The marquee asset of cryptocurrencies is Bitcoin. The mildly informed have heard of Ethereum and maybe Ripple with it’s token XRP, but there are actually some 6000 listed cryptocurrency/blockchain projects with more showing up every day. As a new asset class, it is not without growing pains, and chief among them is liquidity. Wall Street has long decried the barriers to entry in crypto overall but has now, grudgingly perhaps, come to embrace Bitcoin and to a lesser extent, Ethereum. Still, their participation in anything is virtually non-existent.
The difficulty in investing in cryptos are storied and often exaggerated. Their risks of hacks and the difficulty of navigating the blockchain are known and real enough but this is not a deterrent to the technologically savvy and investment banks have dedicated tech departments. So what’s keeping them out of game-changing projects that have a far bigger upside than Bitcoin? Liquidity. There is simply not a large enough market to trade, and the insufficient volume has wrought havoc on the space. Historically, trading in all but the biggest crypto assets could move the market. It has been rife with manipulation and has turned many a trade into long-term depreciating, involuntary investments.
So what about the rest of these 6000 plus projects? Without needed demand to induce active trading for their token has left founders watching a volatile asset while contending with nonplussed supporters. Without needed price discovery and the ability to easily move in and out of trade positions, these assets suffer and the space gets something of a black eye.
Greater Challenges
Current conditions have obviously impacted individual investors; many left holding a basket of assets that couldn’t be sold down at a reasonable price. The bigger issue is that this condition greatly affects those at the helm of these projects. Truly transformative technologies are forced to focus on short-term actions that will spark interest while trying to build the Web3 and deliver on the promise of a decentralized future. The space itself is unique in the sense that it is largely unregulated and individuals can invest in projects at the earliest stages imaginable and trade the asset within days.
Resultant of this, capital is continually redistributing as investors are often as immature as the asset class itself. The lack of inflow-outflow has hampered countless startups who desperately need support to survive. This is a problem inherent to the space with early-stage investments as market-traded assets and the subsequent challenge they face in trying to build momentum.
Compounding the issue is the perception it creates for potential adopters. Many people are still not comfortable holding crypto assets and its reputation for hacks, manipulation, and illiquid markets only slow adoption. In the last two years, decentralized exchanges (DEXs) like Uniswap cropped up and injected some badly needed liquidity via the use of automated market makers. Other platforms like Kyber and Balancer have shown promise that these assets can be successfully traded as well. However, the supply of tokens still outweighs demand, and assessing the fundamentals of a project requires a level of education most don’t have.
A Potential Solution
Cue Bonded.Finance. Their mission is to eradicate liquidity concerns and stabilize the overall market. Given the collective market cap of tokens not named Bitcoin, there is an untapped value that, to date, has gone unexploited. Their value proposition is simple— the fintech platform aims to introduce “exotic” DeFi instruments which will allow investors to lock their tokens in a smart contract and earn interest; effectively killing two birds with one stone. It gives those with a long view a reason to be patient as earning interest on a volatile asset extends hope while simultaneously removes supply, thereby potentially increasing value.
Their recent partnership announcement with Orion Protocol, a liquidity aggregator that finds the best price for tokens across some 700 exchange marketplaces, suggests they are seeking cutting-edge solutions to the hurdles that such a project might face.
According to its launch announcement, Bonded.finance estimates US$50 billion are locked in alternative coins that remain “underserved.” The Bonded team’s forthcoming lineup of financial instruments aims to put these overlooked assets to work and make investors more comfortable holding them.
Bonded decided to pursue this after extended experimentation and market observation. Identifying this reserve of non-performing capital is a significant opportunity. In a recent interview, Bonded’s CEO, Paul Mak, highlighted how otherwise great projects lose value, face relentless criticism, and, in some cases, have their communities wither and die. In Mak’s words, “our smart instruments enable us to repurpose unused capital to offer benefits to longer-term investors, teams, and even to reignite interest in projects that may have fallen off the radar.”
For projects intent on hacking growth or enhancing the utility of their token, Bonded presents an elegant solution. While the future is obviously hard to predict, Bonded has a lot of room to grow. The startup’s public funding efforts concluded with a sold out private sale—with investors contributing US$2.25 million into the project.
Bonded has also announced numerous partnerships with the likes of REN, Origin protocol, Matic, and most recently, the Orion protocol. Orion, as noted earlier, is particularly interesting as an aggregator of liquidity across the entire market that’s placed onto a single decentralized platform.
Final thoughts
As the total locked value of DeFi crests twenty billion, it impossible to dismiss its value and utility or reduce to it a passing fad. Bonded focusing their DeFi energy onto less-trafficked parts of the crypto ecosystem highlights the breadth and depth of the market while addressing some limitations. Whether they’re able to execute on their vision to “make alts great again,” remains to be seen of course but what Bonded is doing—attempting to bring stability to help offset the growing pains of a burgeoning asset class is certainly not without merit. Crypto is notoriously tribal, but projects like Bonded are good news for anyone interested in helping it mature. In such a volatile marketplace, it could spell the difference between success and failure for some projects.
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