely (which I fully support). Feel free to salivate over their treasury here.
Umami. When I started running the numbers yesterday, $UMAMI sold off enough that it looked like a super enticing buy around the $26 mark and I was getting ready to fill a position. I got distracted and the token pumped 30% and I decided to wait a little longer as I rarely ever chase a big pump. Still, this is trading at a very solid valuation and their treasury strategy combined with their new vesting (marinating) option is getting tempting. Even though it looks like $gOHM and $wMEMO are surely going to cement themselves strongly on Arbitrum, neither of them are nearly as good of a value play as $UMAMI. I am keeping a very close eye here and if it ever dips closer to its backing then I’m going to initiate a position.
Spartacus. I have been sleeping quite comfortably with my position in $SPA. They have the best valuation ratio on the list and have been slowly grinding upwards after their APY cut. Fantom is starting to become the chain with the more enticing DeFi plays outside of Ethereum which gives a lot of these treasuries great options to invest in.
Papa. Seeing the activity with the devs on the server, I am starting to see this as a less risky play. They have also done multiple buybacks and burns, which has somewhat stabilized the price. However I still really need to see a better dashboard with an accurate runway number. Assuming that the $1 floor is solid and unbreakable (which is a big assumption), then this appears to be relatively safe as the most you could lose is 50% of your initial position and the rebases would make up for that in a month or so. (Not financial advice)
Rome. Frens, don’t be offended by the last place rank here. I think there is absolutely massive potential in $ROME, but there is just so much uncertainty with how it’s going to play out and their valuation ratio is bonkers right now. If someone wants to hit me up and explain the gamification elements here that make its current valuation ratio justifiable, then let’s chat and I’ll see what I can do about the score.
The rebase token space continues to grow faster than ever before. If you want your favorite rebase token listed, you need to prove to me that they are truly special. I will no longer cover any vanilla OHM forks with anonymous teams. I want to see semi-KYC’d teams with super innovative features that have never been done before and these innovations need to start right out the gate. One of the more promising projects that has caught my attention recently is Warp.Bond, which attempts to gamify rebase tokens by utilizing spaceships that you fuel and bounce between planets to harvest yield. I am eagerly following that project to see how it turns out!
Anyway, if you think you know about a super innovative rebase token or have any feedback for me in general, drop me a comment and I’ll do my best to look into your suggestions!
~Bludex
Disclosures: Nothing in this article should be considered financial advice. I hold $SQUID, $TIME, $OHM, $SPA, and $PAPA.