Asymmetric Market Update™️ #29

Within the narrow context of a token’s home protocol, supply and demand for the token will — for a well-designed system — reflect supply and demand for the protocol’s services and functionality. But no token lives within a quiet walled garden. Rather, every token lives in the noisy Forest.

Token appreciation within the bull market was mistaken for an indicator of business model strength. In a neutral market with all else held equal, perhaps I would concur. But once the tides turned and the music stopped, reality set in. Incentive based tokens deflated quickly and users left in flocks, illustrating the obvious – tokens are not paralle... See more

Capital is flowing into crypto. Over $20B in crypto funds have been raised since the start of 2021 per Dove Metrics. Dry powder is abundant, but liquidity is asymmetrically distributed. Most capital is focused on early-stage, private projects. That’s not sustainable. While retail investors have been able to consume the float of historical crypto ve... See more

Harsh Truth: As long as protocols are issuing more in incentives than they're making in revenue (aka turn profit), token price will go down (over a long enough time horizon).

The big recent example of this is LooksRare. As Cobie explained in his post on the topic, half of the farming rewards were available to early investors whose tokens were still locked. So while retail investors might have been under the impression that they were earning most of the fees of the platform, they were actually going to the early investor... See more