Ouroboros Market Update #5: Ethena's sUSDe growth, Hyperliquid extends points season, Political memecoins
In this issue, we cover Ethena sUSDe yield, Hyperliquid's extended points season and political memecoins. This article was first available to OLAP holders on 31 May'24.
In OMU #4, we covered Mantle's governance proposal to launch a governance token for mETH (LST) and cmETH (LRT). More details have since been announced - mETH holders will be retroactively rewarded, and the token will be called COOK. Infinex's lockdrop has grown to $108m TVL, maintaining high APYs (>100%).
In this issue, we cover what Ethena redirecting more protocol revenue to sUSDe holders, Hyperliquid's extended points season and political memecoins.
#1 Ethena redirects more protocol revenue sUSDe yield
Actionables: Track sUSDe yields, and yield farm when sUSDe yields rise.
More revenue for staked USDe holders. On 16 May'24, Ethena announced an increase in revenue provided to sUSDe holders from 50% to 80%. The formula for sUSDe yield is as follows:
sUSDe yield = ( Protocol revenue x % split to sUSDe) / ( Total USDe supply x % of USDe staked)
Growth in Ethena's TVL entirely a result of sUSDe growth. Because the % split to sUSDe has increased from 50% to 80%, we've seen more farmers staking USDe to chase the increased (absolute amount of) sUSDe yield, resulting in the USDe staked rising from 16% to 39% in 2 weeks, which has caused sUSDe supply to correspondingly increase. In fact, USDe staked (+$680m) has grown faster than USDe (+$610m) and accounts for all of Ethena's TVL growth.
Growth in Ethena's TVL Driven by sUSDe: The increased split to sUSDe has led to more farmers staking USDe, chasing the increased yield. This has caused the USDe staked to rise from 16% to 39% in two weeks. The growth in sUSDe accounted for all of Ethena's TVL growth.
sUSDe currently yields 16%. On Ethena's site, the displayed yield is based on last week's yield and sUSDe supply. With rapid growth in sUSDe, we calculate the current sUSDe APY to be around 16%, based on currently streamed USDe rewards and currently staked USDe).
Yield farm when sUSDe APY rises. While we consider 16% APY on sUSDe to be somewhat low, this was when funding rates were at 5-10%, resulting in low protocol revenue. We expect higher funding rates as we approach the ETH ETF listing, leading to a higher sUSDe APY. For every 5% rise in funding rates, sUSDe APY should rise by approximately 9%. Current borrow-lends for sUSDe looping are pricing borrow at around 15%, which is only slightly lower than the current 16% APY. However, as sUSDe APYs rise, looping could potentially yield high APYs.
#2 Hyperliquid extends points program: Good for PURR
Actionables: Long PURR, participate in Hyperliquid's points program.
Points program extension. Hyperliquid announced an extension of its points program, expanding its ambitions from building a highly performant perp DEX to an L1 that can support the financial system. Previously, Hyperliquid distributed ~4m points to early users and 26m points over 26 weeks. From 1 May'24, to 28 May'24, it will distribute 2m points per week, followed by 700k points per week for the next four months.
Use the spot product to earn points. While this extension indicates previous points holders will be diluted, we acknowledge that the product suite will be significantly expanded. The last two epochs of the prior points season rewarded activity on its spot product - specifically buying and holding PURR. We expect this "L1 season" to similarly reward 1) holding spot tokens, 2) buying spot tokens, 3) trading spot tokens, and/or 4) deploying spot tokens.
PURR benefits. We previously identified PURR as a proxy for advancements in Hyperliquid's product. This view remains unchanged, as PURR constitutes ~90% of Hyperliquid's spot product market cap and should benefit from the new points season.
#3 Political Memecoins: Upcoming Catalysts
Actionables: Long political memecoins into the presidential election in Nov'24, watch Trump's wallet.
Politicians Embracing Crypto. Trump stated on 8 May'24 that he would accept crypto donations. On 25 May'24, he doubled down on his support for crypto, saying "Our country must be the leader in the field, there is no second place". On 29 May'24, Biden also expressed a crypto-friendly stance. This has driven up the price of TRUMP, now at a $600m MCap, up 3x since early May lows.
Political memecoins are correlated with event appearances. The initial price action in Mar'24 was driven by Trump becoming the presumptive Republican presidential nominee. Upcoming catalysts include the Biden-Trump debate on 27 Jun'24 and the Republican National Convention on 15-18 Jul'24. Increased event appearances, press coverage, and debates leading up to the presidential election in Nov'2024 should act as potential drivers of prices for political memecoins.
Track Trump's wallet. Trump's wallet currently holds $11.7m, with $7.5m in TRUMP and $3.2m in ETH. Any action to sell TRUMP could be a negative catalyst.
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.
 | A guest post by
|