David Angliss, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Crypto, shares the fund’s regular take on what’s happening in the fast-changing and volatile cryptocurrency space.
Judging by the market movements of Bitcoin and Ethereum (or lack thereof) just lately, as well as sentiment indicators such as the Crypto Fear & Greed Index, interest in the crypto market has slowed across the board just lately, as investors tread a cautious line amid macroeconomic concerns largely stemming from the US.
That said, that’s not stopping the likes of successful crypto fundies such as Apollo Crypto from opportunity searching. In fact, now might well be the perfect time to keep the ear to the ground and eyes open.
As ever, Apollo has been scouring the decentralised finance scene, and it believes it’s found another potential winner.
It’s called Maverick Protocol, and if, judging by our most recent conversation with David Angliss, its game-changing thesis plays out, it has a chance of becoming a DeFi top gun.
What is Maverick Protocol?
Maverick Protocol is a decentralised, automated market maker (AMM) that, according to Angliss and Apollo, is pioneering a a new AMM design in order to increase capital efficiency in DeFi markets.
What is an AMM, by the way? It’s a type of decentralised exchange (DEX) – think Uniswap, 1inch, PancakeSwap and Curve DAO, for example.
AMMs essentially keep the DeFi ecosystem liquid 24/7 via liquidity pools, unlike in trad markets, which require regular buyers and sellers to do so. Instead of trading directly with other people using a traditional order book, AMM crypto users can then simply buy and sell directly through the DEX.
That’s the general context, but how does Maverick improve the model further, then?
“Maverick, which we’ve recently added to our portfolio of assets, by the way,” notes Angliss, “maximises capital efficiency by automating the concentration of liquidity as prices fluctuate.
“And that means that liquidity providers can add price directionality into their liquidity position. Think of it as combining liquidity provision with speculation as well.
“So, for example, if you’re quite confident that the price of an asset is going to increase and you’re providing liquidity to it, you can choose your appropriate mode to take further advantage. It just gives people more optionality.”
And essentially, this results in:
- More control for liquidity providers over their strategy;
- Reduced sophistication required from liquidity providers; and
- Better prices for traders.
How does the protocol work?
On a reasonably topline level, as follows…
Per a Maverick Protocol Medium blog post, “Liquidity providers can now choose to follow the price of an asset in a single direction, effectively making a bet on the price trajectory of a specific token.
“These directional bets are similar to single-sided liquidity strategies, in that the liquidity provider will be mostly or entirely exposed to a single asset in a given pool.”
Explains Apollo…
Liquidity provider users of the protocol can choose to follow four strategy modes to increase their capital efficiency:
• Mode Right – which follows the price of the base asset when it appreciates against the quote asset.
• Mode Left – which follows the price of the quote asset when it appreciates against the base asset.
• Mode Both – which follows the pool price up and down, automatically concentrating liquidity as prices fluctuate.
• Mode Static – which allows you to add liquidity without engaging Maverick AMM’s liquidity shifting mechanisms, similar to Uniswap V3.
In particular, notes Angliss and Apollo: “since launching, the ‘Mode Both’ liquidity provision option has consistently captured higher-fee APY than Curve Finance for stable assets”.
So when you’re choosing “Mode Left”, for instance, you’re essentially following the strategy that the non-stablecoin “quote” asset is likely to appreciate against the stablecoin? In a pairing such as ETH-USDC, for example?
“That’s right,” says Angliss, who also agreed with our assessment that if you’re opting for ‘Mode Both’, you’re taking a more conservative, bet-each way route.
By way of further explanation, as the price of an asset moves in the chosen direction you’ve nominated through your Mode strategy, the Maverick MM automatically reconcentrates liquidity to follow it, in order to capture more fees – essentially more yield.
As the Medium article notes: “If a Liquidity Provider makes a correct bet on price direction, they can use this mode to enjoy re-concentrated liquidity around the price as it moves in their direction without experiencing any impermanent loss“.
Where Maverick sits in the pantheon of AMM development
For further context, Angliss pointed to the brief history of ground-breaking AMM tech in the crypto sphere, and its more significant developments.
These include Uniswap V1 (late 2018) and V2 (August 2020), which helped usher in a flood of DeFi products into the market in the bull market stage of late 2020, in what became known in the industry as “DeFi Summer”.
Curve Finance’s StableSwap Exchange, which launched in early 2020, brought in superior pricing between assets of an equivalent value, such as stablecoin to stablecoin or ETH to ETH derivative (sETH, stETH etc).
Then, in May 2021, Uniswap delivered its V3 update, which enabled liquidity providers to target specific price ranges, resulting in higher capital efficiency.
However, as Angliss and Apollo notes, providing liquidity to V3 is much harder than Uniswap’s previous iteration, meaning its V2 still has utility and is still relevant.
“Since Uniswap V3, though, there hasn’t been a big breakthrough in AMM tech, but Maverick Protocol now has that chance for recognition,” said Angliss.
What else makes Maverick a potentially attractive investment?
To back up Apollo’s confidence in the project, let’s take a look at the Total Value Locked (TVL) metric.
“Since launching in March 2023, Maverick Protocol has seen clear traction in stable asset swaps, competing directly with Curve Finance and Uniswap V3,” notes the Apollo analyst, adding:
“Despite only having about US$19.1 million TVL, Maverick has a total volume of US$1.42 billion as of May 22.
“It’s important to note that this volume is driven by order flow from 1inch, a decentralised exchange aggregator, meaning Maverick is gaining volume by simply being the best price available to the market.”
Beyond that, though, Angliss says that this highly promising AMM/DEX has a great team, is flying well under the radar, and will eventually release a token that’s made available to the public.
“The other thing we really like about it is that as well as on the Ethereum mainnet, it’s launched as part of the zk-Sync DeFi ecosystem, which we are extremely bullish on.”
None of the contents of this article should be construed as financial advice.