David Angliss, 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.
Overcollaterialised borrowing was phase one of decentralised finance, with projects such as Nexus Mutual, MakerDAO and Alchemix enabling crypto-backed borrowing.
Then came other platforms that enable undercollaterialised loans, including Australian project Maple Finance.
Now a protocol called TrueFi by a company called TrustToken is offering zero-collateral institutional lending. Its token soared late last week, thanks to a US$12.5 million funding round led by BlockTower Capital, Andreesen Horowitz (a16z) and Sam Bankman-Fried’s Alameda Research.
“The price has just gone ballistic over the past 24 to 48 hours,” David Angliss told Stockhead on Friday.
Alameda and Andreesen Horowitz (co-founded by Marc Andreessen, the co-founder of Netscape), especially, have an outsize reputation in the crypto world.
Angliss says the idea of zero-collateral loans was “quite ambitious and specie sort of idea,” but the stamp of approval by the three major venture capital firms was “like three home runs”.
The price of the TrueFi TRU token rocketed from US16.7c to as much as US85c on Thursday. On Friday evening it was trading at 56c, up 40.5 per cent from 24 hours ago. That gave the project a market cap of US$211 million, making it the No. 203 crypto.
Twenty-four-hour trading volume was as much as US$1 billion – mostly on Binance – up from around US$2 million to US$4 million
“Pretty crazy, pretty explosive,” Angliss says. “It’s had a fairly decent pump, but it’s pretty understandable, seeing as we’ve got those heavyweight hitters behind them.”
TrueFi uses a complicated on-chain process, where some tokenholders stake their TRU ERC-20 tokens and assess their creditworthiness of borrowers. Those who are deemed worthy are able to borrow TrueUSD, TrustToken’s stablecoin.
If the borrower repays the money, the stakers who vouched for them are rewarded with more TRU tokens.
“Essentially it’s providing a method of the borrower not having to put up any capital collateral,” Angliss says.
‘It’s like JP Morgan coming up to you’
The protocol is just open to institutional borrowers at present.
“Big crypto trading desks, I guess,” Angliss says. “It wouldn’t be your average punter coming in.
“It sort-of makes sense — it’s like JP Morgan coming up to you and asking for a loan. You know that you’re going to get paid back.”
TrustToken says TruFi has enabled US$288 million in loan originations with zero defaults since its launch in November.
Lenders have earned US$2.38 million in interest. The protocol has three different pools where lenders on Friday could earn between 1.62 and 5.85 per cent annual percentage yield on their stablecoins.
Apollo invested in the project but sold some of its holdings earlier, although some tokens remain in its treasury. “Definitely not as much as we would have to off the back of this pump.”
On Friday there was US$650 million in total value locked (TVL) in TrueFi’s protocol, meaning the TRU token’s market cap is just one-third of its TVL, Angliss said.
“Which, back of the envelope, ‘buy, hold or sell,’ probably still means that it’s undervalued,” Angliss said.
Maple Finance’s MPL token was also a big gainer on Friday, rising 31.6 per cent to US$10.25 after expanding its lending pools earlier in the week.
“We love Maple,” Angliss says, noting its lending pools were offering yields of 44.7 and 45.5 per cent.
“These are the best yields you can find on a stablecoin right now.”
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.