Original title: "Narrator: FDV Indeed Not a meme" FDV Indeed Not a meme Since this article was published, I have been talking to OTC brokers trying to understand the secondary market for the assets I am shorting. structure. The survey results are veryenlightening, so I wanted to share them with you. All in all, I don't think these are bullishunlocks.
Many of these assets have active sellers, but very few bids are
75% below the market price (we are talking about the standard SAFT i.e. Simple Token Agreement, which has a 1 year cliff period and
4 /5year vested period). In terms of trading volume, my rough estimate based on conversations with different brokers is that SAFT’s total trading volume is around
$200 million. Considering these assets will have tens of billions of dollars in cumulative unrealized gains unlocked over the next few years, that's basically the end of the story. To put it bluntly, Bullish Unlock wants to see the lowest possible unrealized gains to market value ratio, as explained in the linked article. Most coins are sitting on substantial unrealized gains from the team (
0 cost basis) and early investors (you can calculate this yourself using tools like cryptorank.io). Coupled with an extremely low floating rate (generally
5-10%), the trading price of most projects is
3-6 times of the market value of unrealized gains. In other words, the total circulating market value of the project is
3 -6x unrealized gains. Assuming that it takes
2 years from CliffDay, this means that assets worth the entire market value will be unlocked every
4-8months. This makes it difficult to attract buyers, especially when their alternative beta exposure is memecoins and other assets that don’t have an oversupply. One way to reduce this effect (besides increasing the initial float) is high pre-issuance secondary trading volume, ideally as close as possible to the current market price. This helps reset the cost basis of unlocked tokens and essentially lowers the unrealized gains to market cap ratio (e.g. the now famous MulticoinSOL assist leading to the first unlock) which I unfortunately don’t see on the OTC market This situation. Related to this, I'm trying to understand the market structure. I don’t want to single out specific assets, but there are a lot of assets with the following characteristics: extremely high unrealized gains to market cap ratio; no secondary demand even ~
75% below market price; consistently positive funding rates on Binance, no Open Interest has reached
9digits; who would covet these things on CEX but not be interested in buying the secondary market at a discount of more than
75%? My hypothesis is just that there are special frictions on both the buyer and seller sides. I don't know much about the buy side, but I think if they're spending money to be long on these things, they're probably unsophisticated retail gamblers who don't understand vesting schedules or OTC platforms. Sellers may include: a) founders/teams who have
95%+ of new coins in locked token bags and therefore have no collateral or inclination to short; b) investors in venture capital funds who cannot or There is no setup for shorting assets on CEX; that is why the opportunity to short these assets and profit from them still exists. By the way, unlike what the CT doomsayers will tell you, this does not mean that all cryptocurrencies are scams, or even that all assets with high unrealized gains will go to zero. I'm very bullish on cryptocurrencies and believe there will be some category winners that rise through their unlocks because they do have real-world applications. However, there will also be situations where long-tail assets “return to zero”. This is natural and what you would expect in an asset class that provides liquidity to early-stage venture capital. After all, most ventures fail. In traditional venture capital, only a handful of elite companies are listed and liquid, while long-tail projects fail quietly. In the cryptocurrency space, a higher proportion of venture capital projects end up with not only spot liquidity, but even liquid derivatives markets. This is unheard of in traditional venture capital and is what makes crypto venture capital a unique asset class. It also means that long-tail failures in crypto ventures will be public and painful, with both parties making or losing significant amounts of money, rather than failing quietly. This also means that there will be more structural shorting opportunities in cryptocurrencies than in any other asset class. To a certain extent, you can basically bet your money on the empirical fact that most startups fail.
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