Advisory
This document is not financial advice and is for education purposes only. Always do your own research before investing or trading cryptocurrencies.
Introduction
Welcome to the first edition of the new Step Finance newsletter. In these newsletters, we will cover varying topics from Solana NFTs, to the latest Solana ecosystem opportunities. For our first newsletter, we will evaluate a Solana DEX which has witnessed rapid user growth since May, why this has occurred, and an opportunity we offer with STEP on this DEX.
Solana DEX Daily Active Users (DAUs)
From 01/04/22 to 01/06/22, the DAUs on Solana DEX’s has increased by +232.82% over this 61 day period. This represents a daily average increase of 3.82%, which is an incredibly fast rate of growth, as shown below.
One DEX which has witnessed a highly correlated rapid growth during this period is Orca. The DEX increased its DAUs by a staggering 381.45% during the same time period, increasing its DAUs from approximately 35K to 133K.
The growth of Orca has been uncorrelated to other DEX’s across the Solana ecosystem, with Orca carrying the growth of Solana DeFi in recent months. During this time period, other selected DEX’s (such as Raydium, Serum, Jupiter, Aldrin, and Mango) have witnessed negative growth. This period has seen DAUs from other DEX’s fall by 4.8%, as shown below.
This rapid growth from Orca has seen its Solana DEX dominance increase from 48% to 79%, creating somewhat of a monopoly in the Solana DeFi space, shown below
Furthermore, this upwards DAU trajectory from Orca is showing no signs of slowing. However, one issue remains for Orca regarding its ORCA token.
Potential ORCA Token Value Accrual Issue
Despite this exceptional growth, Orca's native token has struggled during the same time period, falling from $2.32 USD to $0.84 USD (down 63.8%). Therefore, during this growth period, we have seen a strong negative correlation (correlation = - 0.7719) when comparing DAU growth to token price action. This could place into question the long term bullishness of the ORCA token.
How Did Orca Expand So Rapidly?
Orca have managed to achieve this growth through their public release of Orca Whirlpools. On April 25th 2022, Orca announced that the closed Whirlpool beta had been successful, with these pools now available to the public. What has followed is twelve pools successfully created, with $15.1m USD locked into these pools, with 24hr volumes surpassing $20m USD. Orca Whirlpools are different from typical liquidity pools as they are centred around concentrated liquidity.
$STEP Orca Whirlpool Opportunity
We have recently deployed a STEP whirlpool on Orca against the USDH pair. Should users wish to participate, triple rewards will be available with rewards distributed in ORCA, STEP, and HBB. Rewards over the past 24 hours were as shown below.
Figure 6 = Orca Whirlpool Rewards Breakdown
Current estimated returns at time of writing are 790%. The APR available will depend on the leverage used by the user, which is affected by the liquidity distribution prices selected. In the table below is the current state of play regarding available liquidity distribution.
Conclusion
Orca have seen rapid DAU expansion primarily due to their introduction of concentrated liquidity pools. In response to this, it seems likely that other DeFi protocols across Solana will create their own concentrated liquidity pools, having seen their market share eaten by Orca in recent weeks. Despite this, the continual sell pressure on ORCA (due to its rewards tokenomic design) has seen the token continue to lose value. However, there are still fantastic opportunities on Orca, as shown with our Whirlpool.
Final Word
We hope you enjoyed our first edition of our newsletter. If there is anything else you want to see next time, be sure to let us know on Twitter by tagging @StepFinance_ or @page_analyst.
Author: @page_analyst