Apollo’s Moonshots: Maple Finance could transform crypto-institutional lending
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Matthew Harcourt, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares the fund’s weekly take on what’s happening in the fast-changing and volatile cryptocurrency space.
Maple Finance is an Australian-based under-collateralised lending project for crypto-native institutions, Matthew Harcourt says.
“That’s like us as funds, and exchanges and other crypto business that are trustworthy – they’re not going to run away with the money like you would if it was just an anonymous person on the internet,” Harcourt says.
“They’re been doing really well,” with US$50 million total value locked (TVL) in the protocol, Harcourt says.
Tomorrow the @OrthoTrading Liquidity Pool will be expanding to $37M 🎉
Anyone will be able to contribute to the pool and start earning USDC yield and $MPL rewards
Why should you participate, a 🧵
— Maple Finance (@maplefinance) June 24, 2021
Apollo Capital is taking out a loan from a distribution pool managed by Dutch digital asset investment firm Maven 11, which Apollo will invest into liquidity pools, using a bit of leverage to become more capital efficient.
“We’re like the prime customers for Maple, these crypto-native funds or institutions that want to get a bit of leverage, and be more capital efficient, because you don’t need to over-collateralise,” Harcourt said. (Loans backed by digital coins are generally over-collateralised because of crypto’s volatility).
“And we like Maple as well because of its Australian roots,” Harcourt added.
The project is started by Melbourne’s Sid Powell, a former NAB executive.
“He’s been working on the project for two or three years, so it’s a long time buildup, and now they’re just launched,” Harcourt says.
The MPL ERC-20 governance token was trading Friday at US$6.40, giving the project a market cap of just US$10 million and a fully diluted valuation of US$64 million. That makes it just the No. 828 token on Coingecko.
“So pretty small, and they’ve got that liquidity, but from an information standpoint, the broader market doesn’t really know what sort of volume these guys are doing in terms of their loans, or what they will do.”
For example, no one knows that Apollo is getting a loan from Maple’s platform, Harcourt said.
“The amount of adoption that the product is getting isn’t evident from a public information standpoint,” he said.
“We’re using the product and we can see it get into traction and see the product-market fit. We’re using it and we like the product and think they’re going to do really well.”
A non-collaterialised loan on the platform carries about a 15 per cent interest rate, while a 25 per cent collateralised loan on the platform is at around 10 per cent interest, Harcourt said.
“So, reasonably high interest rate when you compare it to a loan from a bank, but it’s a far easier process for these crypto-native institutions to have crypto-native solutions.”
The MPL token is likely going to be pretty inflationary, Harcourt says.
“I honestly haven’t looked into the tokenomics enough to say whether it’s a buy signal. It is a tiny cap, only got US$80,000 trading volume.
“But if you want a moonshot, this a moonshot – not financial advice,” Harcourt advises.
It will no doubt take time for Maple to develop relationships and generate big revenue, but Apollo believes that defi liquidity sourcing to centralised counterparties has big potential, Harcourt says.
“Lending is one of the biggest markets in the world — credit markets, for those to move on-chain, so that liquidity providers can come from all corners of the world, permissionlessly and trustlessly, rather than having to trust the bank to make the calls with that money, we’re bullish on that narrative of more credit going on chain.”
Apollo invested this week in Tracer DAO, another Australian defi project, which is working to bring highly leveraged trading to decentralised crypto markets.
Currently crypto investors can use decentralised exchanges like Uniswap and PancakeSwap for spot (unleveraged) trading but if they want to use leverage they have to use centralised platforms like FTX, Binance and Bitmex.
“There’s a huge appetite for derivatives in derivatives, and there hasn’t been a killer derivatives platform that’s defi,” Harcourt says. “And we’re really bullish on the fact that Tracer is going to be launching on Arbitrum, which is a layer 2 solution to Ethereum. We really think that so nicely fits.”
When Stockhead talked to Harcourt on Friday (and when this article was written), BTC was trading for a little over US$33,000, after a move to US$37,000 was rejected midweek. Bearish sentiment was creeping back into the market following a premature celebration that Bitcoin had broken out of its range.
“The more that we go sideways at these lower levels, the more it makes me nervous,” Harcourt says.
“It looks weak. I’m not going to full short here, I’m not selling everything. But it doesn’t look fantastic. I’m reasonably neutral right now.”