Apollo’s Alpha: New kid on the blockchain Conic Finance could become a DeFi blue chip

David Angliss, analyst at Australia’s leading cryptocurrency investment firm, Apollo Cryptoshares the Fund’s common sense of what is happening in the rapidly changing and volatile cryptocurrency space.

If you are a strong believer in decentralized finance, and especially in two of the strongest DeFi “blue chip” protocols – Curve (CRV) and Convex (CVX) – then you may well be very interested in the latest project Apollo has spent a lot of time investigating. And it would be Conic Finance (CNC).

Why? Glad you asked. Let’s get into it…

What is Conic? What exactly are Curve and Convex?

To understand Conic Financeyou have to first understand what Curve is,” Apollo’s David Angliss said in a Zoom chat with Coin head. And convex too.

And he is right. So just a very quick refresher on Curve, only then…

“Curve is basically the most used DEX [decentralised exchange] and automated market maker protocol [AMM] for stable assets,” Angliss reminded us. “And it has the most liquidity in the industry for pairs with stable assets.”

Curve, for example, makes it easy to switch between Ethereum-based stablecoins such as USDC, USDT and DAI and Ethereum-based “wrapped” Bitcoin tokens, such as WBTC and renBTC.

“We won’t drill too much into it here, but think of Curve as the base layer of the DEX – the exchange – and Convex as a second layer that enables the increase of rewards for the user/liquidity provider on specific Curve pools,” the analyst said.

“And in the case of Conic, you can think of it a bit like a Yearn Finance for unilateral liquidity. It essentially offers you an automated strategy that adjusts your exposure across different curve pools to maximize returns every fortnight.

“It calls them ‘omnipools’, which are liquidity pools that Conic uses to allocate a single underlying asset across different curve pools. So it’s basically acting as an active yield farmer for you on top of the Curve.”

As further explanation, we took a look at Conic’s minimalistic website, which gives off old OS vibes that we’re not sure are kind of cool or annoying. Or somehow both.

“Conic Finance is a user-friendly platform built for liquidity providers to easily diversify their exposure to multiple curve pools. Any user can add liquidity to a Conic Omnipool that allocates funds across the curve relative to protocol-controlled pool weights,” the Conic website states.

And, just to drive it home, in case you’re having trouble following along, Angliss added the following to us in some email notes:

“Conic Omnipools enable LPs to easily diversify their exposure across the Curve. Each Omnipool allocates the liquidity of a single asset to different curve pools. All Curve LP tokens are staked on Convex to increase CRV earnings and receive CVX.

“In addition to CRV and CVX, Omnipool LPs also earn CNC rewards. Holders can lock their CNC tokens for vlCNC (voted locked CNC) to participate in cone steering and directly control how liquidity is distributed across the curve pools by participating in Conic’s liquidity allocation votes (LAVs).”

Easy, right? The fact is that you need to know how basic principles of DeFi and yield farming work to really few Conic Finance. Treading cautiously with minimal “test” funds you can afford to lose, and actually trying to use these types of protocols, is the best way to understand them.

Off to a flyer when it comes to usage

One of the things that really stands out for Angliss and the Apollo team about Conic so far is the amount of TVL (total value locked) the DeFi protocol has been able to accumulate in such a short amount of time. TVL can be considered a good metric to indicate the activity level and health of a DeFi protocol.

“The thing only went live late last week and it’s already reached more than US$61 million in TVL, which is really impressive,” Angliss noted. “This definitely makes it one to watch in the room.”

Sale-off makes it one potentially attractive purchase

“Another reason I’m excited to talk about Conic right now,” the analyst added, “is that after the launch of the omnipools last week, which created some excitement in the DeFi space, there’s been quite a sales- -news event about it.

“And that means there could be some decent opportunities to get into the CNC token at something of a discount.”

The way Apollo manifests its investment mission in these types of DeFi projects, Angliss explained, is by using and testing the protocols themselves with a view to potentially investing in the assets themselves – ie, in this case, buying the CNC token.

“We’re watching Conic very carefully. If it ends up passing our rigorous tests for yield breeding, we’ll probably end up adding it to our long-position funds as well.”

Additional bullish notes

And just to finish, here are some other bits of info you might want to consider regarding CNC as a potential small investment in your crypto portfolio DeFi allocation…

• Conic has been formally audited by respected blockchain security company Peckshield and the report will be published in the coming days.

• The CNC/ETH Curve pool has been very profitable for liquidity providers so far (with a weekly vAPY* of 16.54%) and has already generated a good amount of trading volume.

• Conic has, in Apollo’s opinion, the potential to sit in the same discussion as DeFi blue chips such as Curve, Convex and Frax. “It has the potential to reach the size of Convex,” Angliss said. And checking the market cap of both projects, Convex’s is currently around $447 million (fully diluted: $593 million), while Conic’s is $33.4 million (fully diluted: $84 million).

• In other words, Conic’s valuation is about 13x less than Convex, which means it could have excellent growth potential if it actually becomes as successful a DeFi protocol as Apollo Crypto thinks it can.

* vAPY refers to the annual rate of trading fees earned by liquidity providers in a DeFi liquidity pool.