[On-chain Weekly] MC and FDV, Uniswap NFTs, APE Staking

Xangle Intern

Xangle

Dec 23, 2022

Chart of the Week - Higher FDV ≠ Higher Drawdowns

MC (Market Cap) is often sought out as the standard metric when evaluating a token’s true value. However, one cannot totally rely on MC as it does not include the value of a token’s future circulating supply.
Some critics claim that it would be more reasonable to include the value of all tokens to be released in the future when evaluating a token's value since sell pressure may increase as a token releases more of its locked supply. Therefore, FDV (Fully Diluted Value) is often referred as a superior metric to MC.
However, our analysis of the correlation between MC/FDV ratio and MDD of 150 tokens has found that tokens with lower MC/FDV ratios did not suffer from significant MDD: the correlation was near to zero.
To put it simply, an FDV higher than MC doesn't necessarily foretell a rapid decrease in value in the near future.

Even when projects were split into separate groups (i.e., DeFi, Mainnet), the correlation between MC/FDV ratio and MDD remained low.
One can attribute the above results to the overall market situation. The industry as a whole saw a huge drawdown, while valuations were driven more by momentum and narratives than fundamentals.
The argument that FDV is superior to MC as an evaluation tool is an arbitrary assumption because there is no guarantee that the entire supply will be put into circulation.
The counter argument is that MC is more practical since it only counts current circulating supply, allowing the market to determine the value of each project.
Further research on evaluation methods for crypto assets will be needed.

Uniswap, the No.1 DEX, launched its own NFT aggregator on the last day of November.
The launch attracted much attention as the announcement took place after it acquired Genie back in June.
However, NFT trading volume on Uniswap did not pick up as anticipated. The Defi behemoth is still trailing behind its competitors after a week.

Moreover, charts are not showing significant growth trends, as seen in the above graph.
Many NFT marketplaces were launched during the previous bull market, yet most failed to take down OpenSea, the de facto monopolistic enterprise of the NFT world.
Contending NFT marketplaces deployed incentives in the form of token distributions, but not been able to overcome OpenSea’s established network. Uniswap, still struggling to garner a userbase, might see even worse outcomes as it has not deployed any incentives except its one-off USDC airdrop to previous Genie users.

On December 13, Yuga Labs announced APE staking. 6.5M APE, or 18% of the APE supply, were funneled into staking pools.
Currently, there are four pools available for APE staking. Users who stake Yuga Labs NFTs alongside are entitled to higher APE rewards.
The APE token has limited utility at the moment, but it might see wider adoption when Yuga Labs releases its metaverse platform Otherside.

Demand for NFT lending has surfaced as bluechip NFTs saw a significant increase in value, sometimes amounting to the millions.
After the Terra-Luna explosion, demand for liquidity has surged, forcing bluechip NFT owners to seek out for lending platforms that will take their NFTs as collateral. Since then, NFT lending has been a go-to solution for bluechip NFT holders.

The boom in the NFT lending market was soon met with new contenders like X2Y2, which launched its lending service in October.
X2Y2 took a significant portion of marketshare from incumbents, BendDAO and NFTfi, now accounting for almost 20% of all lending volume. The momentum is building up with X2Y2's recent weekly lending volume surpassing BendDAO's.