2020 will be remembered as a year that hit us where it financially hurts. Millions unemployed, recessions, constant changing of inflation rates and, for those who wanted to add a four-legged furry companion to their family, the prices for designer dogs hit drastic new heights…and all thanks to a new strain of a virus that infiltrated the globe.
Some surefire ways to make some money without having to come up with a niche new business idea is to invest. But while you could go down the traditional route of stock market trading, have you ever stopped to give some thought to cryptocurrency?
The word alone could be enough to confuse you, but in reality, cryptocurrency, and the way it is traded, is similar to that of stocks. You look for trends and you aim to buy low and sell high. However, you can in some instances trade any crypto assets you have bought for others.
Henrik Andersson co-founder and CIO of Apollo Capital, Australia’s leading crypto asset investment firm, tells DMARGE that prices of crypto assets are independent to those of the stock market due to their being a different set of investors. Asset value, such as that of Bitcoin, which surged in 2020 and has since hit an all-time high in the early part of 2021 of just over US $33,000 (and currently trades at $32,448 at the time of writing) can be partially attributed to there being a finite supply. There will only ever be 21 million pieces of Bitcoin, 18 million of which have already been mined.
There is much to learn about it still, and we could easily go into great detail in a separate article relating to all there is to know about crypto, but it can become a little confusing. To make things a little easier, Matt Harcourt, an analyst at Apollo Capital, is helping us out here at DMARGE, and subsequently helping you, by telling us about some of the best or most exciting crypto assets. They’re not necessarily brand new ones either, but could be assets that have started making gains in the market or have particularly interesting qualities.
Note, the assets mentioned by Apollo Capital may not necessarily be ones they recommend you buy but are assets that are seeing traction or are being talked about in the news. Before you invest in any cryptocurrency asset, you should make sure you are in a financially solid position.
All figures in USD (1 AUD = 0.77 USD at time of publishing, 22nd March 2021)
Broad Market Analysis:
Non-fungible tokens are currently the hottest thing in town, a Beeple NFT sold for US$69 mln… yes you read that correctly. Gaming tokens such as ENJ, MANA, RFOX, ALICE, SAND have been performing extremely well thanks to this wave of hype about NFT’s and blockchain gaming. Bitcoin and Ethereum are consolidating at high levels and look to be preparing for an explosive move. DeFi crypto assets have broadly been selling off since mid Feb and will likely follow Ethereum if we get more upside. Ethereum layer 2 scaling solutions such as ‘Optimism’ are only weeks or months away which will make altcoins such as ADA, DOT and BNB less attractive.
Matt’s Top Coins
SushiSwap (SUSHI) $19.26, $3.02bn Market Cap
For a variety of reasons my top pick for this month would have to be SUSHI. SushiSwap is a decentralised exchange (DEX) which allows users to trade between any two ERC20 tokens on the Ethereum blockchain, with SUSHI being the governance token that can be used to vote in proposals and receive a share of the revenue generated by the protocol. Many crypto investors will be aware of Uniswap (UNI) but may not know much about SUSHI, SushiSwap started life as a ‘fork’ of Uniswap in late August 2020 but has grown into an extremely differentiated product. Currently, SushiSwap is a more decentralised version of Uniswap.
We can compare Uniswap and SushiSwap on a simple market cap to total value locked (TVL) ratio. Total value locked refers to the amount of liquidity locked in the protocol, liquidity is the lifeblood of any decentralised exchange as it enables assets to be transacted between users.
UNI Mkt Cap: US$15.6 bln
UNI TVL: US$4.9 bln
SUSHI Mkt Cap: US$2.7 bln
SUSHI TVL: US$4.7 bln
When two similar products are valued so drastically different, there is a reason. The market is currently excited about the prospect of Uniswap releasing a major update (V3) in the next couple of months, which is pushing up the price of UNI significantly. However, it is possible that the market is undervaluing the fact that Sushi are also on the verge of major developments such as expansion onto other blockchains, layer 2 Ethereum adoption (enabling cheaper transactions for users), lending market integration and even a launchpad for new products. Sushi undoubtedly have some of the most talented developers on their side, and their history of rapid protocol development shows this.
Another important feature of SUSHI and the SushiSwap protocol is that stakers of SUSHI directly receive a share of the protocol’s fee revenue. Most investors will be used to the idea of dividends, SushiSwap pays their token holders a continuous dividend through xSUSHI (yield bearing token). This enables SUSHI to be valued using traditional stock market valuation techniques, which is an exciting development in an industry that has been ridiculed for only being good for speculation.
If we can value SUSHI using traditional techniques, why don’t we compare SUSHI to the upcoming Coinbase IPO, centralised exchange vs decentralised exchange. In an SEC filing, Coinbase’s dividend policy states “[We] do not anticipate paying any dividends on our capital stock in the foreseeable future”. Meanwhile there is US$1.3 bln worth of SUSHI earning an average APY of 4% (this is variable), roughly equating to US$54 mln per year flowing directly to stakers. Coinbase recorded a net profit of US$322 mln in 2020 and is set to IPO at a value around US$100 bln, SUSHI is currently valued at US$2.8 bln. Coinbase and SushiSwap are undoubtedly different, but if SUSHI was valued at the same price to earnings ratio as Coinbase (310), it would be worth $16.77 bln.
The final thing to note is that SUSHI is an inflationary token, so the value of SUSHI will continually be negatively affected by the increase in circulating supply over time. To keep up with inflation, users can stake their SUSHI to receive yield as mentioned previously or deposit other crypto assets into Sushi Liquidity Pools to receive SUSHI rewards.
Siren (SI) $2.87, $24,017,000 Market Cap
The speculative low cap coin for this month is Siren Markets (SI). Built on the Ethereum blockchain, Siren Markets is a distributed protocol for creating, trading and redeeming fully-collateralized options contracts for ERC-20 tokens on Ethereum. With options being a popular derivative for stock market and crypto traders alike, it is a big market that Siren aims to capture. SI began trading on the 3rd of March and is currently only available on Uniswap.
SI is the governance token for Siren Markets, eventually SI stakers will receive protocol fee revenue just like SUSHI, but that feature is currently turned off to attract traders with lower fees. In the decentralised options space, there is one main competitor named Hegic (US$130 mln market capitalisation). To get a better idea of why Siren introduces a superior model to Hegic, we will compare the two.
In an options market there are two sides to every contract, a writer (seller) and a buyer. In both Hegic and Siren the sell side of the contracts is a liquidity pool that is used as collateral for the contracts that are bought by traders. Liquidity providers earn a yield for providing this collateral in the form of premium, trading fees and rewards (SI or HEGIC tokens). These liquidity providers take on a certain amount of price risk, just as option sellers do in a normal options market.
The Hegic liquidity pools are bi-directional, meaning that traders can buy both Call and Put options from the same collateral. Liquidity providers (LPs) in this pool are essentially short volatility, meaning they will only make money if BTC or ETH (depending on the pool they are in) trades sideways. Crypto is the most volatile market in the world and Hegic LPs are betting against volatility. It’s like underwriting fire insurance on a house that is close to a bushfire.
Siren liquidity pools are not bi-directional and LP’s can choose the direction that they want to bet on. Head to https://app.sirenmarkets.com/pool to see the liquidity pools and APY’s available. Other factors working in Siren’s favour are far cheaper gas fees to Hegic (Ethereum network fees, a common problem) and multiple coins supported (BTC, YFI, UNI, SUSHI compared to just BTC & ETH).
Siren (SI) is also an inflationary token, so look to keep up with this inflation by participating in liquidity pools that earn SI.
Farm of the Month:
Check out https://app.vesper.finance/ for some of the best yields in DeFi thanks to VSP rewards. Deposit USDC earn 54% APY. Deposit ETH or BTC and earn over 20%. (Yields are variable and will not last).
December 2020/January 2021
All figures in USD (1 AUD = 0.75 USD at time of publishing)
As we come to the end of 2020 and look forward to a (hopefully) more fruitful and enjoyable 2021, we reached out to Matt at Apollo Capital once again for his market analysis and top picks for crypto assests going into the New Year.
Yearn Finance (YFI) $24,999.35, $749,181,235 market cap
Nothing quite sums up the open, permissionless and fast paced nature of Decentralised Finance like Yearn Finance. Yearn Finance is described as “a suite of products in Decentralised Finance, maintained by various independent developers and governed by YFI holders”. The most popular products on Yearn are the capital pools known as ‘Vaults’, these vaults are designed to automatically generate yield based on opportunities present in the market. These vaults automate complex yield farming strategies in order to generate the maximum amount of yield possible. Vaults are created and maintained by developers known as strategist’s, who are incentivised by receiving a share in the profits of the strategies they create. Other products include lending, insurance cover, swaps (exchange) and more.
YFI reached it’s all time high price of US$43,678 on the 12th of September 2020. With a total supply of only 30,000 YFI, this price put a US$1.3 billion valuation on the 2 month old coin. YFI subsequently witnessed a brutal sell off and traded for around US$8,500 for two days in November. Since then, Yearn Finance have announced multiple partnerships with similar DeFi projects which have been described as the first M&A activity performed by a decentralised protocol. These partnerships are a core part of Yearn Finance’s imminent V2 release.
You can read a more comprehensive analysis of Yearn Finance on the Apollo Capital website.
In short: Decentralised bank, governed by YFI holders.
dHedge DAO token (DHT) $1.07, $7,088,446 market cap
Basis Shares (BAS) $183.81, $28,874,072 market cap
All figures in USD (1 AUD = 0.74 USD at time of publishing)
Bitcoin (BTC) $25,058, $462bn market cap
You can’t talk cryptocurrency without mentioning Bitcoin. The most well-known crypto asset is, as Henrik Andersson tell us, “increasingly seen as digital gold.”
Matt adds, Bitcoin has really been coming into its own as a ‘store of value’. In recent months there have been several notable investors/ companies praising and adopting BTC, comparing it to gold and publicly taking out positions.
These investors include Paul Tudor Jones, Stan Druckenmiller, Microstrategy (NASDAQ: MSTR) are all adopting bitcoin as their ‘primary treasury reserve asset’, Rick Rieder (BlackRock), PayPal, JPMorgan etc.
In short: Seem as digital gold
Ethereum (ETH) $615.18, $69.9bn market cap
Ethereum is the next asset/ protocol that is coming into its own. Many incredible decentralised applications (dApps) have been built on the Ethereum protocol throughout the ‘crypto winter’. The most notable of these applications is the financial application known as DeFi or decentralised finance.
We are bullish on decentralised finance because it is the first time in human history that we have open and permissionless innovation in finance on a global scale and defipulse.com is a great website to check out the biggest names in DeFi. There is currently US$14.24 billion locked in DeFi protocols.
In short: Leading platform for decentralised applications.
Key areas in DeFi include:
- Synthetix assets
- Decentralised exchanges
- Decentralised asset management
Aave (AAVE): $105, $1.173bn market cap
Aave, taken from the Finnish word for ‘ghost’, is the leading protocol for borrowing and lending, and the current market size is US$1.9 bln.
Aave is described as a “decentralised non-custodial money market protocol”, which can allow users to either deposit or borrow. It’s used predominantly by developers, and being an open-source protocol, can be integrated with any third-party service or application.
AAVE is the protocol’s governance token, meaning that holders of the token can vote on the outcome of Aave Improvement Proposals (AIPs).
In short: Governance token of the leading decentralised credit (lending) market protocol.
Synthetix (SNX): $6.95, $833.8bn market cap
Synthetix is a protocol that enables trading of a range of synthetic assets such as crypto, foreign exchange, commodities and equities. Synthetic assets are created by staking SNX. When you stake SNX you receive exchange fee rewards and staking rewards (about 30% APY).
Synthetic assets hold their value because they are backed by a decentralised pool of crypto collateral. The deep liquidity of these synthetic assets will power a new era of financial tools not possible without blockchain technology.
In short: Creator of synthetic assets.
Polkadot (DOT): $6.49, $6.3bn market cap
The ‘new kid on the block’, Polkadot was a significant new project announced in 2017 and built over 2.5 years throughout the ‘crypto winter’ by some of the most respected names in crypto. Polkadot is a ‘next generation’ blockchain and has a few key differences to Ethereum.
Because Ethereum is in such high demand, there have been issues with network capacity and transactions fees. This has made alternative blockchains such as Polkadot an attractive investment. DOT has a limited ecosystem built on top of the blockchain, but that is because it is new. It is a longer-term investment (possibly overvalued currently), the key thing to watch with DOT is whether developers choose to build on Polkadot over Ethereum.
In short: Up and coming platform for decentralised applications.
We’ll be regularly updating this piece in collaboration with Apollo Capital, bringing you the latest and most exciting cryptocurrency assets available right now.