Could This Be the Next YFI? #15
Market Meditations | September 16, 2020
We discuss a promising new DeFi protocol, Binance accused of laundering money, early access to our podcast with Crypto Birb and more!
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Could this be the next YFI?
Microstrategy CEO Says the Publicly Traded Firm Has Bought Another $175 Million in Bitcoin.
Japanese Crypto Exchange Accuses Binance of Helping Launder $9m From 2018 Hack
India Plans To Bring Law To Ban Crypto Trading
Wall Street Stocks Drift Higher Ahead of Fed Decision
Snowflake Opens at $245 per Share in Market Debut, After Pricing IPO at $120
Ray Dalio Warns of Threat to Dollar as Reserve Currency
#6: Crypto Birb: Building a Successful Cryptocurrency Business
Innovate With Urgency
A New Decentralized Stablecoin Hedge Fund?
Today’s Menu: DeFi Food Tokens
Imagine explaining the latest food token hype to someone with no background in crypto. The majority of people would laugh at you and probably think you’ve lost it. The exciting thing is that consensus views rarely lead to big profits, and those looking for asymmetric returns generally have to be willing to take on more risk. I promised my followers to be on the lookout for potential within the decentralized finance (DeFi) space and the only way to achieve that is by looking at everything as objectively as possible.
After Yam, Tendies and Sushi, the latest hot food token is called PICKLES. Pickle.Finance is an experimental DeFi protocol that aims to bring stablecoins closer to their pegs. Pegs is a more technical term which simply refers to the value that these stablecoins are supposed to have, which is $1. Pickle.Finance is looking to achieve this through an experimental mix of farming incentives, vaults, and governance.
Before we continue, readers should realize there are a lot of risks involved in early-stage projects like this. To give you a few examples:
High inflation due to rewarding liquidity providers. Users could dump their farmed PICKLES at any given moment.
Code doesn’t seem to have been audited yet
Token price is up +1000% from its bottom 3 days ago
Deposited liquidity is possible through very high rewards. As rewards drop, that liquidity could vanish if better yields are available.
With that out of the way, let’s take a look at what Pickle.Finance is all about!
As the name indicates, stablecoins have one job. Their value is supposed to be stable. Due to various reasons, imbalances in supply or demand often cause the value of the stablecoins to fluctuate, sometimes deviating ~5% from their peg at $1. This is not ideal, as people generally buy stablecoins to protect themselves from the highly volatile crypto market in the first place.
Picklel.Finance is an experiment that aims to reduce this stablecoin volatility. In the introduction of their Pickle PicoPaper (whitepaper), they wrote that unlike most recent DeFi projects, the project actually tries to solve a problem by ‘bringing the four largest stablecoins (DAI, USDC,USDT, sUSD) closer to their peg by using the power of farming and pVaults.’ To put this in simple terms, the project uses rewards for providing liquidity to the project to incentivize a certain behaviour. Higher rewards are given to pools from stablecoins below their peg and fewer rewards are given to above-peg stablecoin pools. This encourages people to sell above-peg stablecoins and buy below-peg stablecoins. Through a feature called Pickle Swap, liquidity providers can very easily trade between different stablecoins and chase the highest yield possible.
In their announcement on Medium, the Pickle.Finance team replicated YFI’s approach and described their PICKLE token as “completely valueless and has 0 financial value”. The token was launched in a fair way, with no VC involvement, no pre-mine or ICO and no staking prior to reward distribution.. Similar to YFI, the PICKLE token is a governance token so the project will be almost 100% community owned.
This is interesting because although there isn’t much token utility outside of governance for now, the community could vote towards a direction where value accrues to the token through one of their products. For example, one of the first proposals that got approved was about drastically decreasing inflation through a weekly halving schedule as the token currently effectively had an infinite supply. With a token price around $70 and a circulating supply of ~350,000, the market cap of the PICKLE’s token is currently around $25 million. Knowing that the protocol has more than $250 million locked up, there could be room for more growth.
A lot of “What-if’s” are still involved if you want to make a clear bull case. That said, given that the project is a first mover in this area and managed to collect a lot of liquidity early-on, this does seem like a project to keep an eye on. Demand for stablecoins is here to stay, and if Pickle can generate cash-flow from arbitrage opportunities between the most liquid stablecoins, a higher market cap seems justifiable. It’s not unthinkable that through network effects, Pickle becomes one of the largest stablecoin liquidity pools allowing them to earn consistent profits by arbitraging inefficiencies away.
Microstrategy CEO Says the Publicly Traded Firm Has Bought Another $175 Million in Bitcoin. On Monday, Microstrategy told the U.S. Securities and Exchange Commission that it may want to increase their $250m in bitcoin holdings. A day later, the publicly traded company’s CEO confirmed that they went ahead and purchased another 16,796 bitcoins, a transaction worth another $175 million. Microstrategy now holds 38,250 bitcoins at an aggregate purchase price of $425 million. MicroStrategy was the first publicly listed company to convert a big part of their cash reserves in bitcoin, describing it as a hedge against inflation and their ‘primary treasury reserve asset on an ongoing basis”. Read more.
Japanese Crypto Exchange Accuses Binance of Helping Launder $9m From 2018 Hack. A Japanese cryptocurrency exchange that was hacked for $60 million in 2018 is apparently suing popular altcoin exchange Binance for helping the laundering of some of their stolen funds. The exchange claims that the hackers were able to launder the funds on Binance due to its allegedly lax know-your-customer (KYC) and anti-money laundering (AML) protocols that “do not measure up to industry standards.”. The thieves broke the stolen funds into 7,000 seperate transactions all valued below the 2-bitcoin threshold, allowing them to trade on the exchange without KYC-ing new accounts. Biannce has not yet responded to CoinDesk’s request for comment. Read more.
India Plans To Bring Law To Ban Crypto Trading. According to a Bloomberg report, the Indian government is planning to introduce a new law banning trade in cryptocurrencies. The federal government is exploring blockchain innovation, the technology underlying cryptocurrencies, but seems to be against the trading of crypto assets. India’s central bank already banned crypto transactions once in 2018, causing a huge wave of disappointment in the growing crypto ecosystem in India. The decision was ultimately overruled by the nation’s supreme court and transactions on transactions on Indian exchanges have increased sharply since then. Read more.
Wall Street Stocks Drift Higher Ahead of Fed Decision. Wall Street stocks inch higher and Treasuries advance as investors await a decision from the US central bank that is expected to affirm its supportive monetary policy stance. The S&P 500 climbed 0.5%, led by shares of energy and bank stocks, and the technology heavy Nasdaq Composite was up 0.2%. European equities were also modestly high, with the region-wide Stoxx 600 index climbing 0.3%. The Federal Reserve is holding its last scheduled session (tonight) before the US presidential election and the first since it embraced a new strategy that will be more tolerant of higher inflation. Economists expect the central bank to come out with rosier projections for this year than it did in June, while signalling interest rates will remain low. Still, data released on Wednesday showing US retail sales growth lost momentum in August highlighted the choppy recovery from the pandemic. Read more.
Snowflake Opens at $245 per Share in Market Debut, After Pricing IPO at $120. Snowflake shares surged more than 130% in its market debut on the NYSE on Wednesday. Snowflake is the largest ever software IPO. Snowflake on Tuesday priced shares at $120, higher than the $100 to $110 range it estimated on Monday. The stocks trade under the symbol ‘SNOW’. The stock received a vote of confidence last week, when Snowflake revealed in a filing that Berkshire Hathaway and Salesforce each agreed to buy $250m of stock at the IPO price in a concurrent private placement. Snowflake is growing alongside the major public cloud vendors by providing technology that allows clients to quickly analyse and share vast amounts of data and increase capacity as needed, rather than relying on databases that are tied to hardware. Read more.
Ray Dalio Warns of Threat to Dollar as Reserve Currency. The dollar’s decades-long position as the global reserve currency is in jeopardy because of steps the U.S. has taken to support its economy during the Covid-19 pandemic, according to Ray Dalio, founder of hedge fund giant Bridgewater Associates. While equities and gold benefited from the trillions of dollars in fiscal spending and monetary injections, those efforts are debasing the currency and have raised the possibility that the U.S. will go too far in testing the limits of government stimulus, Dalio said Tuesday in an interview with Bloomberg Television. ‘There is so much debt production and debt monetization,’ Dalio said. Read more.
#6: Crypto Birb: Building a Successful Cryptocurrency Business
Today’s episode features Polish Twitter legend CRYPTO₿IRB.
Adrian is the founder of the popular trading community The Birb Nest and also he co-founded Yellowblock, a marketing agency for cryptocurrency projects. He is an active trader and popular influencer on Twitter.
In this episode, we talk about his background as a chemical engineer, his journey and lessons learned from building a successful crypto business and the importance of mindset and networking along the way.
Innovate With Urgency
In the past few months, we have seen a stark contrast between the modest pace of typical change management projects and the rapid innovation that is stimulated by a crisis. We have seen companies launch all sorts of new initiatives to remain competitive. Many leaders built a business case, sketched out a vision, mobilized stakeholders, created metrics for success, and started a pilot. This was driven by the sense of urgency created by the crisis.
This emotional and existential pressure to innovate is much weaker during normal times. Looking to the future, we ought to maintain this sense of urgency to drive innovation. The truth is, constant change and development are urgent and existential, even when it doesn’t feel like it. Covid has taught us important lessons with regards to innovation.
Engage in small experiments. When you try to optimise your way of working, do not focus on a large unattainable future goal. Instead, engage in small experiments and testing new ideas.
Test bold ideas. In a crisis, goals are short term, high priority, and challenging, and there is a sense that they must be achieved. Build these factors into your small experiments. Do not dismiss an idea that seems too bold; attribute the same sense of importance. By way of example, when schools shut down due to Covid, the education sector acted promptly to move learning online. A fantastic initiative that would have previously been deemed too ambitious or unachievable.
Lean in and get personally involved. If you are a leader, or work with other people, be sure to dive into creative projects or attempts to change ways of working. Stay part of the process.
While these steps sound simple and straightforward, they’re not easy, particularly if you have been accustomed to a well planned and well controlled way of working. They require you to be outrageously demanding and to challenge what you are comfortable with. With a sense of urgency, the economy has shown how much can be achieved; let us try to maintain this urgency and desire to innovate even as we come out of the pandemic.