Olympus DAO
Pay Attention to Olympus DAO!
Olympus DAO is a Decentralized Autonomous Organization with the aim of designing a non-USD pegged, stable asset.
Now that we are more confused than ever, let's take a step back and spend some time discussing the present state of Decentralized Finance (DeFi) as it relates to "Stable Coins" and why they are essential in understanding why Olympus DAO is such a big deal.
Stable Coins
Stable coins are cryptocurrencies that are either directly tied or "Pegged" to the U.S. dollar at a 1 to 1 ratio. They are prevalent in the crypto marketplace and are therefore vulnerable to the inflationary practices of the Federal Reserve.
This adds to the irony as the purpose of cryptocurrencies is to move away from the fiat monetary system.
Olympus DAO is a reserve currency protocol based on the OHM token. Its goal is to become a crypto native stable currency.
Click on this link to see a video explanation of Olympus Dao.
Yield baby!
Olympus DAO’s current goal is to grow its supply of OHM. While intended to have a market value that stays stable eventually, the protocol is not immediately aiming to achieve this. Instead, the Olympus protocol has been optimized for growth and wealth creation.
Currently, Annual Percentage Yield (APY) returns of +8,000% are available if purchasers stake their OHM tokens on Olympus. Once staked, holders will receive the new distributions in the form of “sOHM” thereby receiving 90% of the yield generated by the assets in the treasury.
Currently, over 90.79% of the OHM supply is staked by holders.
LOL, okay this sounds crazy. Is this sustainable?
I'm glad you asked. The short answer is no, by design.
The longer, more detailed answer is yes but not forever at the present rate.
Assuming a perfect world where Santa exists, every day is sunny, and nonlinear things can be measured in a linear manner. Let's break this down further by assuming an allocation of 5 OHM was bought at today's present value ($1,047.10 per token) and staked on the Olympus protocol.
Based on these calculations, your original $5,235.21 allocation grows to $448,069.40 or 8,459% within 1 year!
Welcome to the world of DeFi.
Now, I know what you are thinking. What kind of rug am I standing on and who holds the corner?
I consider myself an optimist, but when it comes to allocating capital, I like to manifest the George Costanza within and look for where I might get fucked over.
So what does the worst-case scenario look like?
The following assumes a scenario where the market value of the OHM token declines by 90%.
Now, a 90% decline in price is a definite kick in the nuts. However, assuming APY were to stay constant, our return on the initial $5,235.21 OHM allocation would still give us an estimated return of 756% at the end of a year!
In reality, with the price depreciating so heavily, APY would climb higher as it is designed to do within the Olympus ecosystem, and the compounding element to this trade would come to the rescue.
However, that scenario is not degenerate enough, and the George Constanza in me still has a full head of hair.
Let's take this up a notch.
What does a scenario look like where OHM's yield and market value decline by 90%?
While we do suffer a pretty deep drawdown of approximately 86% in the short term, any crypto veteran will tell you that they have sustained such volatility and drawdowns for breakfast.
I mean, a 15% return at the end of 1 year is still more alpha than Peter Schiff has seen in his BTC portfolio since inception!
Wen yield fall ser?
Below is a chart depicting estimates on what APY could look like relative to the total OHM supply. Courtesy of the community who refer to themselves as “ohmies” - more on that in a follow-up article.
With the current circulating supply of OHM sitting at 4.1 Million, we can reasonably begin to assume we are early on this trade!
But we need a way to reasonably estimate how long these yields may persist over the coming year and into the future.
More on this to follow. Stay tuned for part 2.