So I drew these lines and then literally five minutes later the market did this:
Hmmmmm yeah not great.
The stock market is taking a hit and bringing crypto down with it again. This is to be expected until Bitcoin is traveling below the doubling curve, in which case it will start cannibalizing alts into itself as it increases in dominance. Surprisingly, Bitcoin dominance has actually dropped a tiny bit from the 40%-41% range into 39.7% during this tiny 7.5% dump. Expect that to reverse course hard when we are grinding under the curve.
2022 Bitcoin Doubling Curve
| Jan | Feb | Mar | April | May | June |
|---|---|---|---|---|---|
| $27733 | $29867 | $32,000 | $34133 | $36267 | $38400 |
| July | Aug | Sept | Oct | Nov | Dec |
|---|---|---|---|---|---|
| $40533 | $42667 | $44800 | $46933 | $49067 | $51200 |
As of right now, the doubling curve stands at $34500, and by the end of the month it will be over $36k. We are getting very close to those danger zone levels that will inevitably bleed the alt-market. At the end of the day all the traders and bots know that when the market is down on it's last legs, Bitcoin is the place to be. I highly doubt anything has changed in the last few years. As a store of security, Bitcoin is anchored much more firmly than anything else.
$40k was a pretty obvious resistance line.
However it is only resistance during this 2-week bearish cycle. There's still a very strong chance that the end of May performs much better than we are seeing now. The market is still terrified of recession and trying to price it in. My money is betting that the market is wrong (as is the case 99% of the time) and the current FUD is overblown. Eventually the market will realize it was stupid and oversold and we should correct until the next round of FUD hits us like a ton of bricks.
Dat Polycub doe!
After all my shit-talking I did about the polycub ecosystem and launch, the price had finally hit my targets in the $700k-$1M market cap buy range. I bought back in for like $3000, and I already own 1% of all the staked xpolycub. A friend of mine and I really did a great job trading that market, and it looks like I'm still doing a great job by buying the absolute bottom. The market cap over the last few days has already risen back up above $1M, and I'll wait for it to come back down to support the lower level I've been defending.
We still have a 50% yield reduction incoming and a bunch of locked polycub that will soon be unlocked and inevitably dumped on the market (not all of it but certainly some percentage). The rumor was that like 300k polycub is waiting to be unlocked, and the yield drop from emissions being cut in half is also very bearish even though it's constantly spun as a bullish supply shock. Spoiler alert: "SHOCK" is not something you want to go into, as a living entity or an economy.
Again, supporting this $700k-$1M market cap is 'shockingly' easy, because only a small fraction of that (~$150k) is actually in the liquidity pools. Even an $800 purchase visibly moved the price up a tiny bit. I guarantee that the market cap can't really drop lower than $700k because of how stupidly easy it is to defend that level. Take note.
Why polycub though?
As stated previously, Polycub is a testnet for CUB and any further iterations on other EVM chains. Anything done on Polycub can be ported to CUB, from the vault to the bonding system to the governance votes to the loaning mechanics. As a testnet, this makes polycub risky, as something could obviously go wrong. At the same time, CUB is still totally a relevant project that will eventually get all the same advantages as the testnet.
The only real difference between any of these tokens is which EVM chain they exist on and the liquidity pool options provided. Anyone that wants to have a MATIC or ETH position might find themselves on polycub, while anyone that wants a BNB position will have to head on over to CUB.
Also very important to note that LEO is connected to all of this and is leeching massive free yields from all EVM iterations. pLEO has over $300k liquidity and bLEO has over $200k liquidity, both subsidized by NOT-LEO inflation. That's powerful. LEO itself is grossly underappreciated and undervalued with massive liquidity pools. It's trivially easy to buy 1% of the entire supply (110k) of LEO with very little slip. More than 10% of the entire circulating supply is up for sale right now this second in the LPs. That's pretty damn good.
It's all about liquidations.
As far as polycub is concerned, it might be surprising to hear that the biggest fundamental gain will be how liquidations are handled. Sound weird, right? The best thing about polycub is how people are losing money? But it's true. Liquidation of bad debt is the crux of many-a fundamental development.
With proper liquidations in place, the polycub vault will be able to issue loans to xpolycub holders. That development right there could easily send the price x3 or more. Sure, we might have to wait six months to get there... but whatever. At a market cap this low it's totally worth it. People LOVE to give themselves loans with crypto, and all of the interest rates are automatically paid off by xpc yield, which is pretty badass when compared to something like DAI that is just a sunken cost.
But wait: there's more.
Because after proper liquidations are in place, this tech can easily be ported to allow users to create derivative assets via smart-contract. That means that not only would we be allowed to borrow assets directly from the vault, but also we could create derivative tokens out of thin air using the same collateral mechanics that have already been developed. That kind of modular programming has a ton of value.
The most common derivative asset is an algorithmic stable coin, but I was thinking about this the other day, and the derivative doesn't necessarily have to be stable or pegged to anything at all. It could just have a fair market value based on the yield provided to the LP. And that's another piece of this puzzle. A polycub/derivative liquidity pool would be the first liquidity pool where both sides of the LP are adding direct value to the ecosystem, meaning allocating high yields to such a pool a no-brainer that will pump the price of everything guaranteed.
Not only would allocating yield to polycub/derivative increase the value of the derivative, but the derivative is minted with xpolycub collateral, so the more yield on this LP, the more xpolycub needs to be locked to create the derivative. On top of that each derivative token needs to be paired to polycub itself in the LP, so even more polycub get locked into the LP. In this example, we see that the value of polycub is increased twice and the value of the derivative token is increased once. That's pretty crazy (increasing value 3 times) considering the LP only has two sides.
But what would be the point of holding the asset by itself?
Even if the value proposition of the derivative is only to farm the LP, the individual token still has value. Obviously that value can be increased if there are other uses outside of that. Many derivatives accomplish this by being an algorithmic stable coin. A stable coin would obviously have more consistent value and could even be used as collateral to borrow polycub from the vault and short the market by dumping it and owing it back later. While is seems counterintuitive to allow this, a full fledged margin trading market has a lot of value.
It's also possible to make a derivative like this slightly unstable in an 'only-up' direction. This would be achieved by constantly increasing the collateral required to mint the token. As more and more xpolycub is required to mint the derivative, the derivative gets more and more scarce, driving the price up. However, I've done the game-theory on this, and such a derivative would be highly cosmetic. This is due to the fact that we can get the exact same results simply by allocating more yield to the derivative directly rather than increasing the collateral required to mint it.
That being said, I just realized that the money comes from two different places in both scenarios. In the case of increasing the collateral required to mint tokens, the value kind of pops out of thin air as no actual inflation or yield was allocated to the token. Yields, on the other hand, require that money be subsidized from another area, so perhaps there is merit to a derivative that slowly has collateral requirements increased (I suppose the money comes from users that minted/borrowed the token and owe it back later at a potentially higher price).
But how will polycub even handle liquidations?
The way something like MakerDAO/DAI does it is that when the collateral falls into a certain range it gets liquidated to buy back the token that it was used to borrow (sells ETH to buy DAI and pay back bad debt). This creates a situation where if the market doesn't have enough liquidity it will create a self-fulfilling Black Swan event where the market was so over-leveraged that liquidations actually lower the price of ETH, which in turn creates more liquidations, which lower the price of ETH more and creates more liquidations (death-spiral loop).
Polycub is going to avoid this entirely by not needlessly dumping collateral on the market to buy back the bad debt. Obviously this strategy has other risks but I think it's a very innovative solution. The bonding system being implemented will also be tied into the liquidations.
For example, say a bunch of xpolycub gets liquidated because too many people went long and borrowed USDC. When the market crashed the value of the xpolycub was too low to justify the USDC loans. Thus all that xpolycub becomes the property of the Vault (POL). Rather than dump that xpolycub on the market to get the USDC back, the vault will simply hold the xpolycub or do other things with it. Maybe the Vault simply waits for the market to recover and stabilize before dumping it, or even better it will issue the xpolycub as a reward in the bonding system.
Bonding allows one to give LP tokens to the Vault in exchange for yield. Imagine if the Vault has a bunch of xpc it just liquidated and it wants to trade that xpc for LP tokens that will generate yield elsewhere. The protocol can offer a good deal on LP tokens in exchange for drip yield on the xpolycub. This puts all the burden and risk onto the users to accept the bonding contract. If xpolycub continues to plummet, rather than the Vault taking a loss the people with the bonded drip will absorb that loss. That's the cost of doing business. If the bonding yield was high enough to accept the risk: everybody gets what they wanted. This is a HIGHLY innovative solution for liquidations that I would have never considered.
Bigcorns
Unfortunately all of these points are moot in many contexts because most of us don't own a big enough bag worth of Bitcoin itself. Trust me: when the recession hits, if you're not holding Bitcoin, you're gonna have a bad time, guaranteed. Holding Bitcoin during 12 months of recession is going to be one of the easiest ways to get a massive alt-coin holding after the market has bled out for a year. I know from experience; that's how I got all my Hive at the end of 2020.
Conclusion
Yeah, the market sucks right now. But as long as there is volatility we can make money in either direction. Keep hedging and make sure to get enough Bitcoin and stable assets to buy that dip when it comes around. At the same time don't get caught off guard by a summertime bull run should the iron strike hot. Balanced positions are key.
DEFI hasn't even come close to being fully developed yet. It has really just begun and in a few years we are going to see some wild upgrades and recipes for success get employed and copied a thousand times over. Now that Polycub has crashed to $1M market cap and below, it's safe to buy in, but don't buy too much because even $1000 buy will boost the price up like a fifth of a cent. This is a very easy level to defend, and the protocol is going to do some really amazing things. Crypto is magic internet money after all.