A big upcoming narrative in DeFi is "The Stablecoin War".
$UST, $FRAX, $USDC, $USDT creating a 4pool, could very well be the initial gunshot.
Here is what every investor should know:
$UST, $FRAX, $USDC, $USDT creating a 4pool, could very well be the initial gunshot.
Here is what every investor should know:
In this thread we will cover:
• Macroeconomic conditions
• FRAX and UST partnership
• The Future of Stablecoins
• And I'm going to break this down, as simply as possible.
Let's dive in!
• Macroeconomic conditions
• FRAX and UST partnership
• The Future of Stablecoins
• And I'm going to break this down, as simply as possible.
Let's dive in!
Cryptocurrency
Before analysing the impacts of the partnership between $UST and $FRAX.
It is important for us to understand why the current global situation will allow for DeFi and Stablecoin yields to thrive.
A basic "Economics 101" to start with.
I think you get the idea.
Before analysing the impacts of the partnership between $UST and $FRAX.
It is important for us to understand why the current global situation will allow for DeFi and Stablecoin yields to thrive.
A basic "Economics 101" to start with.
I think you get the idea.
Economy
It consists of various "actors' where decisions made by consumers, firms and the governments depend on each other.
You, my reader are likely classed as a consumer.
Actors make decisions that impact our global markets.
And global markets affect crypto.
It consists of various "actors' where decisions made by consumers, firms and the governments depend on each other.
You, my reader are likely classed as a consumer.
Actors make decisions that impact our global markets.
And global markets affect crypto.
Macroeconomy
The US dollar is known as the global currency reserve.
The world uses the US dollar to price most stuff traded on the global markets.
80% of all US dollars in existence were printed from Jan 2020 to October 2021.
The US dollar is known as the global currency reserve.
The world uses the US dollar to price most stuff traded on the global markets.
80% of all US dollars in existence were printed from Jan 2020 to October 2021.
Recession
Often defined as two consecutively negative periods of GDP growth.
While it doesn't sound pleasant.
Many economists see this as the inevitable consequence for the amount of money printed across the world.
The question arises: 'How do we take advantage of this?"
Often defined as two consecutively negative periods of GDP growth.
While it doesn't sound pleasant.
Many economists see this as the inevitable consequence for the amount of money printed across the world.
The question arises: 'How do we take advantage of this?"
Warren Buffett
While he may not be the most friendly crypto native.
His principles offer us timeless wisdom.
“Be fearful when others are greedy, and greedy when others are fearful."
But HOW and where can we be greedy?
One answer, that we will explore briefly is Stablecoins.
While he may not be the most friendly crypto native.
His principles offer us timeless wisdom.
“Be fearful when others are greedy, and greedy when others are fearful."
But HOW and where can we be greedy?
One answer, that we will explore briefly is Stablecoins.
Sustainability
Before we dive in to DeFi and optimizing Stablecoin yields.
As well as some key players like $FRAX in the Stablecoin game.
Let's first briefly look at where the demand for Stablecoin DeFi and yield comes from...
Before we dive in to DeFi and optimizing Stablecoin yields.
As well as some key players like $FRAX in the Stablecoin game.
Let's first briefly look at where the demand for Stablecoin DeFi and yield comes from...
Inflation
Defined as a rise in the price level from year-to-year.
If you have a $100 in savings and inflation is at 5%.
You need $105 in savings next year otherwise you have "lost real money".
Experts claim that inflation currently resides at 5-7%.
Eating all our savings.
Defined as a rise in the price level from year-to-year.
If you have a $100 in savings and inflation is at 5%.
You need $105 in savings next year otherwise you have "lost real money".
Experts claim that inflation currently resides at 5-7%.
Eating all our savings.
Interest Rates
This is how inflation is often combatted within TradFi markets.
People save money, hoping that the payout from interest>inflation.
Base interest rates are expected to increase over the next 18 months.
cnbc.com.
This is how inflation is often combatted within TradFi markets.
People save money, hoping that the payout from interest>inflation.
Base interest rates are expected to increase over the next 18 months.
cnbc.com.
The West decided to freeze Russia's foreign funds.
Regardless of what moral lens you look through.
This put all countries who owe fiat money at risk, if an entity has the power to restrict it completely.
We will move to Bitcoin as an eventual true long-term store of value.
Regardless of what moral lens you look through.
This put all countries who owe fiat money at risk, if an entity has the power to restrict it completely.
We will move to Bitcoin as an eventual true long-term store of value.
Psychology
Whilst Bitcoin may be the true, immutable store of value.
Across the world many individuals have cognitive biases.
We have held, earnt and spent in fiat currency for so long, that it not everyone will abandon it.
Stablecoins are your fiat, but in crypto.
Whilst Bitcoin may be the true, immutable store of value.
Across the world many individuals have cognitive biases.
We have held, earnt and spent in fiat currency for so long, that it not everyone will abandon it.
Stablecoins are your fiat, but in crypto.
Stablecoins
Broadly speaking, there are two distinct types: decentralized and centralized.
It allows for crypto operating users to preserve their fiat value without cashing out of the market.
The supply of Stablecoins has accelerated to meet rapid demand rises from adoption.
Broadly speaking, there are two distinct types: decentralized and centralized.
It allows for crypto operating users to preserve their fiat value without cashing out of the market.
The supply of Stablecoins has accelerated to meet rapid demand rises from adoption.
Decentralization
Whilst I'm not a decentralization maximalist.
There has been great FUD regarding certain Stablecoins like $USDT and $USDT.
This is often to do with whether there is dollar-value backing it.
Honestly it poses massive risks to the wider crypto industry.
Whilst I'm not a decentralization maximalist.
There has been great FUD regarding certain Stablecoins like $USDT and $USDT.
This is often to do with whether there is dollar-value backing it.
Honestly it poses massive risks to the wider crypto industry.
Bank yields
We mentioned that base interest rates are set to rise.
Commercial banks, like yours and mine can then choose to pass this rate to us.
Unfortunately, these are low which disincentivizes us to save.
On the other hand, Anchor has been giving you 19% for a while now!
We mentioned that base interest rates are set to rise.
Commercial banks, like yours and mine can then choose to pass this rate to us.
Unfortunately, these are low which disincentivizes us to save.
On the other hand, Anchor has been giving you 19% for a while now!
DeFi yields
By removing middlemen who enjoy taking disproportional shares off the profits.
DeFi allows you to attract higher yield opportunities for your stables.
Our particular focus will be on $FRAX within the Curve Protocol.
The holy mother of TVL and interest rates.
By removing middlemen who enjoy taking disproportional shares off the profits.
DeFi allows you to attract higher yield opportunities for your stables.
Our particular focus will be on $FRAX within the Curve Protocol.
The holy mother of TVL and interest rates.
I'll get into the real alpha in a sec, but first:
1. Give me a follow for more threads like this: @Crypto8FI
2. Soon to be filled with SERIOUS ALPHA, join below now:
cryptofi.substack.com
1. Give me a follow for more threads like this: @Crypto8FI
2. Soon to be filled with SERIOUS ALPHA, join below now:
cryptofi.substack.com
Curve
The Automated Market Maker (AMM) which aims to remove any intermediaries in the trading of crypto assets.
I have written about the battlefield of Curve previously.
If you haven't already, check it out:
The Automated Market Maker (AMM) which aims to remove any intermediaries in the trading of crypto assets.
I have written about the battlefield of Curve previously.
If you haven't already, check it out:
Partnerships
$UST, $FRAX, $USDC, $USDT comprise the new 4pool.
An algo-stables main function is to always support the peg.
Can $UST and $FRAX work well together?
Will this new alliance strengthen their peg?
$UST, $FRAX, $USDC, $USDT comprise the new 4pool.
An algo-stables main function is to always support the peg.
Can $UST and $FRAX work well together?
Will this new alliance strengthen their peg?
Peg Strength
To understand this -- we will need to explore FRAX's AMO mechanism.
As stated: "the 4pool enables UST to become a collateral asset for FRAX further aligning interests between the projects since as FRAX grows UST grows too and vice versa."
agora.terra.money
To understand this -- we will need to explore FRAX's AMO mechanism.
As stated: "the 4pool enables UST to become a collateral asset for FRAX further aligning interests between the projects since as FRAX grows UST grows too and vice versa."
agora.terra.money
Frax
The algorithmic market operations (AMO) is similar to a Central Bank.
The Frax protocol influences the supply of $FRAX across the ecosystem by buying or selling $FXS.
They can strengthen their 4pool position and peg by decollateralizing.
Source
docs.frax.finance
The algorithmic market operations (AMO) is similar to a Central Bank.
The Frax protocol influences the supply of $FRAX across the ecosystem by buying or selling $FXS.
They can strengthen their 4pool position and peg by decollateralizing.
Source
docs.frax.finance
Token Holders
Owning $FRAX, $FXS or $veFXS leaves you with a lot to gain.
Now so, more than ever.
AMO earnt LP rewards and trading fees are redistributed to $veFXS holders in the form of profit.
With wider adoption, veFXS holders will gain a greater share of those rewards.
Owning $FRAX, $FXS or $veFXS leaves you with a lot to gain.
Now so, more than ever.
AMO earnt LP rewards and trading fees are redistributed to $veFXS holders in the form of profit.
With wider adoption, veFXS holders will gain a greater share of those rewards.
Changes
As DeFi is relatively immature.
We are seeing more individuals lose money in yield farming to impermanent loss in paired assets.
Unless assets are pegged to each other, you are speculating on near even value accrual to both tokens.
A big gamble, to say the least.
As DeFi is relatively immature.
We are seeing more individuals lose money in yield farming to impermanent loss in paired assets.
Unless assets are pegged to each other, you are speculating on near even value accrual to both tokens.
A big gamble, to say the least.
Anchor Protocol
The limelight of stable DeFi for what has felt like an era.
A recent proposal has changed unsustainable payout rates.
Where will a proportion of this UST go?
I wrote more about this below:
The limelight of stable DeFi for what has felt like an era.
A recent proposal has changed unsustainable payout rates.
Where will a proportion of this UST go?
I wrote more about this below:
So far we have highlighted:
• Macroeconomic uncertainty
• The need for high interest rates payouts
• The beginning of TVL shifts within DeFi
The answer to where the narrative changes too is unclear but as always, it is interesting to speculate.
• Macroeconomic uncertainty
• The need for high interest rates payouts
• The beginning of TVL shifts within DeFi
The answer to where the narrative changes too is unclear but as always, it is interesting to speculate.
DeFi Thesis
As yield farmers and LP's question where to allocate their capital.
I believe that there will be a shift down the risk curve.
We will see greater TVL in SUSTAINABLE rates rather than high ones.
Currently, there is no more battle-tested place to go than Curve.
As yield farmers and LP's question where to allocate their capital.
I believe that there will be a shift down the risk curve.
We will see greater TVL in SUSTAINABLE rates rather than high ones.
Currently, there is no more battle-tested place to go than Curve.
Frax Thesis
This protocol has surmounted my interest for some time now.
It will have a larger role to play.
I have been impressed delving in further to the governance and flywheels it produces.
Expect to see a write-up shortly on my Substack below:
cryptofi.substack.com
This protocol has surmounted my interest for some time now.
It will have a larger role to play.
I have been impressed delving in further to the governance and flywheels it produces.
Expect to see a write-up shortly on my Substack below:
cryptofi.substack.com
Oh, and one more thing.
It'd mean a lot to me if you could like/retweet the 1st tweet linked below.
Help your frens get into this narrative early!
It'd mean a lot to me if you could like/retweet the 1st tweet linked below.
Help your frens get into this narrative early!
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