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Golden Hardcore | An article to understand why Zeus exploded and firmly bearish LINK



Golden Finance recently launched the Hardcore column to provide readers with introductions or in-depth interpretations of popular projects. DeFi is very popular, and so is the "oracle machine" track. The leading currency is LINK. LINK started to take off in July, and rose from below $5 to a high of nearly $20 in more than a month, an increase of more than 4 times, and drove the entire "oracle machine" sector to surge. However, some investment institutions hold different opinions, such as Zeus Capital. Zeus Capital previously issued a short-selling LINK report in July, but then LINK skyrocketed, and Zeus Capital liquidated more than $17 million. Still, Zeus Capital remains bearish on LINK. In this issue of Hardcore, let’s take a look at the reasons why Zeus Capital is firmly bearish on LINK, and look at the price of LINK from the supply, circulation and valuation of LINK. "Price is what you pay, and value is what you get." Warren Buffett In the past month, LINK token surpassed BTC and ETH to become the most discussed cryptocurrency on social media. The cryptocurrency community is discussing Chainlink integration, technology and competitors in the same race. However, no matter where it started, the controversy eventually tended to revolve around the price of LINK. LINK holders are particularly sensitive to the intrinsic valuation of their beloved token. The price of LINK is close to $15, how can it be possible if the valuation is only a few cents? (Note: zeus capital believes that LINK tokens are only worth a few cents) Golden Noon News | List of important developments at noon on October 25: 7:00-12:00 Keywords: Di Gang, blockchain industry, bitcoin rise, Grayscale 1. Di Gang: The central bank's trade finance blockchain platform has a cumulative transaction volume of 205.6 billion yuan and 50 banks have registered. 2. Xinhua News Agency: The Blockchain Industry Service Office has selected nearly 500 companies for incubation and pilot projects. 3. Director of Shanghai Customs Inspection Department: Customs will expand the scope of blockchain business pilots. 4. Jing Xiandong, chairman of Ant Group: In the future, "on-chain" will definitely become a standard configuration. 5. Shenzhen Business Daily: 33 million blockchain electronic invoices have been issued. 6. Grayscale GBTC has grown by $2 billion this year. 7. Bitcoin continued to rise, with a daily low of $13,025.34 and a high of $13,350. [2020/10/25] Almost every transaction is driven by the simple law of supply and demand, which explains how buyers and sellers of resources/assets/services interact to determine prices. Typically, low supply and high demand raise prices, and vice versa. All else being equal, the higher the price, the less buyers are willing to buy and the more sellers are willing to sell. Supply and demand interact until the market finds a price where sellers sell exactly as much as buyers buy. Economics calls this the equilibrium price. Finally, the slope of the supply and demand curve depends on how quickly the number of sellers/buyers increases/decreases at the marginal change in price. On the demand side, if a product is a basic necessity, its demand will fall less when its price rises than for a product that is less important to buyers. On the supply side, depending on the product and cost structure, producers may not be able to increase supply immediately as they need time to react. Golden Evening News | List of important news on the evening of December 30: 12:00-21:00 Keywords: Central Bank, Mutual Finance Association, Trusted Blockchain Evaluation, Huobi CTO, Blockchain ETF 1. Central Bank: Introduce Personal Finance A series of regulatory rules for financial technology such as information protection and blockchain. 2. Mutual Finance Association Conference: Research on the Application Scenario of Legal Digital Currency under the Framework of Mobile Finance. 3. The China Academy of Information and Communications Technology will launch the fourth batch of credible blockchain evaluations in 2020. 4. The News Center of the State-owned Assets Supervision and Administration Commission signed a cooperation agreement with the three platforms on the practice of blockchain technology. 5. Huobi CTO Cheng Xianfeng will resign and his job will be temporarily replaced by Wu Shupeng. 6. The submission materials of the first blockchain index fund (ETF) in China have been accepted by the China Securities Regulatory Commission. 7. Beijing News Express Commentary: "Blockchain" MLM needs to be exposed. 8. SHFE cooperated with Qingdao Customs to promote the research and development of blockchain-based supervision platform. 9. Li Guoqing: What attracts me to the blockchain is not the technology, but the reconstruction of production relations. [2019/12/30] In economic terms, if a small change in price leads to a large difference in buyer demand, we say that demand is elastic. Otherwise, demand is inelastic. Turning the focus to the LINK token, it should be the propensity of node operators to hold/sell LINK that ultimately determines its supply, while demand comes from Chainlink integrators buying LINK to pay for their data requests. In reality, however, LINK supply and demand are largely determined by SmartContract, the company behind the Chainlink project. Sitting on a massive reserve of 350 million LINK, SmartContract has an incentive to sell LINK to Chainlink customers at a staggering 90%+ discount. Whether buying LINK from the open market for $15 or buying LINK for less than $1, Chainlink customers will naturally buy from SmartContract. However, price isn't the only difference between the two options. Every time an aggregator takes advantage of SmartContract's subsidy, new tokens are added to the LINK circulation, slowly but continuously increasing supply pressure. Jinse Finance’s exclusive analysis The increase in speculators has exacerbated this round of market volatility: In addition to the negative inducement caused by security reasons, is there any other incentive for this round of decline? According to the analysis of Jinse Finance, the underlying reason is that the structure of market investors has changed from December last year to the first quarter of this year. In the last round of "shuffling", Bitcoin holders who had experienced a long bull market realized arbitrage, more short-term speculators took over, and the structure of market investors has changed - the market is more retail-oriented, and "retail investors" prefer to chase the rise In the event of a fall, the nerves are more fragile-this characteristic is more in line with the identity of a speculator. From December last year to the end of March this year, this change in market holders can also be glimpsed in the latest research: Blockchain analysis company Chainalysis new research shows (as shown in the figure), the market is currently There are 5.1 million Bitcoin speculative funds, 7.4 million Bitcoin investment funds, and 1.5 million Bitcoins that may be lost. After Bitcoin approached $20,000 and fell back, speculative funds increased—the original long-term holders sold digital assets to new short-term speculators. The influx of new speculators depresses the price of Bitcoin, because these users operate their Bitcoin holdings more frequently than long-term investors and are more susceptible to market fluctuations. In fact, the number of Bitcoin transactions available for trade has increased by 57% since the sell-off began in December. According to Jinse Finance’s analysis, one of the deep-seated causes of the decline experienced in the past two days was the change in investor attributes that made the market more sensitive. And some institutions and large households also seem to be taking advantage of this characteristic of market sentiment to deliberately add fuel to the flames. [2018/6/12] The diagram below explains the process in more detail: In order to reward node operators for doing work (i.e. retrieving data), each operator of the Chainlink network requires LINK tokens (it is the only unit of exchange). The two sources of Chianlink service integrator LINK are either buying from the secondary market (exchanges such as Binance, Huobi, and 1inch), or buying directly from SmartContract with a 90% discount. Jinse Finance live report, V God said: the blockchain is most likely to become a leading industry in the financial industry: At the Ethereum Technology and Application Conference, the audience asked questions: When can the blockchain really be with a specific field and industry? , to be the frontrunner? V God said: The financial industry is the earliest to be applied, and other industries such as the game industry are also very promising. Some people also asked about when Ethereum would rise to 10,000 yuan, but Vitalik admitted that he did not know. [2018/6/3] The choice is obvious, SmartContract will quote and charge the integrator in USD for each task request. At the same time, SmartContract rewards node operators in the Chainlink network. Where are these LINKs from? They are newly minted tokens held in reserves fully controlled by SmartContract. As more and more tasks are performed, the LINK in circulation continues to increase, and the pressure on the supply side increases. Therefore, the current LINK demand comes from speculators taking over the existing supply, and LINK ultimately comes from SmartContract reserves. Will the integrator start buying LINK from the secondary market in the short term? the answer is negative. Based on our previous report calculations, considering the current level of Chainlink adoption and assuming a 5% increase in users per month, SmartContract will be a major seller of LINK until at least August 2027. For now, let's focus on the supply side. As network activity increases, node operators are accumulating more and more LINK tokens. They have no incentive to hold LINK (other than pure speculation), the question is when these tokens will hit the secondary market. Will they sell their LINK now? The answer is yes. Because: 1. SmartContract is transferring tokens to the address paid to the node operator; Golden Finance Exclusive Report丨US CFTC James SNE Currencies are not subject to supervision: Today, at the Boao Forum, James STONE, the US Commodity Futures Trading Commissioner who gave a speech on the same stage as Central Bank Governor Yi Gang, said that virtual currencies are sometimes used to evade taxes, as well as illegal weapons and drugs. , So I am particularly worried about the series of developments in Bitcoin. I think the attitude is the same as that of China, and Bitcoin cannot be encouraged to be unregulated. [2018/4/11] 2. These addresses are being paid to node operators; Node operators are then continuously accumulating tokens to 1inch , Aave or Binance. However, the additional token supply coming out of circulation from the reserve is less harmful. In addition to the 350 million LINK that facilitated the landing, SmartContract also controls 300 million LINK tokens, which are intended to fund the development of the project. Unlike Ripple, which has set escrow rights to limit the release of XRP at any time and regularly reports the number of tokens sold, SmartContract has full autonomy over the 300 million LINK that will eventually be sold. When selling these LINKs, SmartContract could not be more transparent about the timing, size and purpose of the sale. Using on-chain data in Ethereum, it is clear that SmartContract regularly transfers 500,000 LINK tokens from developer addresses. Transfer to Binance through a series of jump addresses: Now, if the integrator buys LINK from SmartContract, and the founder sells a large amount of LINK, the other party of the transaction is LINK who? Where does the demand come from? speculators. The large supply of LINK was picked up by naive investors. These investors either: intend to sell LINK to an operator at a higher price (as described above), in which case the operator has a holding period of 7+ years. And, it's foolish to think that data retrieval could be worth more than $50, which is the current total price. Either: Hope to sell LINK at a higher price to bigger fools. We think the second is the case for the vast majority of LINK holders. If so, the LINK ecosystem is a textbook example of a bubble, a modern version of Dutch tulip mania. We do not just value the price of LINK tokens, but calculate the absolute and relative valuation of Chainlink services based on LINK's landing, replication costs and expected benefits. Relative Valuation: Staking Rewards Instead of Dividend Yield According to Chainlink diehard fans, staking is the catalyst for skyrocketing LINK prices. Let's first assume that the function is real-time, and do some calculations. For simplicity, we will use USD and assume the price of LINK is $15. To arrive at the fair value of the LINK token, we will use a variation of the dividend yield model. But start with the basics first. According to the efficient market hypothesis and modern financial theory, investors should be rewarded for the risk they take. As the saying goes, the higher the risk, the higher the return. By the numbers, one of the safest assets on earth is the U.S. 3-month Treasury bill, which yields just 0.1% a year, and the riskier asset is the U.S. 10-year U.S. Treasury note, which has an expected yield of just under 0.7% %, compared with an implied return of just over 5% for companies in the S&P 500. Now, let us assume that LINK token holders should earn a 3% annual return on their token investment due to its "huge" potential and "limited" risk. What's the meaning? There are approximately 400 million LINK tokens in circulation. At the current price of $15 per LINK, the market cap of issued tokens is about $6 billion. To achieve a 3% yield, the Chainlink project should generate $180 million in staking returns (equivalent to dividends). If one assumes that each task request costs $2, and that node operators distribute 75% of revenue to LINK stakers, there should be 120 million tasks per year. How many missions are there now? Over the last 12 months, according to bloxy, that number was just over 2 million.


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