- Voyager Digital files for bankruptcy.
- Delphi Digital report finds there may be more pain.
- Token Valuation Mini-Series #02.
- Italian government offers subsidies to blockchain projects.
- Sequoia Capital’s new massive fund.
- Fed sees no reason to rush CBDC.
Good Morning Banter Fam,
The news cycle is slow today, and markets appear at a standstill. So we’ll take this opportunity to continue the Token Valuation Mini-series we began last week.
But before I start, I’d like to remind the readers about the important FOMC minute that kicks off tomorrow at 2:00 pm EST. The markets appear hungry for information for the future direction of the Federal Reserve policy and the ever-important role of inflation. Let’s hope they don’t disappoint (very likely).
Token and Project Use Case (Token Valuation Mini-Series #02)
Last week we overviewed the ten most important aspects of valuing a token. As reminder:
The top ten elements of valuing a project token.
- Use case (purpose)
- Team and technology
- Major Risk
- Growth potential
- Price upside
This week we’ll dive deeper into the first aspect, USE CASE. A token is merely a reflection of a project/protocol. So realizing a protocol’s AND token’s USE CASE is the first step to valuing any token!
Protocols utilize tokens as tools; a means to transfer value. Whether the token is used solely in a protocol or across various platforms depends on its purpose. Tokens with higher degrees of utility typically hold more value. For example, a bank’s value exceeds that of a mom-and-pop sewing shop. MORE UTILITY = MORE VALUE.
UNIQUE, WITH HIGH UTILITY = EXTREMELY VALUABLE.
Major USE CASES in Crypto:
- Decentralized Finance (DeFi). Some of the most widely utilized protocols and the backbone of crypto. DeFi encompasses various types of protocols that serve as the financial services in the cryptoverse. Like the real world has banks, lending institutions, exchanges, and various other financial services, crypto embodies similar properties. Examples: Curve DAO (liquidity pools), Uniswap (Exchange), AAVE (lending and borrowing). The list goes on.
- Stablecoins. The most widely used tokens in crypto. Represent stable assets, similar to a currency in the real world. Examples: USDT, USDC, FRAX, DAI.
- Smart Contract platforms or Layer-ones (L1s), Layer-twos (L2s). The producers of blockchain space. These are the building blocks of ALL projects. Without a service that creates blockspace, most crypto wouldn’t exist. I tend to look at them as cities. Cities have citizens, banks, stores, and all the elements of a stable economy. Similarly, smart-contract platforms allow for the building of micro-economies using the blockspace. Protocols and users pay a service to utilize blockspace. Think of it as a tax for living in a city. Major smart contract platforms include Ethereum (ETH), Solana (SOL), Avalanche (AVAX), Cardano (ADA), Polygon (MATIC), and Near Protocol (NEAR). The list goes on.
- Gaming, Metaverses, gambling, music. Pretty self-explanatory. These projects offer gaming, gambling, and music services based on but not limited to entertainment—the Sandbox (SAND), Axie Infinity (AXIE), and Audius (AUDIO).
- Storage. Similar to Amazon Web services. Instead, they allow for the storage of decentralized information. Arweave (AR), Storj (STORJ).
- Other. The most extensive section. There are endless use cases in crypto only limited by imagination, and that’s part of the beauty of crypto—examples: Insurance, Guilds, API services (Chainlink), Rendering (Render), etc.
The best method to explore the use case of a protocol is to visit their website. It typically has an overview on the front page. Example: THORChain is a decentralized & autonomous cross-chain liquidity network. To dive deeper, one must read the white paper of the protocol, which typically begins with its use case and problems it may be trying to solve. CoinGecko.com is a great tool to find websites and links to whitepapers.
And there you have it. You’ve completed the first step towards valuing a crypto project!
Market update 🌍
The markets appear to be on standby, awaiting the latest inflation prints and macroeconomic factors that represent the unknown. Other than a few random stocks and some mild buying of particular altcoins, the markets are at a standstill, likely awaiting the macroeconomic prints scheduled for the coming week. As a result, BTC and ETH continue to hover around the 20k and 1k levels.
Convex Finance (CVX) is a yield aggregator for the most extensive liquidity pool in crypto (Curve DAO). The protocol is a well-trusted essential part of DeFi on Ethereum. With recent updates and the repositioning of reward structures surrounding the FRAXBP pools, Convex Finance is experiencing a nice uptick in price backed by a magnitude of volume. The CVX token could be primed for a move away from a localized bottom after two and a half months of selloffs.
|US markets close||Gain|
|Protocol (Coin)||Price ($)||Gain (%)|
|Curve DAO (CRV)||0.98||+14|
|Basic Attention (BAT)||0.44||+10|
|Frax Share (FXS)||5.25||+6|
|Lido DAO (LDO)||0.57||+6|
|Bitcoin Fear and Greed Index||14 Extreme Fear|
|“Crypto” Google Trends 90d||81|
|“Bitcoin” Google Trends 90d||78|
Voyager Digital files for Chapter 11 bankruptcy. Voyager Digital is the latest Centralized Finance company to get affected by the current state of the crypto market. Its exposure to Three Arrows Capital certainly did not help and was one of many factors that have resulted in the filling. The news comes just days after Voyager Digital paused trading, withdrawals, and deposits to its platform. The company filed for bankruptcy under Chapter 11 in the Southern District Court of New York and is estimated to be left owing somewhere between $1 billion and $10 billion to more than 100,000 creditors.
Delphi Digital report finds there may be more pain. In a recent report from cryptocurrency research firm Delphi Digital, the firm suggests that investors need to be cautious as there may be more downside still to the markets. The report states, “We need to see more pain before we are convinced that the market has bottomed out.”
The Italian government offers subsidies to blockchain projects. The Ministry of Economic development in Italy has announced that $46m worth of subsidies is available to top applicants for blockchain-focused projects. State-sponsored crypto capital!
Sequoia Capital’s new massive fund. The firm’s Chinese affiliate is nearing the closure of four new crypto-based funds worth an estimated $9 billion.
Nexo positions to acquire Vauld. Crypto Lender Nexo has entered a deal to purchase the Singaporian-based crypto exchange Vauld after a 60-day review period. The exchange was facing major financial hurdles and suspended customer withdrawals on Monday.
Fed sees no reason to rush CBDC: At a conference held Tuesday, government panelists discussed the development of a USD CBDC and agreed that “the technology by itself would not lead to drastic changes in the global currency ecosystem.”
At the protocol level ⛓
Protocol Level tidbits:
- The first collateral integration from a US-based bank in the DeFi ecosystem is getting closer through MakerDAO.
- New proposals on Frax and Convex governance.
- Understanding self-repaying loans through Alchemix Finance.
NFT & metaverse update 🐵
- Lamborghini-backed motor racing team adopts NFT authentication for factory parts.
While in the depths of the bear market, the best action we can take is to retool and patiently wait for better times ahead. Unless you’re a trader, Dollar-Cost-Averaging (DCA) and increasing knowledge are two of the most potent endeavors one can pursue. So build a Batman-sized utility belt to encounter the variety of challenges ahead.
In the next major cycle, while the rest of retail is scrabbling, those who prepared will be ready to take actionable steps to protect and increase their wealth.
Follow me on Twitter for daily updates!
Good Morning crypto (issued by Crypto Banter) is a newsletter for entertainment purposes only.
All opinions expressed by the publisher, writers, and chartists should not be construed as financial advice and do not necessarily reflect the views of Crypto Banter. The publisher, writers, and chartists may hold positions in the tokens and assets discussed. Readers are encouraged to do their own research.