Most of us already know that the more you know, the more you realise you don’t know. I learnt last week that it was Aristotle who famously said this first.
This framework for thinking definitely holds true for the crypto rabbithole. I respect that there’s a lot I don’t know but I am also gaining more clarity in specific areas. Just like my last few posts on hive, the purpose for this post is to synthesise a lot of things I’m thinking about now in DeFi and the wider crypto space to gain more clarity with these thoughts. In other words, purely selfish reasons!
Here’s the TLDR -
Bullish: ETH, UNI, COMP, AAVE, SUSHI, BADGER, Axie Infinity, Bitcoin on Ethereum (eg. WBTC, DIGG)
Neutral: AXS, Bitcoin, Aavegotchi
Bearish: BAT, HIVE
... and here’s the long-form -
Nosebleed-high gas prices on Ethereum
On the one hand, there are folks on Crypto-Twitter (CT), let’s call them Camp 1, who argue that these crazy-high gas prices are a testament to Ethereum’s popularity and it’s evidence that it’s the clear leader in Layer 1 smart-contract platforms.
On the other hand, there are those (Camp 2) who argue that if we have to wait too long for ETH2 upgrades, including sharding, folks will stop building on Ethereum and move to alternatives like Polkadot. Camp 2 also argues that only whales are able to use the network because the gas they pay is very small percentage-wise versus normies who want to play around with DeFi.
Whilst I see where Camp 2 are coming from, gas fees should be considered in terms of opportunity cost, and that there are opportunities for normies in DeFi that are still profitable in spite of nose bleed-high gas prices.
Edge-case - supply BAT on Compound - earn BAT interest and COMP governance token
I had some BAT earned through Brave Rewards from browsing the web on my laptop I’d accumulated over a few months. Nothing special about that. Some of you may have heard that Brave had to drop support for folks on iOS earning BAT through the Brave rewards program. Sigh. The funny thing is Brave had still not developed a solution for iOS users to access their earned BAT. The latest iOS update for Brave includes a feature that allows a one-time transfer of BAT from i-Devices to a desktop wallet, so this meant I had quite a bit more BAT. Not heaps, but enough to make it worthwhile for me to withdraw.
But what to do with the BAT? Swap for ETH, BTC, some Degen DeFi token or HODL? Under most circumstances I would have simply swapped for ETH. But I had - of course - noticed the tear that DeFi blue-chips had been on in the previous week or two, eg. COMP, AAVE, UNI, etc. I was already pretty invested in AAVE and UNI. Although I did not officially own COMP, I was earning some by supplying DAI (from my leveraged Maker Vault I created about nearly two years ago) and UNI (100% of my allocation from the 2020 airdrop) - I just had not claimed. I have this belief (maybe it’s an anchor?) that for tokens one can earn (like COMP), I prefer to earn them rather than buy them. This thought occurred to me - look at COMP go, I can supply BAT on Compound and earn 2.8-ish% (not high, but apart from stablecoins on Compound, I think it’s the highest rate) but more importantly, the COMP earning rate was around 6%. To put this plan into action I of course had to pay crazy-high gas. Here’s the thing though - I did not have to do anything to earn the BAT in the first place. It was free money. The gas I paid to implement this plan was almost the value of the BAT, so it hurt for sure. But I thought about it as an opportunity cost. I think COMP and other DeFi blue chips will continue to outperform ETH and BTC for the current bull run. This earned BAT supplied to Compound protocol will mean the amount of my COMP holdings will grow at a faster rate than it was and its value will (hopefully) grow at a faster rate than ETH. Win!
Happy to admit I was wrong about some projects
I am slowly starting to swallow my pride and look at key projects that (for various reasons) I overlooked when I first heard about them. Typically I tend to ignore projects that DeGens ape into. But I’m starting to come around and realise that there is something to be said for the wisdom of the crowd. Some hyped projects I ignored - Badger, SushiSwap and AAVE. Why?
- Badger - Silly name. Seemed to come from nowhere at around the same time loads of other copycat DeFi projects launched, so it got lost in the crowd. What changed my mind? Crazy, insane, game-changing ideas - see Ampleforth fork BTC-pegged elastic supply DIGG, NFT farming in partnership with (Don’t Buy) Meme and nose-bleed APYs from their ‘SETT’s, etc. They just get it (it being DeFi, DAOs, NFTs etc), and for that reason the community are really engaged. Badger has really hit home for me the potential returns for Bitcoin on DeFi. CeFi Bitcoin platforms like BlockFi, Celsius, Nexo, Crypto.com don’t come close to matching the potential returns the likes of Badger offer. I started looking at Badger early-mid January. I ummed and arred for a week or two before putting in a small amount to buy some Badger and stake it, as well as staking the Badger-WBTC SushiSwap LP tokens. This procrastination meant that I just missed the snapshot for the DIGG airdrop. Sigh. But it turns out I wasn’t that late. I jumped on board before some crazy run-ups in the USD price of Badger. Woop!
- SushiSwap - Dodgy conception. Too meme-ish. Dismissed it as Uniswap copycat. What changed my mind? Release of roadmap in new year. The quality of the projects they have collaborated with for their Onsen farming pools.
- Aave - when I first heard about Aave early in 2020 I also thought it was just a copycat project. I wasn’t aware at the time it was the rebranded ETHLend that ICO-ed towards the end of the 2017/18 bull run. I didn’t understand why folks were so into it. It’s funny now thinking about Compound versus Aave because I used to think that Compound was the pioneering project in Decentralised lending and borrowing. In a way it was. It was the first to gain traction but projects like ETHLend were around much earlier. I think Compound were lucky because they launched at a time when a lot more of the DeFi ‘money LEGOs’ were available. In other words, those that came before were too early. Anyways - what changed my mind? I started to pay a bit of attention around the time when they released their Aavenomics paper. I also became interested in Aavegotchi and I was further drawn in by @redphonecrypto’s tweets about the value proposition for the LEND-AAVE conversion.
A really interesting conversation on a recent Bankless podcast with SushiSwap’s 0xMaki about first-movers versus fast-movers also got me thinking about this mental shift a bit. There were three example pairs given for first-movers versus fast-movers - Coinbase vs Binance, Compound vs Aave and Uni vs Sushi. This made me realise that I generally anchor to the first-mover and miss opportunities by ignoring the fast-mover. I think now am much better equipped to pick out the winners than I was not too long ago.
Theses for my Neutral and Bearish coins / tokens
BAT
I’ve written quite a few posts on BAT in the past. I feel like their narrative has died down a bit the last six months or so. The iOS Apple move seems to have really put BAT on the back-foot. I will probably continue to use Brave browser on all my devices but it makes it so hard for them to deliver on their vision with such a large percentage of their potential user-base unable to reap the benefits of their virtuous triangle (advertisers, creators and consumers).
HIVE
I feel bad about this. I’ll be interested to see if anyone comments on this. I have been a lot less engaged on Hive the past few months. I don’t think it’s just me. Hive (if we count the Steem years) has been around a long time in crypto terms. Back in 2017 when we were bitcoin crazy I thought of Steemit as an immature Reddit/Medium hybrid that was destined to go mainstream. I think if it was ever going to make it, it would have happened by now. I cringe a bit reading posts by folks that have invested a lot of their money buying STEEM/HIVE over the years anchoring to the same arguments for why Hive will moon. There. I said it. But I’m still here. Just.
AXS
What do AXS, HIVE, and BAT have in common? They are all what I’d call ‘earnings tokens’. You earn them, so why would you buy them when you can do ‘work’ to earn them and put ‘money’ you earn into other investable assets. Don’t get me wrong - I get the premise that the more of the likes of Hive and AXS you own, the more you stake, the greater your future earnings potential. To get back to basics - you have a day job. From said job you earn FIAT. A smart hooman does not hold said FIAT, they ‘sell’ it for something more alpha. For me, these earnings tokens are not the most alpha investments. There is likely to always be selling pressure because of this.
I am super-bullish on Axie Infinity as an ecosystem. However, since AXS currently has no function and we already know that a snapshot was taken in October last year and folks that played Axie Infinity beforehand, owned Axies, owned land and used the Axie Infinity marketplace will all be airdropped AXS, I don’t understand the urgency to own the token at this point. I think things like Mystic Axies are more alpha than the AXS token. But maybe I’m wrong. The Axie Infinity community are balls-deep in AXS token so perhaps I’m missing something?
Bitcoin
Long-term bullish on Bitcoin but medium-term believe that ETH and DeFi blue chips will outperform it.
Aavegotchi
I was absolutely gutted in the days leading up to the Aavegotchi mainnet launch (which ended up being delayed) with gas prices going nuts. Previously I was excited for launch but those gas prices were going to kill the project. Fortunately with the delay, the team regrouped and worked towards launching on Matic network. The team seem to have done a great job with keeping folks engaged, especially with their GHST-Quickswap farming pool. I thought the delay would lead to a loss of momentum but these promotions seem to have kept things on track for a successful launch. I have a bit invested (aka gambled) in this project so I’m hoping that it gets some hype and becomes a fun and profitable game.
*Please excuse the lacklustre title for this post.