gOHM - 30 March 2022
The Dopex Community Analyst series is a series of strategies, ideas, opinion pieces and educational resource written by independent contributors from the Dopex community. Every month many knowledgeable community analysts share a short analyses of a coin of their choice and share these with Dopex. The goal of these articles is to empower the community and help Dopex increase SSOV volume & deposits. With these articles we hope to provide users with additional information that will help them in making an informed choice of strategy using our products.
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gOHM April’s Epoch
Summary
- Bullish price action all across crypto markets will inflate OHM premium.
- The backing price of OHM still may go down despite the bullish on OHM treasury’s volatile assets.
- Market volatility and uncertainty leads to better play the risks on both ends.
Quick Stats
Price: $38.5 OHM — $4,040 gOHM
Circulating Supply: 15,673,861 (Rebase Token)
Market Cap: $532,253,581
Largest Liquidity Pool: OHM-DAI (Eth L1), gOHM-ETH (Arbitrum)
gOHM conditions
Olympus has a volatile asset on treasury with ETH, OHM-ETH, and BTC claiming as the majority of the portion and a smaller portion on their Olympus Pro partner token. Despite the appreciation for nearly 20% of the treasury’s volatile assets, the liquid backing is not moving up at all. This happens since volatile assets only account for around 15% of the whole treasury.
Our analysis for gOHM is probabilistic thinking that revolves around Olympus Liquid Backing and overall market sentiment. At the time of writing, gOHM sits at $4040 price and with an index of 105 sOHM, so a single OHM price is $38.5 (gOHM/index = OHM), with current staking APY on 918.3%. Since mid-March, gOHM price has raised 25% to $4040 and with the assumption of constant price and APY, we will get $4850. We will deep dive into the probability of this assumption:
- Historically, Olympus has the highest price premium (OHM price/backing) on 10x in April and November 2021. Currently trading on a 1.5x price premium (OHM price $38, liquid backing $23), statistically speaking there is still so much room to grow on the price premium without significant growth on the treasury. This price premium relies heavily on market sentiment and speculations. So, if the current market sentiment remains until the end of March we may see gOHM price ending around $6000 (with linear assumption).
OHM price premium compared to liquid backing
- The bullish price action doesn’t last for the April epoch and will lead back OHM price premium to nearly 1x. Below 1x premium is unlikely since Olympus will introduce inverse bonds which allow users to claim a portion of treasury with premium. Projecting the decline of backing in January which no bullish price action takes place, OHM backing declined by 40% and if this takes place in April, the backing could go down to $15 and OHM price going near 1x on that.
Conclusion
In April’s epoch, OHM price can go up significantly based on market sentiment and can go down significantly if market sentiment dies and the lack of catalyst of OHM fundamental. With this high uncertainty, the best play is to take risks on both ends with Inverse Iron Butterfly play. The details on this technique are on this tweet: https://twitter.com/donuts_itm/status/1502295916442800130.
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**Inverse Iron Butterfly illustration
To put it simply, the play is to sell put on $3,000, buy put on $4,000, buy call on $4,000, and buy call on $5,000. This play will win on price expiration on $3000 or below and $5000 or above subtract the win with premium to get the net profit. The only loss is when the gOHM price stayed in the range of $4,000.
Disclosures
The author does not currently hold OHM/gOHM but did in the past.
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Views expressed in this article are the author’s own and not reflective of the position or professional views from Dopex.io.
Dopex reimburses analyst contributors with a small payout to partially compensate the time spent on research and writing. For questions feel free to jump into our discord (discord.gg/dopex) and chat with the team or analyst contributors directly.
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