Ouroboros Market Update #1: Ethena + Wormhole $1.6b airdrops, 400% APY ETH farm on Fluid
Ethena + Wormhole airdrops: $1.6b wealth creation, 400% APY leveraged points farming on Fluid. This article was first available to OLAP holders on 2 Apr'24.
We publish our first edition of Ouroboros Market Update where we provide actionable insights including: catalysts, governance proposals, airdrops, yield farms and directional trades.
Big week for airdrops: Ethena + Wormhole
This week, we'll see two of the largest airdrops in recent history - Ethena's ENA and Wormhole's W. Cumulatively, we calculate ~$1.6b of wealth will be created via these airdrops.
1) Ethena: $450m airdrop + More farming opportunities
Actionables: Claim + TGE on 2 Apr'24 (today), Participate in Season 2
Shards program: ~400% APY. In the short 6 weeks Ethena's Shard program has been running, it has grown USDe supply to $1.6b. Today's TGE will see the project reward users with 5% of its supply. Assuming the average USDe supply was around $1b and the current as-of-writing price of $0.60, Shard program participants would have yielded ( $9b FDV x 5% ) / $1b USDe supply = ~400% APY on average, with certain DeFi integrations earning significantly more than others.
Sats (Season 2): 50% APY. Ethena has announced that its points program will continue for a Season 2, with Shards being replaced with Sats. This program will last until 2 Sep'24 or when $5b USDe supply is reached, whichever earlier. Given Ethena took just 4 weeks for it to reach its USDe supply goal of $1b, we expect the Ethena to reach its supply goal ahead of the 2 Sep'24 deadline and believe this can be done by the end of Jun'24.
Assuming that TVL USDe supply averages ~$3.5b from now until 30 Jun'24 and season 2's airdrop is also 5%, users will be yielding ( $9b x 5% ) / $3.5b USDe supply = ~50% APY on average. While this is lower than before, we expect certain DeFi integrations and strategies to yield much more than others. We'll be specifically looking out for looping strategies (Morpho, Gearbox and INIT) which could potentially produce >100% yield, as well as mispriced Pendle YTs.
Perfect environment to TGE. Ethena's ETH OI is now roughly 15% of global OI. Despite this, funding rates continue to be persistently high at >30% which has in turn driven explosive demand for USDe. With BTC cash & carry about to go live and more partnerships in the pipeline (such as with Maker + Morpho), we expect USDe supply to continue growing. Leveraged farming / looping has also started to see traction where users borrow other stables (at 40%+ APY) to collaterize high leverage positions (5-10x). Other potential growth avenues include Ethena adding LRTs to juice yield further (hinted by Head of Growth, Seraphim), and adding other major tokens to long spot / short perp.
Ethena airdrop details
Initial airdrop: 5% of token supply. Current price at $0.6 is implying ~$9b FDV and a $450m airdrop to users (5% airdrop). Additional airdrop details include:
Exiting pools: Users who dispose of USDe following Ethena's 28 Mar'24 blog pose will lose their eligibility to claim ENA. Repositioning within the ecosystem is fine.
Vesting schedule: The top 2k wallets by shard count (out of 90k+ total) and Pendle's YT tokenholders will be subject to a vesting - 50% of ENA is liquid immediately while the remaining 50% is subject a 6 month linear vesting period. This suggests that the token supply initially available is even tighter than the headline 5%. In addition, users have to maintain their participation in the project to vest their unvested portions.
Airdrop to NFT collections: 0.2% of token supply will be airdropped to Schizo posters, Redacted Remilio Babies, and Milady Maker. The total supply of these collections amount to ~26k, which implies $700 / NFT. That said, the airdrop is on a per wallet basis.
Claim duration: Claiming last for 30 days after the launch of ENA.
Tokenomics: Mostly community. Initial circulating supply is 9.5% of FDV. This includes 5% which will be airdropped, of which around half will be vested over 6 months. 2% will be allocated to Binance launchpool and 0.1% to Bybit launchpool, while the remainder presumably goes to market makers for liquidity. Investors / team unlocks only start unlocking a year later.
2) Wormhole: $1.1b Airdrop + Good for other bridges + Stimmy for Solana ecosystem
Actionables: Claim on 3 Apr'24, 11.30pm UTC, Long bridges, Long SOL ecosystem
W: A $1.1b airdrop. Wormhole is currently trading at $16b FDV on Aevo and on Whales Market. Relative to other recent airdrops, Wormhole is allocating a much larger proportion of token supply as airdrops (17%). Its initial airdrop will feature 679m W being distributed to onchain users (81%) and community groups (19%) which includes Wormhole communities, Zealy and Galxe quest participants, Pyth stakers, Monad, Mad Lads, DeGods & Yoots and Bad Kids communities.
Good comp for other bridge tokens. With 18% of supply circulating initially, (11% airdrop, 5% ecosystem, 2% treasury), Wormhole's initial market cap is currently implied at $2.9b. Collectively, bridge tokens have a market cap of just $4.5b, with the top 2 being Thorchain ($2.5b MCap) and Axelar ($1.1b MCap). The remaining bridges are trading at $220m MCap or less. We see the launch of W potentially help to re-rate these cheaper bridge tokens.
Solana ecosystem benefits. Given that Wormhole airdrop will be predominantly focused on Solana and Solana NFTs, we expect the airdrop to create a wealth effect and result in rotational flows into other projects in the ecosystem.
3) Leveraged Points Farming on Fluid: 400% APY
Actionables: Leverage farm on Fluid for 400% APY when caps are lifted
What does Fluid do: Fluid (built by Instadapp) allows users to create leveraged positions using vaults. It is a two-sided marketplace where lenders put up collateral (stables and ETH) and borrowers borrow for leverage.
Why is it interesting? Last week, Fluid's weETH / wstETH vault, marking its entrance to the points farming meta. It also later introduced USDe and sUSDe vaults. We have been closely observing (and participating in) leveraged points farming which has proven to be one of the most capital efficient and highest yielding way to obtain points, which protocols offering 10x leverage in many cases. The underlying points protocol typically also boosts points for using DeFi, which adds an additional layer of multiplier on the 10x leverage.
weETH / wstETH vault: 400% APY. Based on our calculations of $30b EigenLayer FDV and a 5% airdrop, we calculate the vault offers up to a 400% APY until the end of Jun'24.
What to look out for: Leverage points farming requires active monitoring and accepting several protocol risks. They include:
Active monitoring: The position's health factor will worsen rapidly over time as a deposit APY (0%) than borrow APY (-23% currently on debt). When leveraged this implies a very negative APY initially amounting to ( -23% x leverage ). This negative APY is incurred to farm points which will translate into tokens later. While using high leverage, we recommend active monitoring of health factor to ensure the position is sufficiently collaterized.
Protocol risk exposures: Users are exposed to Ether.fi and Fluid smart contract risks
Depeg / liquidation risk: This risk is low for the weETH / wstETH vault. Fluid does not use price oracles but instead uses contract balances to determine underlying LST / LRT collaterization. This reduces liquidation risk due to market volatility.
Caps to lift soon: While the vault has currently hit its borrow limits, there is a governance proposal to raise the borrow limit from 10k wstETH ($39m) to 85% of wstETH total supply ($50m). We expect borrow limits to max out quickly and recommend keenly watching when the proposal will be passed.
Disclosure: The opinions expressed in this research piece are solely those of the author(s) and do not constitute financial advice. Ouroboros Capital may hold position(s) in the token(s) mentioned in this research articles. These position(s) may influence the author's perspective and analysis of the token. Readers are encouraged to conduct their own research before making any investment decisions.
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