Hello, hello,
I wanted to finish accumulating HXRO before posting this but I am going away for the weekend and have committed to all you degens to get consistent content out there…
So, what I’ll be exploring today is looking at the Hxro Network and its HXRO token.
But haven’t you already done that?
In short, yes. You can find that HERE.
But, that was surface-level stuff and what I am trying to do here is give the active readers and supporters on this platform as much insight into my own personal research as physically possible.
So, what I have been doing specifically the past week is looking at the Hxro Network and projecting future volumes into a model that can determine a fair price…
Fair price: What does that mean?
Well, if you read the first article you will know that HXRO is a real yield value accrual token that gets stakers paid for every single transaction that happens on the Hxro Network. Users will be able to stake HXRO and each time a trade happens, 50% of that fee will be sent to stakers in USDC.
Now, we are not talking about Ponzi staking… By that I mean protocols paying you in their own native token from the remaining supply. This is useless and only dilutes your holdings over the long term. No, Hxro Network generates fees from options, perps, futures, parimutuels, prediction markets and ANYTHING that builders want to place on top of the HXRO network.
Think of Dopex, GMX, Tracer, all these projects bundled into one mammoth protocol that can handle any derivatives product.
Naturally, having a derivatives swiss army knife will draw in tonnes of volume once the network gets going. Not to mention the type of big-money players that will utilise HXRO Network and add it to their trading venues. So, I expect a slow burn with regards to increasing volume but I am very confident that they will surpass or at least match the types of volumes that are already being seen in a particularly bad market today.
Again, 50% of all trading fees from this expected volume will be distributed to HXRO stakers, daily, in USDC…
If it still isn’t sinking in imagine your favourite exchange let’s say Binance, FTX, KuCoin etc. primarily used their own token and said the following:
“Stake our token and every time a trade happens, we will take 50% of the trading fee and distribute it to stakers, in USDC”
That seems like a ridiculous business plan and YES, I am not saying Hxro will have Binance or FTX volumes initially, but this is an easy way to think of it… With the way that on-chain derivatives are growing in comparison to off-chain, this market share will only begin to increase. Throw regulation and privacy into the mix and I think we have a recipe for exponential growth on-chain.
Any whoooooom, let’s take a look at some scenarios…
The Low Ball:
Okay, I hear you “What the hell am I looking at?!”
This my degenerate friend is a sheet (which I will link to below) that says when The Hxro Network reaches $100m in average daily volume (ADV), this is the returns stakers will be expecting to see.
There are a few assumptions here which you can play around with in the calculator but they are as follows:
Initial purchase price - I could probably pull the API from CoinGecko to keep this fresh but I am an idiot and don’t know how to do that… help is welcomed…
$Amount Purchase - Pretty self-explanatory.
$Notional Volume ADV - this is the average notional volume traded on the platform.
Percentage of HXRO Staked - This is the percentage of HXRO in the staking contract compared to the circulating supply. I used 85% as an estimate as that is the current staking rate for the likes of GMX. Also, why would you hold HXRO naked, when the returns can be so lucrative, it makes no sense. This could be higher… who knows… In a PvP market you want less staked so you get more of the pie, but let's not be greedy here.
Platform Fees - At a flat fee of 0.05% this $100m ADV would generate around $25,000 a day for stakers. Remember 50% of fees get distributed to stakers… Protocol Revenue would be $50,000 whilst staking rewards would be $25,000. Easy.
If we then take our expected staking amount and work out our share of the staking rewards, we can project expected daily returns.
Now, given the multiplier boost based on duration lock up, you can estimate how beneficial it would be to lock the tokens for the long haul, particularly when you take price appreciation into account which will be a natural consequence of volume (more on this below).
I did have to check with some other intelligent apes that my numbers are checking out because the returns that are generated even from these low ball numbers are far exceeding the average going rate on the market for acceptable real yield.
At my lowest volume estimate of $100m ADV and the shortest 7-day lock, you are looking at around 13.5% APR paid in USDC.
Not bad at all…
For the max lock-up of 3 years, with multiplier points coming into effect you would be looking at around 54% APR paid in USDC. Now, I went a little overboard and went full degen and had a look at what the returns would be if I compounded back into the staking contract each day and that is around 71.54%.
I’d like to see multiple lock-up options to be able to come up with some nice strategies around yield too.
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The Mid-Curve:
The next sheet is looking at $500m ADV, which again, may not be immediate but I think we will see that in the medium term for sure.
All other things equal, the returns for a minimum 7-day lock, come out at around 67.51% APR, paid in USDC… The 3-year lock? Pfft, now we get into ohm-fork style yield territory (without the ponzu).
This comes out at 270% APR paid in USDC… You can use the sheet to work out APY if you wish, you degenerate bastard.
Dare we look at $1bn ADV? I think we should drink the kool-aid together.
The minimum 7-day lock-up comes out with a yield at 135% APR, roflcopter.
Whilst, the 3-year lock-up allows you to fake your death, buy an island and sail off into the distance in your new yacht.
At 540% APR paid in USDC from trading fees with the max lock-up duration, this all begins to become a little exaggerated, I’ll admit.
Naturally, if total volumes on the platform begin to hit these larger and larger ADVs, then the token value accrual alpha will naturally get leaked. All the above is based on the current token price, so instead of creating a mindless YouTube video with an embarrassing shocked face designed for clicks, I’ll work backwards from typical industry-accepted APRs of around 20%.
Even 20% is nuts, to be honest. But, let's go with 20% as I think at those returns retail will begin to get interested.
So, if we input a few variables based on the volumes above we can roughly give a fair estimate of the HXRO token. Now, take everything I say here with a pinch of salt as I am an idiot and don’t know what I am talking about…
$100m ADV at 20% APR for maximum lock up of HXRO -
So using the lower end of the volume profile, $100m ADV generates a 20% APR for max lockers at a fair price point of $0.49…
The current HXRO price at the time of writing is $0.18 so around a 2.78x return.
$500m ADV at 20% APR for maximum lock up of HXRO -
Again, at $500m ADV we can work backwards from the 20% APR and see a fair value price at around $2.45 which is a 13.6x increase from the current $0.18 price. Nice…
So, based on my $10,000 initial investment figures, all being well, $136,000 staked earning around 20% APR ($27,000 per year in USDC).
Again, this is all speculation but I like to run these models when finding undervalued projects with big potential.
The Big Cheese - $1bn ADV at 20% APR for maximum lock up of HXRO -
At $1bn ADV, the rough estimate for the token price that would generate 20% APR for max lockers would be around $4.90.
This is a 27.2x gain based on the current price of HXRO.
Just some food for thought on why this isn’t nuts… the current market cap of HXRO is roughly $77m. That gain would put it at around $2.1bn. Now, it won’t come overnight, but good things take time.
What also isn’t nuts is the projected notional volumes…
GMX are now averaging around $250m ADV in notional volume on perps alone. DYDX, favoured for its high throughput and low latency pulls in around $1bn + ADV on repeat.
Now throw options, futures and anything that anyone wants to build on top of that, in an ecosystem that is swimming with institutional money, then I don’t think it is too outlandish.
If you would like to use the calculator it is below. Please make a copy to use and follow the instructions on the first tab. If there are any additions you would like to make just let me know and I will make sure they are added.
https://docs.google.com/spreadsheets/d/1w-DZyFXt72uEa-bC1RmXjhsX6zA9g7AwJ_xazLx7q2I/edit?usp=sharing
Again, this is not financial advice, I have a HXRO bag and they are good friends in the industry. We like to keep it transparent here unlike some…
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