First, understand I’m not involved in Bancor other than as a user of the protocol. Full disclosure this includes a large Link position, and more recently a long position on BNT held outside of the protocol. I’m also not your primary mode of research, do your own, these are just my opinions that could change as new data comes in. Also, the reason I post these thoughts here is because in my mind by the time a user is reading the governance pages, it seems to me that they are more invested in learning about the protocol. It’s a useful filter to just share thoughts to people who would likely take the time to read them, rather than the mosh pits of Discord. So here we go:
Overall, the dollar and interest rates are clearly dictating the space. As long as the dollar continues to rally (or stay high) and rates do the same, capital generally stays out of crypto, and most crypto risk assets stay low. Case in point, both the Merge and Smartcon had little effect on their respective tokens. Hidden in the noise is the relative stability of the crypto markets. For the past few months, most crypto assets have traded sideways.
In terms of BNT and the deficit, we’ve basically remained steady in the mid-40% range. If the Fed hints at any pause in rate hikes (or inflation starts to roll over as some leading indicators suggest) all risk assets including crypto will very likely catch a strong bid. Looking at the V3 Dashboard, it seems that when there’s improvement in the markets, volumes increase. For our current structure @ 90% of fees being used to effectively cut BNT supply in V3, coupled with the potential boost from Almanak in both fees and capital efficiency, it sets the stage for good improvement.
For an individual here, I would say know your bias. For me I naturally lean bullish, so I have to be mindful of overestimating positive developments while discounting signs of downside. I bring that up because it seemed the conversations pre-merge and Smartcon were heavily tilted towards impending doom and the deficit blowing out, none of which occurred. The way I’ve viewed the deficit is when this all started (call it around 41%) I knew I had to be ready for that to blow out well above 50%, but ultimately that was a potential path to recovery, and that the risk of major downside was mitigated with the pause in ILP. It has surprised me that it has remained so steady, which may be a result of the perpetual buying pressure from the fee splits counterbalancing any major selling pressure on BNT. The probability of the deficit growing is still on the table, but its useful to consider how you would feel if it reached higher levels, and how that would change your thinking. For me, I don’t place much weight on the relative percentages, but more if Bancor as a whole is moving in the right direction, which I think it is.
One interesting thing I’ve noticed over the past month or so, are these volume spikes that aren’t correlated with other tokens. When the typical volume on a given day is say 1,000,000 BNT but you suddenly have a 500% spike in buying in the 1-5 million BNT range (see those long wicks on the chart) it catches my attention. I don’t know how to interpret it other than you may have a large buyer making a position in a generally illiquid order book, or its my bullish tint making too much of some bot trading activity. Hard to say and take this whole point with a grain of salt.
This is all before learning more about the patent filing. Directionally the development of new IP is clearly positive. I’ve written about it before, but there’s something to the pressure cooker of this summer that led to this new idea, so I’m excited to hear what it is about. Also, the discussion around migrating protocol-owned assets from V2 to V3 took a very interesting turn from @Nix, and I think that could further lower the temperature and aid in the recovery. That proposal could potentially reduce the outstanding BNT by a large margin, and if implemented can make V3 more cohesive and fundamentally sound. There’s something to a simplified Bancor all being on the latest version.