Finance Redefined: Puff, puff, pump on 4/20! April 16-21st

April 22, 2021 admin

A new generation of crypto investors get taken for a ride as Aave makes some puzzling moves.

Loyal Finance Redefined readers:

Hi, I’m Andrew. My inestimable colleague Andrey, the previous compiler of this newsletter, is stepping away from Cointelegraph in order to build [REDACTED], leaving me to take over lettering the news. While I’m thrilled he’ll be keeping around the DeFi ecosystem, I’m also infuriated that there’ll be yet another gigabrain trading against me.

Also: journalists quitting their jobs to do DeFi stuff. Talk about top signals. While DeFi tokens and ETH prices in particular have largely rebounded from dispepsia-inducing lows, I remain antsy.

Nonetheless, the highlights of the week:

4/20 Haze It

In the 4/21 hangover today, a new crop of crypto investors are discovering some cruel market realities. Hopefully, they’ll learn to laugh about them.

Yesterday, the Dogecoin community cashed in on some of their growing (if likely destined to be short-lived) cultural capital, attempting a hostile “unofficial holiday” takeover of 4/20 — a social media push to snatch the date away from stoners and rebrand it as “Doge Day.”

To some degree, it worked: Elon Musk, the meme superstar who happens to run a few tech companies, ratioed some disbelieving Boomers, and noted celebrity sex tape participant Dave Portnoy himself bought a bag that prompty tanked in price. DeFi-ers shouldn’t care too much about the meme currency aside from its utility in predicting wider altcoin runs, but Dogecoin day did feature a few other pump-and-dump absurdities.

Happy #DogeDay2021 @blockfolio pic.twitter.com/qgpZLTRTSm

— Dave Portnoy (@stoolpresidente) April 20, 2021

Self-styled DeFi tokens like $SAFEMOON and $SHIB hit the zenith of multiweek pumps on 4/20, along with projects like $ASS following suit. The moonshots led to some remarkable on-chain stories of guppies growing into whales essentially overnight on paltry initial investments:

so this guy bought $shib for +/- 10eth 180 days ago

guess how much it’s worth rn?

4 fucking millionhttps://t.co/aCzfDrORDV

— UniHax0r ~ (@UniHax0r4000) February 1, 2021

Then, as it always does, the other shoe dropped. At the time of writing, $SAFEMOON is down a whopping 41.95% on the day, $SHIB in the red 38.48%, and $ASS looks like ass.

Burj Khalifa charts for all these scam tokens…. $ass #safemoon $doge $shib pic.twitter.com/hzv7bgqyH3

— ⓗathor.chuck (@BloodyChuck) April 21, 2021

These pump-and-dumps stand out for two reasons: how little effort went into them, and how much interest they managed to attract anyway. SAFEMOON features a token burn and redistribution on every sale; classic pumpanomics offering little by way of novelty. SHIB’s utility is still in the formation stages, with a DEX and an “artist incubator” in the works (though they are donating… something? Somehow? To animal rescue organizations), and features a companion coin, LEASH, a synthetic rebasing DOGE that no one needs or asked for. I don’t know what ASS does and refuse to find out.

SAFEMOON in particular bears superficial similarities to the Bill Drummond money experiments like $XAMP and bonding curve ponzis like $TRIB that dominated late last year. I remember those for being fun; everyone knew that it was musical chairs that you played with real money, but dived into games with the zeal of kindergarteners anyway (XAMP’s case, the project emerged from a pseudonymous dev whose namesake is famous for literally burning piles of money — no one was trying to fool anyone else about how things would turn out). It was a string of absurd schticks acted out in what often feels like a fundamentally absurd space.

Safemoon, by contrast, has a slick marketing campaign underway that likely includes considerable PR heft (as a journalist I feel as if I can spot inorganic narratives; Google Safemoon’s news coverage and tell me what you see). Likewise, the sums of money made and lost in the bygone era of Drummond all of six months ago are anodyne compared to the sea of cash that lifted these shittokens on 4/20. It’s still fun and games — all a big joke, really — but the investors don’t seem to totally understand that.

At my most idealistic, I believe the mass adoption of DeFi could be as beneficial to the advancement of the human species as mass literacy; on days like 4/20, however, I think it’s an unusually efficient mechanism for parting fools from their money.

Scams Pump The Hardest Lesson 1:

Scams will pump so high you will question your reality and wonder whether it is actually a scam.
– Fontase, 2013

Scams Pump The Hardest Lesson 2:

<redacted>
– Newton, 1687

— ∞ CO฿IE (@CryptoCobain) April 20, 2021

From chapter 49 of Moby-Dick, “The Hyena”:

“There are certain queer times and occasions in this strange mixed affair we call life when a man takes this whole universe for a vast practical joke […] And as for small difficulties and worryings, prospects of sudden disaster, peril of life and limb; all these, and death itself, seem to him only sly, good-natured hits, and jolly punches in the side bestowed by the unseen and unaccountable old joker.”

I have endured pump-and-dumps. I have learned that, like Ishmael’s god, the market often acts as predator cackling as it tenderizes your ribs. The best — and maybe only — way to stick around is to cackle right back, smile at the sea of red in your portfolio, and carry on.

I’d like to welcome the new crop of investors who have taken their first ride on the euthanasia rollercoaster. To you, my stimulus check-investing, Tik-Tokking friends! You’ve been hazed, you got through it, and I hope you hang in there. Avoid rebase games and remember that boring old 10% APY stablecoin farming is always an option.

DeFi is better when you can laugh about it.

What’s going on with Aave?

Perhaps the biggest story of the week somehow went largely unnoticed: money market and lending giant Aave is considering a move into social media.

The bizarre shift was first teased by Aave’s official Twitter account on Saturday:

What if there was a social media protocol built on top of a DeFi Protocol..?

— Aave (@AaveAave) April 17, 2021

I followed up immediately with Aave co-founder Stani Kulechov to confirm that the Tweet wasn’t the work of a ponderous intern celebrating 4/20 early. He gave me a short statement, one whose visionary heft raised more questions than it answered:

“At Aave we believe in a thesis that eventually interactions in web3 realm will become finance, whether its likes, sharing pictures or moments, everything will become user-owned value that can be empowered with Aave Protocol.”

I’m reminded of that tortured plotline in The Office where Dunder-Mifflin’s paper company sales website introduces social media features. How would it work, what synergy if at all does it have with decentralized lending, and, really, why?

Aave’s head of integrations, Bily Zeller, gave some additional background, implying that there would be a pay-per-post model in which interest on deposits could be used to post:

What if the cost of that tx represent a few seconds of interest on a double digits deposit?

— Marc ‘七 Billy’ Zeller (@lemiscate) April 17, 2021

This doesn’t necessarily translate to the “posts-as-value” model that Stani laid out, however. At the moment, I’m skeptical: if Stani ever responds to my DMs I’ll be interviewing him to get more background. I look forward to being convinced.

Pivots to entirely new industries aside, the protocol is firing on all cylinders.

Yesterday, Stani teased an image of the money market with bolstered yields from Aave token distributions, part of testing for a liquidity mining program currently live on the Kovan testnet:

Kovan pic.twitter.com/JNX7xXBIZY

— stani.eth =(⬤_⬤)= (@StaniKulechov) April 20, 2021

Aave is already a core layer in many retail and protocol-level farming strategies; adding AAVE token rewards for lending and borrowing would supercharge TVL metrics. I’m somewhat concerned for token price (look at what governance token rewards did to CRV last year), but suspect the program could bolster the ecosystem considerably.

Bright, if sometimes puzzling days ahead for the protocol.