Watch out for these unlocks

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By EdgyJuly 4, 2024

One of the hardest skills by far is “cutting losses.”

It’s the art of not letting a -20% loss become a -90% loss. Why is this so hard? It’s because no one likes to admit that they’re wrong.

So you listen to everyone else in your echo chamber that says to HOLD. Or you think back on all the stories of people who held, and it eventually pumped back up.

For me, I don’t take it personally. It’s not admitting defeat, it’s taking back control. 

Sometimes you have to retreat from a losing battle. This lets you maintain your soldiers, regroup, and eventually win the war.

Here’s what we got today:

  • Crypto marketing fails. Lessons from Polkadot treasury report.
  • The FTX repayments. An unexpected bullish catalyst.
  • Token unlocks. Dynamics and July highlights.
  • Around the web. Wormhole to bring WorldID to Solana, Bittensor temporarily halted, and more.

Here’s your Edge 🗡️!


When DAOs go Wild

Burning $$$

Millions spent in marketing should be great for any crypto project, right?

Prices can pump when there’s a ton of attention directly towards a protocol. What easier way than pumping millions into marketing.

Well…it’s a problem when the marketing dollars seen as wasted. This is what’s going on with Polkadot right now.

What is Polkadot? It is an L1 blockchain launched in 2020. It was created by an Ethereum co-founder, Gavin Wood. And it was pretty popular during the last cycle.

Polkadot recently released its latest treasury report covering the first half of 2024. Below is a screenshot of their expenses:

Polkadot expenses.

Whoa, over ~$37M spent on “Outreach.” This includes marketing, BD, and community development. This accounted for 42% of Polkadot’s overall expenses. There’s another ~$5.5M on “Talent & Education.” This includes education, hackathons, recruiting, and talent incubation.

With all of this marketing, even my granny should start buying $DOT. Right?

Alas, barely anyone has looked at Polkadot this year. So where has all this money gone?

  • $4M in digital ads.
  • $4.9M to influencers – there’s a ton of controversy around this point. Basically, they’re overpaying for low quality influencers
  • $7.9M to various crypto events.
  • $2.9M to Polkadot Decoded and Sub0.
  • You can see more details in the report.

But this spending was senseless and the strategy behind it misguided.

  • $400k to put an animated version of its logo on CoinMarketCap. This seems insanely overpriced.
  • They also spent $180k to put their logo on Europe-based private jets for six months. You are targeting the wrong people with this.
  • If you were to look for more, you’d find many more insane expenditures just like this.

​On the other hand, Polkadot has defended itself by saying other networks are doing similar stuff. They are simply keeping it behind closed doors.

What does this mean?

Firstly, just throwing money at marketing isn’t enough. There should be a useful product behind the marketing.

If you are an L1 like Polkadot, you need to build a diverse ecosystem and provide a great user experience first and foremost. Similarly, DEX should attract liquidity and improve capital efficiency. And so on.

Marketing can only act as gasoline to fuel an existing flame. It cannot build something out of nothing. They should have spent more on attracting devs and dApps first.

Second, DAOs are not good at the business side of things, like strategy and marketing.

The Polkadot treasury is managed by $DOT tokenholders. In contrast, the Ethereum Foundation and Solana Labs are independent centralized organizations.

Many times, DAOs are an easy way for people to extract money without providing adequate value. I’m even skeptical about Arbitrum DAO’s recent $200M+ gaming fund.

Many are also bashing Polkadot for paying Key Opinion Leaders (KOLs). But in my opinion, Influencer marketing is actually very effective in attracting attention to projects. It’s just that not all KOLs are created equal.

In crypto, attention often follows price pumps. Since the treasury was spending a lot of $DOT, this was putting downwards pressure on the price. So, this marketing spending might have contributed to the opposite outcome.

At the very least, their poor marketing expenditure has attracted some attention across crypto X. And as they say, bad press is better than no press..


A New Bullish Catalyst: Thanks, FTX?

Pheonix rising from ashes.

FTX, the reason for the latest bear market, can be a bullish catalyst!

If you are reading this newsletter, you probably already know about the FTX disaster. But if you’ve been living under a rock these last few years, then here is the 80/20 to get you up to speed.

What is the FTX saga? FTX was the second largest crypto exchange. In November 2022, a CoinDesk report led to a bank run on FTX. It was eventually revealed that FTX had used customer funds to trade.

FTX wasn’t able to pay back all of its customers. In fact, it owed customers ~$11B USD!

The fraud was so massive that Sam Bankman-Fried, the CEO of FTX, has been sentenced to 25 years in prison.

Recently, the FTX estate announced that they’ll be able to repay creditors the full $11B that it owes to creditors.

If Sam and co embezzled customer assets, then how did they manage to raise enough money to pay everyone? Well, most of FTX’s assets were in crypto and high-growth tech ventures. Some of those investments have since made impressive returns.

At the time of the FTX collapse in November 2022, one $BTC was worth about $20,000. Now, this same bitcoin sells for triple that amount.

Over the next few months, FTX will distribute money to its customers.

This might be bullish for crypto. A large majority of FTX users were crypto natives. And since billions are going to crypto natives, a large chunk of this money will likely be used to purchase crypto.

This is approximately ~11B in buying pressure. And it can pump those prices.

Remember, this won’t happen in the next month or the one after. There are a few more steps that need to be completed before the money actually reaches crypto natives.

Over the coming weeks, FTX customers will be asked if they want to be repaid in crypto or in fiat. FYI, even if customers want crypto, FTX isn’t obligated to repay in crypto.

Creditors have until August 16th to cast their vote.

Judge Dorsey will evaluate the plan’s approval on October 7th.

If approved, the FTX estate will move to distribute funds to creditors. If everything goes smoothly, repayment might happen towards the end of Q3 2024 or at least by Q1 2025.


The July Unlocks to Watch

Wondering why your favorite token suddenly plummeted?

Token unlocks might be the answer. It refers to the scheduled release of previously locked tokens into the market.

They are largely bearish for prices. But occasionally, they can be bullish as well.

Why are token unlocks bearish?

  • Supply and demand. When a large number of tokens are unlocked, it increases supply. If demand doesn’t match this increase, the price drops.
  • ROI of early investors and team members. They often receive tokens at a very low cost. When their tokens unlock, they might sell to secure their profits. This selling pressure can push prices down.
  • Market perception. Token unlocks can signal potential sell-offs, causing traders to preemptively sell. This creates a self-fulfilling prophecy whereby the expectation of a price drop leads to an actual price drop.

How can token unlocks be bullish?

Many locked tokens have an active market of their own. This uses legal contracts to facilitate trading.

Cobie has given an explanation of bullish unlocks in this article:

Imagine some initial seed investors sold their locked position for a 10x profit to another VC, and this VC in turn sold their position for a 5x. The tokens that are now coming “unlocked” have a cost basis not too far away from the current market price, some market participant’s expectations were that the holders were sitting at a 100x profit. Since some investors expect the unlock event to be bearish, but it is actually neutral, this removal of a bearish catalyst can result in a net bullish event.

In other words, early investors who put money into locked tokens could have already taken profits. And since they paid a higher price, new holders might want to wait a longer time before selling.

Most crypto markets price in upcoming token unlocks. If the dumping from unlocks doesn’t happen, it’ll be bullish for the token.

The July Unlocks

July is a big month for token unlocks. Across many projects, over $730M is being unlocked in July.

Wu Blockchain, a crypto media company, used Token Unlocks to create the following sheet. It lists the details of the top projects with unlocks in July.

Source: WuBlockchain X

The biggest unlocks of the month are $ALT and $XAI.

AltLayer is a protocol that facilitates the launch of restaked rollups. On July 25th, ~$105M worth of $ALT will be unlocked to:

  • Team and Investors (84.6%)
  • Ecosystem and Community (8.8%)
  • Treasury and others (6.6%)

Since April, the $ALT chart has been trending down. The new unlock will add ~42% of $ALT to the circulating supply. This is very bad for $ALT.

XAI is an Arbitrum Layer3 chain focused on games. On July 9th, ~$73 M worth of $XAI will be unlocked. It is 71.59% of the existing circulating supply of $XAI.

  • $25.22M to team.
  • $38.15M to investors.
  • $7.21M to ecosystem funds.
  • $1.24M to reserve funds.

Investors are probably up from the initial investment. Since a large percentage of the fund is going to investors, this unlock is also bearish.

Your portfolio token might also have an unlock, hop over to Token.unlocks to check. Ideally, you should vist Token.unlocks on a regular cadence.

🚀 DeFi Catalysts

Scroll, the zkEVM L2, introduced Curie, their next major upgrade that will reduce the transaction costs on Scroll by 2x.

Symbiotics shipped restaking pools for Ethena’s $ENA and $sUSDe tokens. This is an additional utility for Ethena tokens.

PancakeSwap’s AI-Prediction Market is now live on Arbitrum. Users can earn by forecasting the price movements of tokens such as ETH every 10 minutes.

Aevo, a derivatives L2, will commit to buybacks of at least 1M $AEVO every month, from July to December.

Curve Finance transitioned its fee distribution mechanism from the 3crv token to Curve’s native stablecoin, crvUSD.

Aave‘s stablecoin, $GHO, is now available on Arbitrum. This first step in cross-chain expansion is powered by Chainlink’s CCIP.

Avalanche introduced Interchain Token Transfer (ICTT). It enables the seamless transfer of tokens between L1s on Avalanche.

Wormhole received a grant from the Worldcoin Foundation to bring World ID to the Solana ecosystem.

Frame, an Ethereum L2, was acquired by Igloo, the parent company of Pudgy Penguins. They’ll now contribute towards the Abstract Chain.

🪂 Airdrop Alpha

Blur completed season 3 of its incentive program. Users have 30 days to claim. They’ve started season 4 for a 500 million $BLAST reward pool.

Mantle‘s new incentive program for $mETH and $cmETH, “Methamorphosis“, has launched its season one.

Penpie has shipped new Zircuit pools with a maturity of 26 Aug 2024. You can earn multiplied points on ETH and USDe with them.

Silo Finance has added lending market support for $ezETH on Optimism. Depositors can earn OP rewards, Renzo points, and EigenLayer points.

Renzo Protocol has introduced $pzETH. It’s built with Mellow Protocol as an LRT on Symbiotic. Depositors will get Symbiotic, Mellow, and ezPoints.

📰 Industry News

The SEC asked the ETH ETF issuers to refile before July 8th. The new listing time for the ETF is estimated to be in mid-July or later.

Bittensor was temporarily halted after an attack on several user wallets. The attack is suspected to have been caused by a private key leakage.

Solana also entered the ETF conversation. VanEck and 21Shares filed to launch Solana ETFs.

Circle became the first global stablecoin issuer to be compliant with MiCA. $USDC and $EURC are now available to European customers.

Mega Labs raised $20 million in seed funding to build MegaETH, a “real-time blockchain” that aims to achieve 100,000 TPS.

🚀 New Launches

Zerion launched ZERϴ Network Testnet. It’s an EVM-compatible L2 rollup built using the ZK stack.

Magpie introduced a new sub-dao called Sympie. It’ll provide Liquid Restaking Services built on Symbiotic restaking protocol.

Rarimo Protocol launched RariMe. Users can generate passport ZKPs and prove their age, citizenship, & humanity without revealing their identity.

🐦‍⬛ X Hits

  1. Alts run are different this time.
  2. Emotionally unstable people should not play in this market.
  3. Vitalik’s new article on faster transaction confirmation times.
  4. Stablecoins are an internet-native liability.
  5. Good APR on ETH from Stephen.

😂 Meme

Meme screenshot