January 5, 2022 · 8 min read
Emerging Tokens - 5th January 2022
This week we see a big surge in DeFi projects. Trending themes are fixed interest rates, non-USD stablecoins and trading. The chart below compares the price movement of BTC and ETH and Novum’s handpicked emerging tokens. Fixed interest rate protocol Pendle, foreign stablecoin protocol Jarvis and decentralized options AMM Premia largely outperformed BTC and ETH.
Last updated: Jan 5th 2022 11am GMT
Running on Avalanche, Pendle allows users to tokenize future yield. Users deposit yield generating assets and they are divided into Ownership Tokens (OT) that represent the principle and Yield Tokens (YT) that represent the right to earn interest in supported yield markets. OTs are locked until the maturity date and YTs are free to be deployed anytime upon mint to 1) be sold for cash upfront or 2) be deposited into Pendle’s AMM and earn LP rewards. Traders who want an exposure to yield only can buy YTs directly using Pendle’s AMM. Pendle’s AMM is designed in a way that the curve is shifted to minimize impermanent loss, reflecting the fact that YTs decrease in value as the maturity date approaches (because there is less time to generate yield). Pendle currently uses Trader Joe, Benqi and Wonderland as yield generating protocols and supported assets are PA(PENDLE/AVAX LP token from Trader Joe), xJOE, qiUSDC, qiAVAX and wMEMO. Pendle charges a 3% fee of the interest accrued from YTs. Pendle AMM also charges a 1% swap fee and 0.85% is distributed to LPs.
Pendle raised $3.7 million from Mechanism Capital, D1 Ventures, Crypto.com Capital, DeFi Alliance and more. The graph below shows the weekly emission rate of PENDLE. The emission rate decreases until week 260 and it will be followed by a 2% annual inflation rate.
PENDLE had a great run in the past week logging in a price increase of 150% pushing the RVI up to 85 and RSI up to 78. Though, PENDLE is still trading 74% below its ATH in May. PENDLE has a market capitalization of $56 million and the trading volume increased by almost 300% in the past 24 hours.
Paraswap, a DEX aggregator launched its governance token back in November. 150 million PSP tokens have been airdropped to users. Paraswap was built on Ethereum and now supports Polygon, Avalanche and BSC. Paraswap connects to major decentralized exchanges, such as Uniswap, Kyber, Curve, or the 0x network to offer the best rates. On top of these DeFi protocols, Paraswap has its own market maker pool called ParaSwapPools whose liquidity is sourced by professional liquidity providers. ParaSwapPools provide MEV resistant trading and 0 slippage. To ensure best rates, Paraswap can also split orders across multiple platforms and if there isn’t a direct market for a desired pair, Paraswap will use its MultiPath feature to enable two or more hops. Paraswap does not charge any protocol fees. However Paraswap takes 15% of the fee generated by the services that are integrating with Paraswap. With the recently launched PSP tokens, liquidity incentive programs and staking options are offering competitive returns. PSP farming is available on Sushiswap, Balancer, Quickswap and Cometh. And by staking on ParaSwapPools, the staker receives an auto compounding APY in PSP depending on the ParaSwapPool’s performance.
ParaSwapPool Staking - Source: Paraswap documentation
PSP reached its ATH at launch and is now trading below 82.5% its ATH two months ago. Despite its negative price movement, with the new governance feature there are lots of governance proposals going on at the moment aiming to create better user experience and community incentives. It will be interesting to see how Paraswap can help users tap into deep liquidity.
Premia is a decentralized options AMM. There are currently 3 assets supported by Premia - BTC, ETH and LINK. For each asset, there are 2 pools : a call pool and a put pool. Here, liquidity providers the underwriters. Premia introduced a supply and demand factor, C-level, to the traditional Black-Scholes option pricing model. The C-level acts as a dynamic multiple to the Black-Scholes model and so high C-level is interpreted as expensive options price. LPs will also earn returns(option premium) sensitive to C-level where higher C-level will translate to bigger returns for LPs. The protocol fees for option purchase and exercise are 3% each. 80% of the protocol fee goes to users who stake PREMIA. And users can also have discounts in protocol fees if they lock staked PREMIA (xPREMIA) for some time. PREMIA has a total supply of 100 million and 30% is allocated to liquidity mining program.
PREMIA increased by 47% in the past 7 days and the RSI and RVI are at 51 and 62 respectively, which is not a bad moment for investors to buy. Apart from the price increase potential, PREMIA’s 80% protocol fee share incentivizes users to stake PREMIA. PREMIA has a market cap of $48 million and the trading volume has increased by more than 600% in the past 24 hours.
Jarvis is a synthetic token protocol for foreign stablecoin built on Polygon. Jarvis uses jFIAT, a synthetic representation of fiat currencies on multiple chains, over-collateralized by USDC. To buy jFIATS, users deposit USDC and mint jFIATs. This trade happens without price impact, at oracle price. The collateral ratio depends on the jFIAT’s volatility against USD stablecoins and jFIATs have have a liquidation threshold of 105%. Users can buy or sell jFIATs here. In partership with Mt Pelerin, Jarvis created jEUR, jCHF, jGBP that can be bought with fiat.
The native integration of Jarvis with Paraswap marks an important achievement in Jarvis’ development. Paraswap is a leading DEX aggregator. Paraswap can help improve Jarvis on-chain liquidity immensely. Paraswap can now combine a burn/mint with an AMM trade to perform something like this - from jGBP to USDC and fining the best market to swap USDC and AAVE, ultimately allow jGBP to tap into markets where USDC is deployed.
Jarvis Reward Token (JRT) has a total supply of 565 million and users who stake JRT has multiple benefits. LPs who also stake JRT will earn liquidity rewards from the yield generated by the collateral. Traders who stake JRT will have rebates on trading fees. However, the tokenomics have not been implemented yet.
JRT increased by 60% in the past week and the RSI and RVI are both at 80. This can potentially signal an approaching correction. However it will be interesting to see how Jarvis can onboard non-USD users who had previously been left out in the DeFi scene due to complex fiat on/off ramps.
DFX Finance (DFX)
DFX Finance is a decentralized Forex protocol for non-USD stablecoins. Built by team members who have previous experiences in UMA, Consensys, Deloitte and more, DFX Finance is building an AMM specifically designed for low volatility trading of FX. DFX’s AMM is designed in a way that the price changes based on both oracle price and trades that change the pool ratios. DFX Finance is focused on working together with various stablecoin issuers around the globe and seek out local on and off ramps. DFX Finance is backed by Polychain Capital, Boost VC, HEX Capital, DeFi Alliance and more. There is currently six markets established with DFX - CAD, EUR, SGD, IDR, TRY and NZD. There is currently $23.6 million in liquidity and the chart below is the breakdown of each market. The most liquid market is CAD/USD and the most demanded market is SGD/USD.
Source: DFX Finance
The total supply of DFX token is 100 million and 35% is allocated to liquidity providers. DFX recently launched a community incentive program using UMA’s KPI Options. DFX KPI Options will thus pay out more DFX tokens once a KPI is reached before an expiry date. In DFX’s case the KPI is TVL and the expiry date is set at March 1st 2022.
The price of DFX decreased by 9% in the past 7 days and there is no trading signal showing a potential positive volatility. Both the RSI and RVI have been in the range of
32-50 in the past week. However, this week we see a growing number of Forex / stablecoin projects rising in Sushiswap including DFX, Jarvis, Angle and KP3R and we will keep monitoring which project will attract the most liquidity.
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