June 15: Convex or Concave? 🐂🧸

Why $CVX price down while fundamentals up

For a good week or two the Curve companion site was generating amazing yield. Billions of dollars flowed in. It was all anybody in DeFi was talking about. Then returns started to taper off, the token price started dropping, and people gradually lost interest.

This is the story of Ellipsis, what were you thinking?

Really, it’s often the same story for pretty much every new protocol.

But, OK, let’s talk about Convex.

Convex was quick to knock out its first $3B, in a bear market no less, but the fourth has been more elusive. The $CVX token also dropped off from its all time high near $20 into the $5-$6 range where its been resting.

So what say you, Bula or Bera?

One reason sentiment dropped a bit is that so much popular focus was on a battle with Yearn. Reality proved more complex than the narrative. Yearn itself also invested a great deal of money into Convex pools, and they never saw it as much of a competition.

Convex quickly lapped Yearn, so the much followed #Lockening quickly turned into a rout, like watching any Pittsburgh Pirates game. (Asian readers can substitute Hanwha Eagles for Pirates so it makes sense… Europeans, substitute some garbage La Liga football club).

Also worth noting @Banteg published a helpful dashboard, in which Convex is continuing to show accelerating growth in key metrics.

Presumably the drop in token price sapped some degree of populist energy. Token pricing is never a smart measure for any DeFi project, with so much bad technical analysis and outright manipulation overriding fundamental cash flows. Still, one could see how a plummeting token price could turn people bearish.

In one possible example of this phenomenon, the legendary BowTiedBull played bear:

They later deleted the tweet for unexplained reasons. We’re inclined to pay attention when the wealthbringer speaks, so we’re curious to learn the reasoning behind this analysis. Something we’re not considering? Perhaps they were more persuaded by the $CVX army’s thoughtful replies?

Unfortunately they have not replied to our interview request so we can only speculate.

Chip Off The Block

One factor to watch is the behavior of Alameda. Of course, their news sheet likes to underinform their audience about CRV and CVX. If you don’t like being misled, you gotta DYOR fam!

Despite their attempts at misdirection, their $1.6B wallet has $766M worth of CVX, representing nearly half of their holdings.

Despite the claims of dumping, they do look to mostly be accumulating, occasionally dropping a few hundred thousand onto Sushi or dropping it onto Unit Protocol.

Efficient Pricing

For what it’s worth, we’re still quite bullish on CVX. We have a simple script based on our recently published code snippets to check our balances against expected rewards. At the moment, even with price drops, we’re making the most by keeping it in Convex. Then again, we also happen to have too little $CRV for our taste (don’t we all!)

When we run the numbers for other scenarios, it seems like CRV is optimal for some users, CVX for other users. We see this as a sign that these two assets are approaching something like an efficient pricing, at least relative to each other (both are undervalued).

We believe most users pay a lot of attention to their veCRV balance versus their holdings and weigh things quite appropriately. When we previously did a spot check, we saw most people did a good job of maxing out their boosts.

Our working hypothesis is that the first $3B was excess funds users weren’t able to boost on Curve without locking much more $CRV. With this low-hanging fruit dried up, the next growth will probably be more proportional to Curve’s growth rate, which is continuing to grow (nearing $11B) but not at the “initial ape energy” sort of rate.

We also are impressed by the continuing development work and integrations at Convex, a great sign for any project not named Cardano (which gets by solely on good looks and charm).

Largely, the users who have dug into the fundamentals continue to remain bullish on CVX and its role in the CRV ecosystem:

We’d love to hear your thoughts. Unless it’s asking “WEN CVX on LEADERBOARD”, because the answer is soon…

Update, 6/16:

My interpretation of the Debank site was incorrect — it does appear to be true that Alameda is dumping most of their Convex. Thanks to @TekGrinder for pointing out the flaw!

For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. Author is a $CRV maximalist and therefore also a $CVX maxi.