Uniswap DeFi’s Stimulus Check #16
Market Meditations | September 18, 2020
We discuss DeFi’s $1200+ Stimulus Check Uniswap, give early access to our podcast with Devchart and more!
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DeFi’s Stimulus Check
Kraken Is Launching a Crypto Bank, Paving the Way for Possible Stock Offerings
Bitcoin Supply on Ethereum Tops $1b
Coinbase Will Require Pro Customers to Pay Withdrawal Fees
LSE in Exclusive Talks With Euronext Over Borsa Italiana Sale
Trump to Block U.S. Downloads of Tiktok, Wechat on Sunday
Chime Surpasses Robinhood as the Most Valuable U.S. Consumer Fintech
#7: Devchart (Andre): Creating a Market Leading Chart Alert Tool for Cryptocurrency Traders
The “70 Percent Rule” for Decision-Making
DeFi’s Stimulus Check
Never a dull day in crypto. Although there were strong rumors about Uniswap eventually implementing a token of their own, yesterday’s move proved to be a pleasant surprise to almost anyone that participated in the decentralized finance (DeFi) frenzy in the last few months. Any user with at least one transaction (even failed) interacting with the Uniswap protocol, before the snapshot taken on Sept 1st, was eligible to claim an airdrop of 400 UNI, a reward currently worth ~$2000. With DeFi users receiving a stimulus check of their own, could this be a turning point in the market?
We wrote about the exponential growth in volume on Uniswap and other decentralized trading protocols a month ago and volumes have only increased since then. According to The Block, month-to-date volume in September has already surpassed the total volume seen throughout August and so far, the $14.9 billion in volume in September reflects an almost 30% increase over the already sky-high numbers of August. A recent cause for celebration was a tweet mentioning Uniswap’s volume alone topped Coinbase Pro’s for the first time, indicating a tipping point for cryptocurrency exchanges.
In the past few weeks, due to the open-source nature of the protocol, numerous competitors like SushiSwap iterated on Uniswap’s design and managed to ‘steal’ hundreds of millions of liquidity through creative token designs. Users familiar with DeFi knew that it was Uniswap’s turn to make a chess move to attract some of that liquidity back and Uniswap coming out with a token of their own was certainly a debated topic. That said, the launch of their UNI token by retroactively rewarding early users still managed to make waves in the community. A move for the history books?
By distributing governance of the protocol in the hands of the community, Uniswap followed the playbook of some of the most successful launches in DeFi this year. In the announcement post, Uniswap expanded on why the protocol is ‘well-positioned for community-led growth, development, and self-sustainability. The introduction of UNI (ERC-20) serves this purpose, enabling shared community ownership and a vibrant, diverse, and dedicated governance system, which will actively guide the protocol towards the future.’
With a total supply of 1 billion UNI, 15% can immediately be claimed by early liquidity providers and users based on a snapshot that ended on September 1st. 5% of that allocation goes to historical liquidity providers, the other 10% to early users evenly distributing UNI supply over ~250,000 unique addresses, instantly making it one of the most decentralized projects in the DeFi ecosystem. Users all trying to claim their reward completely congested the Ethereum network once again, with gas prices soaring over 700 gwei per transaction, setting an all-time high once again. Details about the remaining distribution are beyond the scope of this article but are described in detail in the announcement post above.
To Sell Or Not To Sell?
As one would expect, the first reaction by many who managed to claim their reward was to instantly sell their UNI token, regardless of the price. Who doesn’t like waking up to +$1000 worth of free money, not an insignificant amount for most crypto users around the world. The token price fluctuated between $2,5 and $4 yesterday, situating the market cap of the circulating supply between $150-300 million. An onslaught of small orders hit the market all day and it became clear that the market was able to easily absorb the incoming sales. The bigger players were accumulating UNI instead of cashing in their reward.
There was some evidence to suggest the UNI price could go higher. With an average daily volume of $350 million over the past month and an estimated annualized revenue of ~$450 million, a higher valuation for DeFi’s favorite product could have been justified at a $250 million market cap, based on circulating supply at the time. With governance in the hands of the community, one of the first features likely to be voted in is turning on Uniswap’s 0.05% protocol fee, good for ~1/5th of the protocols $450M project annualized revenue, according to an article in The Defiant. Speculating on the price of such a nascent asset is hard, but given that it is probable that value will accrue to the UNI token by having rights on a part of Uniswap’s cash flow in the future, it could be an altcoin worth holding. The exponential growth DeFi and DEX’s have seen over the past few months further supports this idea. I look forward to covering future developments of the protocol in this newsletter. See you next time!
Kraken Is Launching a Crypto Bank, Paving the Way for Possible Stock Offerings. Kraken, one of the earliest crypto exchanges, has received approval from the state of Wyoming to build the country’s first crypto bank. The exchange will be regulated under a ‘Special Purpose Depository Institution’, a new structure that was specifically built for cryptocurrency companies. This structure will allow Kraken to offer certain bank functions to clients, like deposits, operate payment systems, and custody crypto for individuals and businesses. Read more.
Bitcoin Supply on Ethereum Tops $1b. More than $1 billion worth of bitcoin has been tokenized on Ethereum so far, or 0.42% of the total supply of bitcoin. This is another metric showing the insane growth of the decentralized finance (DeFi) ecosystem this year, as in January this year, only $7 million was tokenized. Sam Bankman-Fried, CEO of FTX said there was “huge buying demand” over the counter, started by the DeFi yield yield farming craze earlier this year. Read more
Coinbase Will Require Pro Customers to Pay Withdrawal Fees. Network costs, those of Ethereum in particular, continue to be elevated and in an email to its customers on Thursday, Coinbase Pro announced that users would have to pay crypto withdrawal fees based on an estimate of the network transaction fee going forward. Coinbase Pro took care of the fees themselves up until now and introduced this new rule to “ensure a smooth experience for our customers and reasonable transaction processing times. In certain circumstances, the fee that Coinbase Pro pays may differ from that estimate. All fees we charge will be disclosed at the time of your transaction.” Read more.
LSE in Exclusive Talks With Euronext Over Borsa Italiana Sale. The London Stock Exchange Group has begun exclusive talks to sell the owner of the Milan stock exchange to rival Euronext, in a concession to secure approval for its $27bn deal to buy data and trading group Refinitiv. Euronext, which owns the main stock exchanges of Paris, Amsterdam, Dublin, Oslo, Lisbon and Brussels, pushed ahead of Germany’s Deutsche Borse and Switzerland’s SIX Group in the battle to win Borsa Italiana. Analysts estimate the Italian assets are worth about 3.5bn – 4bn euros. Although they are being sold privately, their sale has been a sensitive issue for the Italian government because they are regarded as key domestic infrastructure. Euronext said it planned to keep governance of Borsa Italiana in Italy and make an Italian its chairman. These were two of the preconditions Italy demanded to move forward on the joint bid, said two Italian government officials. Read more.
Trump to Block U.S. Downloads of Tiktok, Wechat on Sunday. The U.S. will freeze TikTok’s app and ban some transactions over WeChat starting Sunday, Wilbur Ross said. The government will prohibit U.S. to U.S transactions related to WeChat and its parent Tencent but that won’t impact activity in China. President Trump has provided until Nov, 12 for the national security concerns posed by TikTok to be resolved. If they are, the prohibitions may be lifted. Wedbush said it could be a ‘Fort Sumter moment in the U.S./China cold tech war’. There were also responses from TikTok: “we disagree with the decision from the Commerce Department, and are disappointed that it stands to block new app downloads from Sunday and ban use of the TikTok app in the U.S. from Nov. 12,” the company said in a statement. “We will continue to challenge the unjust executive order, which was enacted without due process and threatens to deprive the American people and small businesses across the U.S. of a significant platform for both a voice and livelihoods.” Read more.
Chime Surpasses Robinhood as the Most Valuable U.S. Consumer Fintech. The fintech world has a new heavyweight. Chime, the startup that delivers banking services through mobile phones, has closed a fundraising that values the company at $14.5 billion, CNBC has learned exclusively. This makes Chime the most valuable American fintech startup serving retail consumers. Robinhood (the popular free-trading app) raised money last month at a significantly smaller $11.2 billion valuation. In this latest round, a series F that raised $485 million, Chime more than doubled its valuation from December and is worth almost 900% more than just 18 months ago, when it hit a $1.5 billion valuation. Chime will become ‘IPO-ready’ within the next 12 months, CEO Chris Britt said, although it isn’t locked into going public in that time frame. Read more.
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The “70 percent rule” for Decision-Making
A bias for action is a trait that many successful people share, Waiting for the stars to align perfectly before making a decision puts us at risk of delaying our development, both in business and our personal lives. We should be able to make smart decisions even if we don’t have all the available information or a lot of time.
Jeff Bezos, founder and CEO of Amazon, uses what he calls the “70% rule” for most decisions in a fast moving company like Amazon. There isn’t a one-size-fits-all process for decision-making, but Bezos can make a distinction between reversible and non-reversible decisions. Almost every decision we make is reversible, and those should probably be made when we have somewhere around 70% of the information you wish you had. If you wait for 100% of the information all the time, people will be able to catch up with you and move at a faster pace in many areas of their life and business.
Don’t be afraid to take risk. Accept that you don’t have all the information and have a fallback strategy in place.