Strategy – shorting airdrops

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The DeFi Edge shares the best DeFi strategies, insights, & analysis so you can be early to the next opportunities.

By EdgyJune 20, 2024


What a crazy week in Crypto.

  • Certik (a Crypto audit firm) researchers exploited $3m from Kraken the Crypto exchange.
  • TerraLabs settles for $5b, but I’m not sure where the $$$ gonna come from.
  • The SEC drops its investigation into Ethereum 2.0 .
  • The Curve Finance Founder, Michael Egorov, was liquidated for $140m in CRV loans.
  • And apparently, Martin Shkreli might be behind a Trump meme coin with Barron Trump.

Never a boring week in this space.

Here’s what we got today:

  • Time.fun. The next trending protocol.
  • Shorting airdrops. Make money from overhyped airdrops.
  • Around the web. LayerZero released Eligibility checker, Trader Joe introduced Stable Jack, Ethena updated tokenomics, and more.

Today’s email is brought to you by Hats Finance — the first decentralized security platform.

Here’s your Edge 🗡️!


Protocol

Time.fun: The Next Hot SocialFi App

Time.fun banner image
Source: Timedotfun X account

Crypto’s biggest problem? It doesn’t have fun non-financial apps.

And most of the “fun” dApps that tried to address this have been in the SocialFi space. Farcaster, Friend.tech, and Fantasy.top are just some examples. Because if you’re not monetizing your friendships, are you even in the crypto?

And now the next hot SocialFi app is here. Time.fun launched a few days before. It has already taken the cryptoverse by storm. Let’s look at some numbers from the past few days.

  • Around 293k in TVL.
  • ~1.65 million USD in volume.
  • >$33k collected in creator fees.
  • >$27k collected in app fees.

What is Time.fun?

It’s a platform that allows users to trade people’s time. Finally, you can get someone’s attention without pretending to be a hot girl.

Anyone can issue tokens representing a minute of their time. These tokens are created on a bonding curve. As new tokens are created for your time, they increase in price. And vice versa.

These tokens also have “real” utility. The platform provides really smooth UX for redeeming these utilities as well:

  • You can DM the issuers with minute tokens.
  • You can redeem the minutes for one-on-one calls or video calls.
  • You can trade the tokens and make money that way.
  • You will be given access to a private Telegram group with the issuer and other holders. A Telegram bot will automate all the logistics.
  • The tokens will function as the currency for all interaction between an issuer and the community. The protocol plans to add more utilities in the future. These might be auctions, lotteries, giveaways, etc.

In my opinion, this protocol is a better version, and more straightforward version ofFriend.tech. In FT, “keys” gave you access to a group chat. Here, users can gain a lot more utility with their time tokens.

Does this have potential?

Right now, the protocol is still quite niche. But similar to Friend.tech and Fantasy.top, I believe that this is going to be hot for a while.

This is a protocol that adds real value to its stakeholders. Cameo is a similar Web2 project. It also enables interaction between celebrities and fans. So, time.fun have some “fundamental value.” It isn’t simply a Ponzi.

#1 Influencers can earn $ETH from the following sources:

  • 0.5% from referrals. This gives them incentive to promote the protocol.
  • Up to 2.1% of the trading volume of your tokens. So, influencers are incentivized to shill their tokens even if they are not getting redeemed.
  • When users redeem tokens in 1:1 meetings or messages, 95% will go towards influencers.

Influencers can also decide which services they want to offer. If they don’t want to offer video chats, for example, they can choose not to. So, they have flexibility.

#2 Timeholders has few benefits. They can trade it and make money, or redeem it and interact with the issuer. Also, a part of the trading and redemption fees goes to the timeholder’s fund. The issuer can gift it to loyal fans or host giveaways.

#3 Attracting influencers is great for growth. When influencers talk about this on social media, it’ll attract more users.

#4 Growth from airdrop speculations. They don’t have a token yet. So, a ton of people are going to use the protocol to farm the airdrop.

They’ll probably start a points program. If used correctly, it could be a great way to bootstrap the protocol.

Where can I buy Edgy’s time?


Doing 1 on 1 calls with random people doesn’t “spark joy.” I love writing publicly as it’s much higher leverage. Also as you get older, you learn to value your time more. It’s the one thing you can’t get more of.

I do think this is an interesting protocol that could have some staying power. The markets are moving sideways. And degens are itching for good crypto apps. Time.fun is likely going to be the next protocol on everyone’s radar.

On a sidenote, AllianceDAO has been hitting bangers.

It seems they have crystal ball for consumer apps. They are investors in Time.fun, Fantasy.top, and Pump.fun. There’s probably Alpha in looking at their portfolio companies for crypto consumer applications.


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  • You can’t oversee the audit process.
  • It takes a lot of time.

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Tactics

How to Make Money from Overhyped Airdrops?

Airdrop image

Market sentiment is in the gutters. And the alts are being slashed left and right.

There are many responses you can have. Take a break from the markets, enter into your long-term investments, and so on.

​Recently, I found a new strategy to make money: shorting overhyped airdrops.

Overhyped airdrops 101

Points farming was a major meta of this cycle. And smart devs realized the opportunity for markets dedicated to airdrops.

Protocols like Whales Market (covered in previous newsletters) and Aevo are the market leaders. ByBit and Kucoin have also recently joined the game. The more platforms are available, the higher the chance of price divergence.

Some pre-token projects are insanely over-valued in these markets. This is especially true for highly anticipated projects with a large number of unqualified users. Those who missed out on the airdrop either:

  1. Misprice the initial valuation.
  2. Are willing to pay a higher price because of FOMO.

​When it comes to most hyped-up airdrops, the pre-market price tends to have a substantial divergence on the upside. Aka, they are over-valued.

Shorting the airdrop 101

95% of the time, the prices on “airdrop markets” are higher than our prediction for the prices at TGE, You can short it by “selling the airdrop token” at airdrop markets. Keep in mind that you don’t need the airdrop token to sell it.

I use Whales Market for this. You can use it to “sell the airdrop”. (I have no affiliation with Whales Market. It is just the tool I use.)

If you know how options work, this is like selling a call. The seller of a call (writer) is obligated to sell the underlying asset at the strike price if the buyer exercises the option.

In our case, the buyer must exercise the contract. And we are expecting the price of the underlying asset to stay below the strike price.

Technically, we aren’t shorting the asset. we are playing on price divergence and the market not being mature yet. I’m using the term “shorting” for the sake of simplicity.

Let’s look at some examples

I have shorted two big airdrops, Wormhole and ZKSync:

  • I sold $W to someone willing to buy it at $2.01
  • I sold $ZK to someone willing to buy it at $0.31.

​And both have been successful. $W at TGE traded between $1.53 and $1.03.It never reached the $2.01 mark in the first 24hrs post-TGE.

$ZK at TGE traded between $0.30 and $0.20. It never reached the $0.31 mark in the first 24hrs post-TGE. The max price that was reached on the Whales Market was $0.87.

Timing the top is always challenging. The max price for $W on the Whales Market was $2.27. But I could profit even without timing the tippy top.

Why the 24hrs?

This has to do with the mechanics of Whales Market.

Whales Market Screenshot

This is what a typical pre-market window looks like on Whales Market.

I’d say it’s very intuitive, but one thing must be noted. The collateral lock is happening on both sides. The buyer locks collateral to confirm he is going to buy at the agreed price.

The seller, aka the shorter, does the same. If the seller does not settle the order within 24 hours, the transaction will be closed automatically. Instead of airdrop tokens, the buyer will receive the seller’s collateral.

Hence, I mentioned 24hrs from TGE in the $W and $ZK examples.

How do I know if an airdrop is overvalued?

Unfortunately, it’s not easy. Crypto is more a “gauge” game than a “forecast” one.

But what usually helps me is comparing protocols to competitors by considering the following metrics:

  • Market Cap
  • FDV
  • Token Allocation
  • General Tokenomics (mainly percentage of token airdropped)
  • Last but not least, Token Price.

Example: I compared ZK to other L2s, and my best estimation was returning $ZK at $0.25.

Remember that there’s no free lunch. Everything comes with risks. And other than market risk, there is also the smart contract risk associated with the airdrop market.

So, proceed only after having done accurate risk management.


🚀 DeFi Catalysts

Ethena updated $ENA tokenomics. They introduced generalized restaking for $ENA and $USDe using Symbiotic.

Trader Joe‘s Liquidity Book V2.2 went live. It adds a hook capability for the Liquidity Book. They’re also launching incentive programs on Arbitrum & Avalanche.

Mantle introduced $cmETH. It’ll be their new LST. They’ll launch it with season 1 of its points program on July 1, 2024. It’ll last for 100 days.

Ronin Network announced that devs will be able to use Polygon CDK to build zkEVM L2s on Ronin Network.

EtherFi introduced a new LRT, $weETHs, based on the Symbiotic Restaking Platform. With this vault, users will get EtherFi, Symbiotic, and Veda points.

Jupiter cofounder shared the coming updates. It includes Jupiter Swap V3, Dynamic Slippage, Token List V2, Value Averaging, and Jupiter APE Wallet.

Drift Protocol partnered with Ondo Finance. USDY holders can use it as a margin for trading perps and lend/borrow on Drift.

BNB Chain will undergo the Haber hard fork today. It introduces Blob-Carrying Transactions which is inspired by Ethereum’s danksharding.

Beefy introduced Cowcentrated Liquidity. It is a tool to simplify liquidity provision into concentrated liquidity pools.

Uniswap went live on zkSync L2. It is a new market for Uniswap and users can now provide liquidity and swap on zkSync from Uniswap interface.

Nuri Exchange, a Concentrated Liquidity DEX with ve(3,3) implementation on Scroll L2, launched their $NURI token.


🪂 Airdrop Alpha

zkSync has opened the claim portal for the $ZK airdrop. It’ll be open unti January 3, 2025.

LayerZero shared the Eligibility checker for $ZRO airdrop. They’ll launch the token today.

EigenLayer started Phase 2 of the season one $EIGEN airdrop. ~113 million $EIGEN will be distributed. It’ll be open until September 7th, 2024.

Orderly Network has allocated 10% of $ORDER to early users. You need to check your allocation and bind your wallet before June 27th.

Mode Network introduced activity points. Users can now earn a share of 5 million points daily based on their transactions on selected dapps.

Pac Finance introduced its native token, $PAC. Users can now earn 6x Pac daily points by supplying and borrowing assets on Pac.


🚀 New Launches

Mellow Protocol, a primitive for permissionless LRTs creation and curation, launched on Ethereum. Right now, it uses Symbiotic for restaking.

Zapper, a portfolio platform, introduced Zapper Protocol. It’ll be powered by $ZAP. And it’ll incentivize the interpretation of onchain data.

100x Finance, a platform to trade perps, pre-launch perps, launched on Blast. They have zero trading fees and have 114,144 Blast Gold to distribute.

Moon.Inc went live on Base. It lets users create unruggable tokens in a few clicks. Its partnership with Ajna creates immediate DeFi utility as well.

sdf Stable Jack, a decentralized yield-bearing stablecoin, fully collateralized and backed by $AVAX LSTs.


📰 Industry News

Risc Zero introduced zkVM 1.0. It makes zero-knowledge proofs scalable, accessible, and cost-effective for any chain.

Solana Labs launched Bond. It’ll allow global brands to use blockchain to create better loyalty programs.

Michael Egorov, Curve Finance founder, had his on-chain $CRV loan positions liquidated on last Thursday.

Tether introduced Alloy. Users can mint Alloy tokens using Tether Gold (XAU₮) as collateral. The first Alloy token is aUSD₮, a USD-pegged stablecoin.

Stacks, a Bitcoin L2, went offline for ~9 hours. It is said to be due to Bitcoin reorganization (reorg) and “unexpected miner behavior”.

Nftperps had a bug in one of their contracts. They had paused trading while fixing the issue and have now resumed trading.

Notional Finance is deprecating the v2. V2 Borrowers will be swapped to V3 by July 1st. Everyone else on V2 will be swapped to V3 by July 8th.


🐦‍⬛ X Hits

  1. The “Ground Zero” post of the whole Certik drama.
  2. Bloomberg is now covering crypto protocols.
  3. Binance Data is something you don’t want to miss.
  4. Another win for the crypto industry.
  5. Cobie on projects doing airdrops.

😂 Meme