Cryptovestor’s Alpha Corner #1

Aug 29, 2023
Cryptovestor’s Alpha Corner #1

Editors Note: We’ve invited Cryptovestor to take over our Tuesday slots when we aren’t doing Frax Check, as he’s the resident alpha watcher in the Telegram chat. We think that he’s got a great eye for scooping Frax Alpha.

I've been a lurker in the Frax community for well over a year, and only recently decided to start contributing my knowledge about Frax and about the Curve ecosystems. I have tremendous passion for Defi and more importantly stablecoins.

I started posting on X a few weeks ago and I guess I popped up on some people's radars as I pieced together what Frax v3 might look like when it launched.

I was approached by the Flywheel team and asked to contribute to their newsletter and I am super excited to be able to provide my insight and perspective as Frax continues to grow.

On to the Alpha..

What's the scoop? Could Frax holders soon have the opportunity to stake their holdings and earn some yield?

I tossed the question to Sam K in the Telegram group chat, and his response was classic “big eyes”.

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Thanks to the impressive versatility of FXB’s, it seems like this is in fact a possibility. MakerDAO’s DSR may have some competition coming soon.

While the chatter revolves around MakerDao's DSR yielding 3% to 5%, Frax is quietly building a robust contender.

I don't think the degens have spotted it yet, but that's about to change.

Let's first delve into FXB yields.

Given Frax's strategic utilization of the Curve flywheel, I anticipate FXB could generate an overall APY ranging from 6% to 8%. Currently U.S. treasuries yield 5.25% plus CRV, CVX, and FXS emissions.

Now, let's consider, what's the significance?

If Frax can get a steady 8% yield on FXBs, but what's the next step? Well, what everyone is missing here is LEVERAGE. Imagine capitalizing on this impressive yield and amplifying it up to 9x on platforms like Fraxlend, BAMM, or Curve's LLAMA Lending market, incorporating soft liquidations.

This is a recipe for conservative degeneracy.

Some estimates even suggest potential APYs ranging from 15% to as high as 25% when FXBs are employed in this fashion. Don’t believe it’s coming, take a look…

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9x FXB Leverage is coming to LLAMA Crvusd Market. Just take a look at what Mich from Curve thinks.

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It's been a really slow week for alpha coming from the Frax team but there were some pieces of great information that surfaced.

The main theme I think has to do with how Frax v3 can compete with MakerDao's DSR. The ability for people to stake their Frax and earn yield Is something that I don't think most people were expecting.

On top of that, It wasn't clear that the team had leverage on their roadmap but clearly they have been thinking about this and plan to implement it into Frax v3 at launch. Even Mich from Curve confirmed that leverage with FXBs would be huge.

I think DeFi users will be shocked when they see how FXBs, a totally new primitive, can be used and how they will generate yields well beyond Maker's DSR.

That's all for now but expect a lot more in the next few weeks as Frax v3 launches. I will be scouring discord and TG to bring you the latest and most juicy alpha!

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