ALGORAI FINANCE
ALGO
0.3491
0.04%
ALGO
0.3491
0.04%
Crypto Winter 2.0 and the “CAPM” — Crypto Asset Pricing Model
Since our last discussion, expectations have broadly been in line with developments — a range trade and recovery followed by generalized trend weakness as macro factors of inflation, higher rates and slowing economic momentum have remained salient features. As before, episodic periods with crypto assets divergent from high beta equity correlations are present, and interestingly, this phenomenon appears to be coincident with major support levels in crypto. We find this price action an encouraging sign that value is being realized while the greater development in the eco-system continues to capture it from other risk assets. We are pleased to see the recent sharp recovery in ALGO, which has been quite constructive. In general, the outperformance in recent days amidst a global rout in equities has again not only substantiated the value proposition for the ongoing innovation in the sector but also a sign of growing maturity. The increased pace of the differentiating crypto landscape continues to appear increasingly analogous to global foreign exchange rates, as idiosyncratic factors begin to assert themselves through price discovery, such as ETH’s merge, or ALGO’s ascent, among others. Winter clearly isn’t over, but increasingly it appears crypto will no longer lead the charge as the global liquidity bubble pops. Should this observation be accurate, we can expect the digital asset space to lag the correction in broader markets more directly affected by real economic cash flows — asset pricing affecting more the numerator instead of the denominator — or cash flows instead of market discount rate. Thus, expected returns from correlated assets with cash flows may be lower on a relative basis than crypto, even as interest rates stabilize around present terminal rates in the present cycle. As the cold winds of recession bite, valuations can remain under pressure after the effect on net present value from the compounded effect of higher rates. This isn’t a bull case of course, however the point is that market based risk measures on a relative basis should decline implicating stickier support levels across crypto assets, lower relative volatility and reduced selling pressure. Put another way, if the beta declines, then volatility will too and with it expected returns, on a relative basis. In a bear market this may implicate reduced losses or outperformance. While many market participants have studied crypto markets’ bear cycles ad nauseum, global equity markets have yet to see a serious bear market since their inception — until now. Nor have they seen a serious credit contraction through a bear market in rates. Most tradfi developed market participants have not seen a bear market in rates in fact. Popular assumptions may be flawed, and correlations and analyses between credit, equities, rates, and crypto will continue to be an evolving process as innovations drive adoption and more data is acquired. In short this could imply, ceteris paribus, that the risks of holding crypto assets, on a relative basis, are declining (and will continue to do so), representing rising opportunity costs to investors under allocated to the space. Further discussion will follow as we expand on this idea, and relate it to our business and understanding the inherent tradeoffs between return, risk and volatility which AlgoRai’s DOV solutions present. We are pleased to announce that after much hard work and preparation, AlgoRai’s DOV’s are now opening to the marketplace! We look forward to being the platform for structured De-Fi solutions, helping investors and market participants navigate risk and create returns in cryptocurrencies! Great work and great thanks to the team, our investor and liquidity partners, and especially the Algorand Foundation! Your Leader in Algorand DeFi Structured Products! We are a group of highly experienced, talented and dedicated professionals with one mission — to bring value to you, with secure DOVs helping your assets grow over time. AlgoRai creates robust and transparent DeFi structured products on Algorand’s ecosystem. We provide users with a means to separate and harvest inherent volatility on their underlying assets through our products. We currently offer option vault strategies for ALGO, wBTC, and wETH. We are looking to implement new developments in the future. Follow us on our socials to stay updated! | | | 
Coming Soon
Top Performing Vaults
Realised APR
%
ALGO
Covered Call
Realised APR
+1,537.39%
TVL
0 ALGO
Avail. for Dep
999 ALGO
ALGO
Covered Call
Realised APR
+1,172.66%
TVL
10.5 ALGO
Avail. for Dep
499 ALGO
BTC
Covered Call
Realised APR
+1,080.07%
TVL
1.9 BTC
Avail. for Dep
100k BTC
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