At the time of writing, the Solana market cap is $9.08 billion with a 24-hour volume of $872 million. The price of SOL is $24.44 and its market dominance is 0.86%. The Total Crypto Market Cap is $1.05T, down 0.87%. The Solana NFT transaction volume surpassed 984,000 SOL, closing in on $23.9M in the last 7 days.
Summary
Introduction
What is Hadeswap?
What is an AMM and what are its benefits for NFT Trading?
Growth
$HADES
Latest Announcements
Risks of being a Market Maker
Conclusion
Introduction
Solana NFTs have been through a rocky period in 2022. Looking at the Solana NFT Index Chart by SolanaFloor, it is evident that even though several bluechips such as Famous Fox Federation, Taiyo Robotics, and ABC have recently hit all-time-highs in SOL terms, most are negative in USD terms, given the 96% drawdown on the Solana Token Price.
The last three months have been reasonably positive for Solana NFTs. The discussion around Royalties forced projects to find alternative sources of revenue to offset their loss of an otherwise reliable income. While existing teams worked to adjust their products, a new wave of projects launched, such as Sharky - which we covered in one of the most recent newsletters.
In this week’s newsletter, we will present data that suggests an increase in the popularity of Hadeswap, an NFT-DeFi protocol created by the Founder of the ABC NFT Collection, HGE.
The term NFT-DeFi is named after several NFT projects that began introducing DeFi mechanisms to their NFT collections.
What is Hadeswap?
Hadeswap is an Automated Market-Maker that improves the liquidity of the NFT ecosystem and its trading experience.
Hadeswap aims to let users make the market & the rules in a decentralized setting.
A decentralized protocol like Hadeswap encourages users to have full control over their decisions and outcome.
Hadeswap unlocks a new source of revenue for NFT investors and traders, giving them the possibility to make markets for NFT collections of their choice. Market Makers collect 100% of the fees generated by the protocol.
What is an AMM and what are its benefits for NFT Trading?
Automated market makers (AMMs) are a type of algorithm that facilitates trading on decentralized exchanges (DEXs). They are designed to provide liquidity to the market by continuously buying and selling assets based on pre-determined rules.
A benefit of AMMs is that they drastically contribute to price stabilization, which combats the natural volatility of the NFT markets. This can be especially useful for smaller or less liquid collections, which may not have as many buyers and sellers actively participating in the market.
Overall, AMMs can provide several benefits to traders and the NFT market as a whole, including increased liquidity, and lower trading costs.
Growth
Hadeswap’s volume has been steadily growing as more collections are added. The LP mechanism is easy to use, works as intended, and provides users with what they need the most when selling - instant liquidity. The AMM is on average, ranked third in the Solana NFT Transaction Volume leaderboard.
Hadeswap is deeply connected to the NFT collection ABC as both were launched by HGE. Looking at the ABC chart from SolanaFloor, the influence of HGE & Hadeswap is notable, as the collection recently reached an all-time high in SOL terms.
$HADES Launch
On January 22nd, Hadeswap officially launched the long-awaited $HADES token.
Holders who stake their ABC NFTs will earn $HADES. In the event of unstaking their NFTs, there will be no emissions during the 21-day cool-down period. 500,000 tokens are emitted each month.
You can read the full token roadmap here in Hadeswap’s whitepaper.
Latest Announcements
Over the last two months, Hadeswap has had several announcements which served as catalysts for its run-up in Floor Price.
Partnership with Tensor.
Hadeswap x Crossmint Partnership
Hadeswap reaches over 500,000 $SOL TVL.
Hadeswap passes 1,700,000 $SOL Volume Transacted.
Risks of being a Market Maker
Big collections like ABC, OkayBears, and Claynosaurz generate a lot of daily volume. High volume generates high fees for Liquidity Pool providers.
Although it might be a good strategy to put your NFTs at work, you could partially or fully lose your investment. It is important to understand the risks associated with Liquidity Pools.
The risk associated with this strategy is called Impermanent Loss.
It occurs when the value of an asset in a liquidity pool changes significantly, causing the ratio of the asset's value to the total value of the liquidity pool to shift. This can cause the value of a liquidity provider's contribution to the collection to decrease, even if the value of the asset itself has not changed.
When you create a two-sided Liquidity Pool, you need to add the NFTs you wish, plus the underlying value in SOL.
Imagine adding an NFT worth 10 SOL. You need to add the 10 SOL into the other side of the pool, so you have a 50-50 ratio on the Liquidity Pool.
If the NFT value drops, the SOL you have added to the LP, will be used to purchase a market sell order by NFT holders. As the price drops more, your LP will try to absorb all the market sell orders until there is no more SOL on your LP.
At the end of it, you might be left with low-value NFTs and no SOL.
If the NFT rises in price, your pool will buy NFTs with SOL at a higher price, risking the downside of it just being a pump followed by a dump.
The volatility that is implied in NFT markets is very risky for Market Makers, especially for non-bluechip NFT collections.
Conclusion
Hadeswap is a growing protocol backed by a community of holders of the ABC NFT Collection. It has experienced strong growth on TVL and Daily Volume. The launch of $HADES will be a test of the protocol’s strength and adoption.
Impermanent loss is a risk because it can erode the value of a liquidity provider's contribution to a DeFi platform. It is important for liquidity providers to carefully consider the risks associated with impermanent loss when deciding whether to provide liquidity to a DeFi platform.