Recent market turbulence shocked both traditional and crypto investors. On the heels of above expected inflation (CPI = 8.6%) the S&P 500 sold off by more than 10% at the time of this article. Historical correction in the traditional markets spread to the crypto markets creating doubts in crypto fundamentals. Data presented in this article will show that digital assets present a non-correlated asset class to traditional assets. Further examination shows that game theory behind DeFi 2.0 helps coping with event-driven shocks outperforming vanilla crypto projects.
Bitcoin vs. the World
S&P 500 is down -23% YTD, while FAANGs and Bitcoin are down -42% and -57% respectively. Increased borrowing rates triggered the selloff of over-leveraged positions in both worlds. Yes, Bitcoin is bleeding. But so are the tech darlings.
Correlation matrix looks unintuitive. Bitcoin is the least correlated asset when compared to the S&P 500, Facebook, Apple, Amazon, Google, and Netflix stocks. Non-defensive assets tend to correlate across the board in times of shock. Borrowing schemes offered by DeFi protocols incentivized crypto leverage; hence, the reaction to higher rates. Causation, not correlation. But the correlation data insists that digital assets still offer non-correlated exposure and are worth having in one’s portfolio.
DeFi 2.0 vs. Crypto
OK, crypto markets got hammered with the rest of the world despite low correlation coefficients. How did DeFi 2.0 perform?
OlympusDAO, an inspiration behind ghostDAO, actually outperformed the crypto markets. But let’s start from the beginning.
In Nov 2021 Olympus became very HOT. Top influencers tweeted the (3, 3) meme and helped spread the word. The hype quickly dissipated, and by Jan 2022 the price of OHM – a native token of OlympusDAO – fell to new lows. The un-inspiring price chart demonstrated on Figure 3 discouraged many crypto natives and non-natives from joining the protocol.
Those who familiarized themselves with the OlympusDAO lightpaper are still repelled. They understand that OlympusDAO is a rebase token, and the market cap is the focus (not the price). They look at Figure 4, see a huge spike in market cap with the consequent demolition of thereof.
Statistics experts preach to remove the outliers to receive a homogeneous data set. Let’s remove the hyped period from Sep 2021 to Jan 2022, and reassess OlympusDAO performance relative to Bitcoin and Ethereum. Figure 5 doesn’t look so bad anymore, especially, when compared to AAA-cryptocurrencies.
To double down on the comparable analysis, we looked into the performance of OlympusDAO vs. Bitcoin and Ethereum over the course of the last 3 months. While all 3 protocols dropped with a broader market, OlympusDAO held much better. Apparently, the game theory component of OlympusDAO is stronger. When users leave the protocol, not only do they increase the Treasury via DEX fees collected due to the Protocol-Owned Liquidity, but also the APY increases incentivizing new members to join.
If sound game theory component is the reason behind OlympusDAO outperforming the most capitalized cryptocurrencies, can it be further improved to create even more resiliency against flash crashes?
ghostDAO is a better DeFi 2.0 Protocol
Turns out that ghostDAO has 2 additional features enriching the game theory: bridging and NFT 2.0.
At the end of the day, it’s all about creating proper incentives for protocol users to keep staking their GHST tokens. The key is not forced lock-up periods, but incentivized behavior from the community.
On top of the (3,3) Olympus model, bridging expands the matrix towards (4,4). Read the full version of the lightpaper in the ghostDAO community. ghostDAO offers a very attractive APY of 413.6% at the moment of this article.
GHOST native chain enables bridging capacity possible to and from any EVM-compatible chain (Ethereum, Binance Smart Chain, Avalanche, etc.). While earning staking rewards on an EVM-compatible chain, users can bridge their GHST tokens to the GHOST native chain and start receiving double staking rewards – the concept of GHST Double Staking.
The NFT 2.0 development is in stealth mode, and not much will be revealed in this article. However, the concept goes around matching GHST tokens and NFTs to incentivize users to stake their GHST tokens, thus making the entire protocol more resilient against market turmoil.
NFT trading volume is not as significant when compared to DeFi and DEXes. The trend is changing as more projects are coming out with novel approaches for NFT staking and gamification. ghostDAO will undoubtedly pioneer the NFT 2.0 trend to move crypto innovation forward!