Dear Liqwid Community,
I have compiled several data points related to our protocol (Period: 01.02.2023 - 01.03.2024), and I am sharing with you the main facts that I believe are relevant to know.
The conclusions and actions resulting from this information and data analytics will be shared and proposed by the Core Team within the next 1-2 weeks. Additionally, everyone is welcome to draw their own conclusions and share them in this post.
The master file containing this data can be found here.
1.Macro view – ADA & LQ price development
Figure 1: Price development of LQ and ADA (base 100) over the last months, including the LQ daily emissions as part of the market incentive.
In this graphic, we can visualize the development of the LQ price versus the ADA price over the last 12 months (normalized price : base 100).
We observe that during this period, despite LQ inflation remaining stable at approximately 100k LQ per month, the LQ price was going down while ADA remains stable.
Also, it LQ price drop even increased in 2024, further accentuating the divergence between ADA and LQ price developments.Since January 1, 2024 to March 1, 2024, the price of LQ did -33% ( from $3.5 to $2.4, while the price of ADA did +10% (from $0.59 to $0.66)
2.Effect of LQ incentives over time
The total $amount of LQ rewards given only for the “market distribution incentive” has reached $8.3M over the last 12 months.
This represents a total around 1.6M of LQ distributed in the hands of the Liqwid community (~7.6% of the total supply).
For comparison, Liqwid raised $2.7M from private investors, which was the only time when Liqwid sold LQ tokens.
We can also note that during the same period of time, we witnessed the price of LQ being divided by 6, while the price of ADA increased by +67%. (Utilisation of normalized LQ and ADA price to present the value in a comparable basis).
Today, the Fully Diluted Valuation of Liqwid is around $50M, and it means that ~15% (~8M/50M) of the protocol value was distributed to the users of the protocol.
3.Liqwid protocol profitability analysis
Since its inception, the protocol has successfully raised its TVL to more than $70 millions. At the same time, the profitability (“$ value of LQ distributed” – “$ value of accrued interests”) also increased, but mostly due to the fact that the costs side was being reduced, as the LQ price was falling.
Note: In the excel file under the link, you can also access the breakdown of the TVL per assets and the accrued interests.
4.Costs of liquidity acquisition
This graphic is showing that in February 2023, when 210’000 LQ were distributed monthly, Liqwid paid 1$ to attract 3$ of TVL.
- It means that If someone supplied $10’000 during the whole February, this person received $3’333 worth of LQ. (10’000 / 3’333 = 3)
- It means that If someone supplied $10’000 during the whole March, this person received $2’176 worth of LQ. (10’000 / 2’173 = 4.6)
At the same time in February 2024, some borrowings were made and generated some revenues. For 1$ of incentives, the protocol received $3 of TVL and $0.04 of revenues.
Analysis of the purple line “ Paid $1 of LQ for X$ of accrued interests”:
A value of $1 would mean that in term of profitability the $ amount of accrued interests equals the $ amount of LQ incentives.
A value above $1 would mean that in term of profitability the $ amount of accrued interests is superior to the $ amount of LQ incentives.
We note that this ratio was only positive at the end of February 2024, but it seems to be attributed more to the LQ price falling that to the accrued interests being accumulating at a bigger pace.
5. Analysis of the revenues from accrued interests compared to repaid interests
As the Liqwid protocol offers perpetual loans, no revenue is collected at loan origination (although this may change with the upcoming governance vote on this matter). The interest generated by existing loans is referred to as accrued interest, which is repaid once the loans are closed.
In the chart provided, we can observe that repaid interest aligns with accrued interest. It’s important to note that a loan being opened and closed within the same month does not generate accrued interest, which explains why accrued interest appears lower than repaid interest.
Recently, it has become evident that the high utilization of stablecoin markets is resulting in significantly higher accrued interest compared to repaid interest.
Opinion:
We can assume that currently, people are anticipating a bull run, and their priority is not selling their tokens to repay the loan.
In the past weeks, we have seen a clear acceleration of these 2 data being decorrelated.
This shift is anticipated to persist for several months.
Consequently, if the governance vote passes and interest rates rise, it will further accelerate the accumulation of accrued interests compared to the growth rate of repaid interests.
6. Projected LQ emissions for 2024 (Staking and market distributions)
Figure 6: Projection based on the current LQ emissions
Market incentives | current data: Given the current rates of LQ emissions, the protocol will distribute:
- LQ 20k monthly given for the borrowers
- LQ 100k monthly given to the suppliers
Staking rewards incentives | projected data: Given the current rates of LQ emissions, the protocol will distribute around:
- LQ 38k monthly until the end of May (starting for the month of March)
- LQ 138k monthly starting in June.
Note 1: These forecasts are based on the total amount of LQ being staked by the current stakers monthly of the last 12 months.
Note 2: Originally 10% of the LQ supply (2.1M LQ) has been allocated for the staking rewards in the tokenomics.
*Note 3: The Core Team is not receiving since inception any staking rewards or programmatic distribution for their LQ tokens staked.
If everything is staying the same, around 16.4% of the total LQ supply will be distributed for the year 2024.
