Ouroboros Catalysts Issue #1: Solana Breakpoint, Lido sunsets Solana staking, Polkadot crowdloan unlocks
Our research notes are first available to our NFT holders one week prior at https://paragraph.xyz/@ourocap
Welcome to Ouroboros Catalysts where we share actionable and impactful research ideas with clear timelines. None of the following is financial advice.
In our first edition, we cover:
Solana's price performance into its annual Breakpoint conference
Lido's sunsetting of Solana staking and what it means for liquid staking competitors and
Polkadot parachain crowdloan unlocks
Analysts: levinski, 0xRamen, 0xMize
Catalyst #1: Solana Breakpoint
Catalyst: SOL has historically outperformed into Breakpoint conference and underperformed following the start of the conference (in 2022, price performance was interrupted by FTX's failure). Currently at T-7 days to the conference, SOL has already risen more than 30% from a month ago.
Potential Trade Idea: Long SOL into Breakpoint, short SOL at the start of Breakpoint
When: 30 Oct’23
What to look out for: The agenda for Breakpoint has yet to be released. We recommend watching the agenda for potential announcements during events.
Separately, we do think that the FTX estate sales, managed by Galaxy Digital, will continue to be an overhang on SOL. The estate holds 56m SOL (worth $1.7b) with ~30% vested which eventually will have to be dollarized.
Catalyst #2: Lido sunsets Solana staking
Catalyst: A Lido vote to sunset Solana staking passed on 6 Oct’23. Starting 16 Oct'23, users can only unstake Solana while the UI will be available until 4 Feb’24. Unstaking Solana takes roughly 2-3 days before the SOL is available.
Potential Trade Idea: Long MNDE on market share gains
When: 16 Oct’23 to 4 Feb’24
What to look out for: Market share changes in other LST projects, follow up actions from unstaked SOL.
Lido controls ~19% market share of SOL LST market with 2.3m SOL ($62m) staked. The sunsetting of stSOL should benefit competitors Marinade Finance (48% market share, has token) and Jito (80% market share, has points program which could lead to an airdrop in the future).
At the moment, 4 wallets control ~53% of the stSOL with FTX’s cold wallet (27% of total) being the top wallets. List of addresses:
6b4aypBhH337qSzzkbeoHWzTLt4DjG2aG8GkrrTQJfQA (FTX cold wallet)
4FDKx3S3k9eD7HeAhjQxHeYNLXHtreCD1GTUWktiYUvR
B1BvMR1K6S7yVYCRNcVrLPBJLiWGHGsLEBLUdK7uwyN7
ENZXDpzA32RGG7RtrcURV8zGYGzR5efT5t7EchSPpH5x
The FTX estate (managed by Galaxy Digital), staked 5.5m SOL using Figment (not liquid staked) on 15 Oct'23. We expect the FTX wallet to do the same.
Catalyst #3: Polkadot crowdloans unlocks
Catalyst: Roughly $390m of DOT from Parachain crowdloans will become accessible to users on 24 Oct'23, after a two year lockup period. The way crowdloans work is a project can give out tokens in exchange for users to bond their DOT in order to bid for a parachain slot.
The first tranche of unlocks features users who bonded DOT at $26, which is since down 85%. The following tranche of unlocks on 16 Jan'24 is also substantial at $110m at today's price ($3.90).
Potential Trade Idea: Short DOT into crowdloan unlocks, watch liquid DOT crowdloan derivatives redemptions
When: 24 Oct’23 and 16 Jan'24
What to look out for: While the unlocks are large, some of the DOT locked is already liquid. During the crowdloan raises, users had the option to lock up their DOT in exchange for liquid DOT derivatives (bDOT, lcDOT, cDOT) which will be redeemable for DOT These amount to ~67m DOT or ~67% of the unlock on 24 Oct'23.
While this partially mitigates some of the sell pressure, these DOT derivatives have low liquidity and exiting these derivatives in size is not feasible. Moreover, the remaining $130m worth of unlocking tokens is still substantial. Our proprietary market depth analysis tool reveals that it takes only ~$1mn of DOT spot sell on Binance to move it >5% down.
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