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Biggest launch in Defi history? @feiprotocol raised $1.2B from its Genesis event, and the $FEI - $TRIBE pool is #1 on Uniswap with $2.6 BILLION in liquidity.
Simultaneously, retail investors got predictably rekt.
Here's how the drama unfolded:
Simultaneously, retail investors got predictably rekt.
Here's how the drama unfolded:
Tl;dr $FEI is another algorithmic stablecoin, this time with an actual peg to USD. It maintains its peg via its protocol controlled value (PCV) design (think: central bank) selling and buying back supply as needed to maintain price.
However, unlike uncollateralized seignorage models like Basis and ESD, $FEI is actually collateralized to the tune of $1.2 billion dollars, ~$1 billion of which was raised in the last 24 hours.
Why is collateral important?
Uncollateralized stablecoins are like a Fed with no balance sheet. They can print money to inflate supply / depress value, but if demand falls they have no liquidity to buy currency back.
As people rush for the exits your currency's value --> 0.
Uncollateralized stablecoins are like a Fed with no balance sheet. They can print money to inflate supply / depress value, but if demand falls they have no liquidity to buy currency back.
As people rush for the exits your currency's value --> 0.
The protocol also builds on the insufficiency of PCV designs by adding "direct incentives."
Translation: "we punish the shit out of you if you trade against the protocol."
Translation: "we punish the shit out of you if you trade against the protocol."
Selling $FEI below its $1 peg triggers a burn mechanic that gets exponentially worse the further price is from the peg.
Penalty = (Distance from peg * 100)^2
Right now $FEI is 5.96% off its peg, so the penalty for selling it is a whopping **35%**.
Penalty = (Distance from peg * 100)^2
Right now $FEI is 5.96% off its peg, so the penalty for selling it is a whopping **35%**.
So, onto questions:
1) How did they raise so much fucking money?
2) Why rekt?
1) How did they raise so much fucking money?
2) Why rekt?
Two answers to #1: first, they sold the initial $FEI on an ETH bonding curve dependent on demand. $FEI would be issued between $0.50 and $1.01 depending on demand, with the $1.01 price being triggered at $250 million $FEI issued.
There was $1.2 billion of demand.
There was $1.2 billion of demand.
So here's what happened to $FEI in plain English:
You thought you were buying a dollar for 50 cents but instead you paid $1.01 only to get $0.95 and now if you try to sell it you'll end up with $0.60.
lol
You thought you were buying a dollar for 50 cents but instead you paid $1.01 only to get $0.95 and now if you try to sell it you'll end up with $0.60.
lol
The bigger reason the raise was so big was an air-drop of the $TRIBE governance token.
If you kept your Genesis purchase in $FEI, you got part of the $TRIBE air drop pro rata, though investors also had the opportunity to pre-swap $FEI for $TRIBE.
More pre-swap, higher price.
If you kept your Genesis purchase in $FEI, you got part of the $TRIBE air drop pro rata, though investors also had the opportunity to pre-swap $FEI for $TRIBE.
More pre-swap, higher price.
$383M of retail money decided to pre-swap.
This excellent doc from @korpi87 helps explain the underlying math: https://docs.google.com/spreadsheets/d/1aWbQLYiHF6XV8dl3Vkv24NqFZlk332qpQSGjZbFGDJ0
This excellent doc from @korpi87 helps explain the underlying math: https://docs.google.com/spreadsheets/d/1aWbQLYiHF6XV8dl3Vkv24NqFZlk332qpQSGjZbFGDJ0
The predictably unfortunate problem with handing out free shit is, well, people will want to dump it for something that actually has value -- $ETH.
As a result, whales took retail to the fucking woodshed.
Look at this post by @angelomint of a whale who made a cool 650 $ETH:
As a result, whales took retail to the fucking woodshed.
Look at this post by @angelomint of a whale who made a cool 650 $ETH:
$TRIBE went from an opening price of $3.18 to $2.04 (as of this writing). So:
If you pre-swapped $FEI for $TRIBE you got rekt.
If you held $FEI straight up you got rekt.
Basically if you aped in for the airdrop without a *programmatic* exit plan, you. got. rekt.
If you pre-swapped $FEI for $TRIBE you got rekt.
If you held $FEI straight up you got rekt.
Basically if you aped in for the airdrop without a *programmatic* exit plan, you. got. rekt.
It remains to be seen how $FEI will restore its peg given it continues to diverge--there seems to be limited interest from traders at buying it below $1, despite incentives.
The next few days will test the protocol's willingness to re-weight $FEI to $1--a throw-in-the-towel type event given re-weights are a) expensive and b) a signal market-based peg incentives can't be relied on.
Finally, even w/ $2.6 BILLION in liquidity on Uniswap, there is ironically no good exit option for $FEI holders.
Uniswap doesn't show the burn mechanic, meaning you think you're swapping at market rate, but in the background the protocol is spanking you for 30%.
Uniswap doesn't show the burn mechanic, meaning you think you're swapping at market rate, but in the background the protocol is spanking you for 30%.
The biggest Defi launch ever seems like it'll be a multi-billion dollar teaching lesson for retail:
- DYOR
- Don't ape
- Whales eat pieces of shit like you for breakfast
$FEI $TRIBE @feiprotocol
- DYOR
- Don't ape
- Whales eat pieces of shit like you for breakfast
$FEI $TRIBE @feiprotocol
