There is a popular phrase in the currency circle, “The team is doing things”, which is often used to mock projects that do not rise in price. Indeed, everything the team does is not necessarily reflected in the currency price. But the team can work hard in the right direction, and the value of the project will eventually be reflected in the currency price.
Original title: “First-class warehouse resumption: How to make AAVE a thousand times profit for 61 Capital”
Written by: Liuyi Capital / First Class
Value investment philosophy is the core investment philosophy of Liuyi Capital. We firmly believe that today in the Internet world is bound to be the future of the blockchain world. Advocating value investment will not only help us better capture the unicorns of the future, but also guide funds to be injected into a truly hard-working team, thereby promoting the healthy development of the blockchain industry.
For this reason, Liuyi Capital will announce the details of all transactions and decision-making after the investment operation of each project is completed. I hope to provide some ideas and references for the majority of users, and hope that more users can correctly understand the concept of value investment.
Seven Capital is an investment team with value investment as its core philosophy. Relying on the first-class warehouse [Wealth Code] research report , it focuses on investment in the blockchain field. The first-class warehouse has traversed 2300+ domestic and foreign blockchain projects, helping us to find undervalued investment targets. At present, all the projects invested by Liuyi Capital come from the research report of first-class warehouse [Wealth Code].
The project we are going to share today is Aave (AAVE) , formerly known as ETHLend (LEND).
Thanks to the development of the DeFi track in 2020, ETHLend, as a dark horse player in the lending field, overtakes cars on corners. The first-class warehouse started the “Project Screening” in the second half of 19, and Liuyi Capital discovered Ethlend from it. After launching the project research, it got on the train. The warehouse cost was 0.0039 USDT/LEND (the cost after token exchange was 0.39 USDT/AAVE). Subsequently, LEND ran all the way and broke through a hundred times, rebranding, token shrinking (100 LEND for 1 AAVE), and renamed AAVE.
After that, AAVE experienced a short-term correction, and the momentum was broken. On February 4, 2021, it rose to 520 USDT. The CMC ranking grew from #504 to #13 for 16 months. The total magnification was 1200 times. During the period, one currency was not sold. The full magnification was achieved in all, and 61 Capital made a profit of RMB 63.18 million.
The following is how Liuyi Capital’s resumption of trading has maintained its stake in AAVE’s entire growth process.
ETHLend
We first saw this project in June 2019, when it had not been renamed, it was called ETHLend.
In 2017, after ETHLend raised more than US$16 million, it launched a decentralized lending application. The product was built on Ethereum and used smart contracts to achieve disintermediation. Both borrowers and lenders can publish their requirements on the platform and customize parameters such as loan interest rates, collateral types, and mortgage asset ratios. Borrowers and lenders can directly find suitable orders on the platform, and the matching process is point-to-point. However, due to the lack of standardization of the product, the demand difference between the borrower and the lender is too large, the interest rates of the borrower and the lender do not match, and the amount does not match. It is actually difficult to match effectively, and ultimately the actual transaction volume of lending is miserable. The following is a screenshot of the statistics at that time.
ETHLend user interface, 2019-6-20
ETHLend operating data, 2019-6-20
We believe that the demand for borrowing in the bear market will be stronger than in the bull market, because users will be more inclined to mortgage cryptocurrency for borrowing when they are stuck, rather than sell at low prices. However, there is a contradiction in order-matched lending. It is difficult for both lenders and borrowers on the ETHLend platform to agree on the borrowing interest rate and loan amount through orders. This results in not many actual transactions that can be matched in the market, and the borrower releases the loan. After placing an order, it is often too late to wait for the matching loan order and have to cancel the order, which will eventually further reduce the effective transaction volume of the platform.
Therefore, at the time we had questions about lending such as Ethlend, can such lending products meet the needs of users? How big is the user demand? Finally, after some intense discussion, we decided not to vote.
At that time, LEND was ranked 318 in CMC, with a currency price of US$0.0101, which was a 42% drop compared to US$0.0173 for ICO.
Aave in a facelift
The work of project mining continues. We occasionally crawl the top 1000 projects in the market value of CMC website to screen and investigate, and capture new projects in the industry. In a flash of time came September 2019, ETHLend has been renamed Aave and once again appeared in our target list. After the first screening, Aave’s product revision plan aroused our great attention.
The Aave project was renamed, rebranded, and released new product loan fund pools DLP, Aave Pay and Aave Pocket, although the latter two products were not launched.
Among them, Aave’s decentralized loan pool DLP refers to the design of Compound, which is an open source loan agreement. Aave uses a smart contract to design a loan fund pool. In the fund pool, the lender can deposit working capital and receive interest income immediately. The borrower can borrow by depositing collateral, and the loan can be repaid as soon as it is borrowed. The two parties do not need to wait for the order to be matched. This fund pool greatly solves the problem of low matching transactions, allowing lenders to deposit and earn interest, and borrowers to borrow and withdraw.
Principle comparison chart before and after product improvement
At that time, the products launched by Compound also adopted such a decentralized loan fund pool solution, and the user experience was good. After the comparison, we found that although Aave’s product is still in the planning stage and has not yet been launched, the direction of the project improvement is correct, which solves the original problem of matchmaking. Therefore, after the resumption of trading, we immediately decided to invest.
At that time, LEND ranked 507, with a currency price of US$0.0036, a 64% drop from the first encounter of US$0.0101. The price of LEND currency traded sideways in the range of US$0.006-0.012 for about 7 months. With such a beautiful price and the potential for the future, we immediately decided to open a warehouse and get on board.
On September 7, 2019, we bought LEND for the first time on the Gate Exchange at a price of 0.0034 US dollars (33 satoshis).
Gate’s transaction history, 2019-9-7 to 2019-9-25
Binance transaction records, 2019-9-10 to 2019-9-19
From September 7th to September 25th, 2019, we completed the buying and opening of LEND. We bought a total of US$9,200, the quantity was 2,348,418, and the average price was US$0.0039, about 37 satoshis.
The first big callback
As the saying goes, it is easy to buy coins but difficult to keep them. But if you know every detail of a project, it’s not difficult at all to keep the money.
Our chief bargaining officer Luiz even made a prediction that it might rise to 1,000 satoshis when the price of LEND was 80 satoshis (October 16, 2019). As shown:
It is a pity that before we had time to build a full position, the currency price began to rise without looking back, rising all the way to the high of 268 Satoshi ($0.0220) on November 19, 2019, which is nearly 6 times higher than the holding cost. . Subsequently, the currency price corrected and reached the low of 116 satoshis (0.0085 US dollars) on December 29, a 61% drop.
During the major callback period, Aave disclosed more and more product information, code audit work was underway, and the product was released on the Ethereum testnet. The mainnet time is approaching. Among similar products, Compound’s capital scale has reached 27.05 million U.S. dollars, and Dharma’s capital scale has reached 21.39 million U.S. dollars. The scale of funds in this industry is gradually increasing, and the industry is improving.
LEND/BTC daily line, 2019-12
LEND/BTC daily line, 2020-01
At that time, we preliminarily judged that the daily level of the LEND/BTC trading pair had gone out of the bottom of the arc, and the price rose to the upper edge of the arc at the range of 175 satoshis to 280 satoshis, and fell back to the daily MA300, which has not yet fallen below 100 satoshis. And the good news of the project is approaching, the price of LEND has not risen but fallen, and the transaction volume has shrunk. There must be something strange, so the preliminary judgment is that LEND is in the stage of washing dishes. We don’t move.
From December 30, 2019 to January 1, 2020, LEND increased by 260% in three days, breaking through the previous high of 268 Satoshi, and ranking among the top 200 CMC. This is in line with our expectations to some extent.
Things go against one’s wishes in the transaction, it is common. Faced with a sudden drop in the currency holding process, if it is confirmed that the fundamentals of the project have not undergone major changes, and there is no negative information from the team members, you can continue to hold it. Of course, many people may make decisions based on gossip or even conspiracy theories. However, we believe that as long as we know enough about the project, we can tell the truth about most of the news. Making decisions based on the understanding of the project is the right choice.
Open the “One Horse Pingchuan” style rise
As we continue to follow up, the more we learn about the lending track where Aave is located, the higher the probability of accurately grasping the currency price. The first big callback did not wash us off. LEND, after breaking away from the bottom, combined with the progress of the project, ushered in a “one horse flat river” style rise.
On January 9, 2020, Aave products were officially launched on the Ethereum mainnet, supporting 16 cryptocurrencies. On January 18, Aave’s first flash loan, Flash Loan, was completed. Lightning Loan, a brand-new product, refreshes the knowledge of the DeFi circle. The scale of Aave’s funds also quickly exceeded US$10 million, US$50 million, and US$100 million, and business data continued to rise.
During this period, the price of LEND went from 100 satoshis to 500 satoshis, 1000 satoshis, 2000 satoshis, and 3000 satoshis. At the same time, Aave’s mortgage lending business volume continues to climb rapidly, and the team continues to innovate products, launching Flash loan flash loans, CA unsecured loans, adding ENJ and SNX as collateral, and changing the token mechanism, adding token Staking .
In addition, the DeFi sector continues to be hotspots, new gameplays continue, and community discussions continue. Finally, DeFi projects have launched mining mechanisms one after another, making the currency circle enthusiastic. Compound launched its own governance token COMP, leading the upsurge of lending/market making that is mining. Aave also improved the use of tokens, launched a new token, AAVE, to replace LEND, and added new gameplay.
The popularity of the DeFi industry continues to rise, and new Aave products are introduced one after another. * We constantly dynamically increase Aave’s market value estimates. *
LEND/BTC daily line, June 2020
After dynamic analysis of the project, increase the expected valuation
With the high enthusiasm for mining in DeFi projects, the launch of a new product of FYI revenue aggregator, and a series of popular events such as the issuance of Uniswap coins, the Aave project is also progressing very smoothly. In July, it received US$3 million from two well-known institutions, 3 Arrows Capital and Framework Ventures. Investment, announced in August the launch plan of the Aave V2 version, introducing community governance functions, a new token economic model, and a new security module. This series of projects has iteratively improved the product, and the team’s product and operational capabilities are very good.
On August 7, 2020, LEND hit a record high of US$0.8274 since its listing in December 2017, an increase of 212 times.
The second big callback
During this period, Aave’s assets exceeded $1 billion, the platform supported 19 tokens, and the number of users reached 1,500. However, after hitting a new high, LEND fell back and began to fall continuously for 3 months. During October, LEND performed migration and converted to AAVE tokens at a ratio of 100:1.
The low point on November 5, 2020 was US$0.2593 (converted to AAVE price of US$25.94), and the correction rate was about 70%.
LEND/USDT daily line, source CoinGecko, 2020-11
There is a popular phrase in the currency circle, “The team is doing things”, which is often used to mock projects that do not rise in price. Indeed, everything the team does is not necessarily reflected in the currency price. But the team can work hard in the right direction, and the value of the project will eventually be reflected in the currency price.
Although, after LEND tokens were converted into AAVE, there was a big callback. We feel that the product iteration of the project is rapid and the business is developing steadily. The founders continue to accept interviews & AMA, continue to expand the circle, and have strong operational capabilities. Call back, hold on!
Make a thousand times profit and sell
On December 4th, Aave officially launched the V2 version, which successively realized many important functions before.
Aave big event, source first-class warehouse wealth research report, 2020-12
As market sentiment picked up, DeFi funds exceeded 30 billion U.S. dollars, Aave funds exceeded 5 billion U.S. dollars, and the number of users reached 9,777, ranking among the top three in loan projects.
As a result, the AAVE currency price started the main upward trend, rising by about 30% on the same day for two consecutive days, with a cumulative increase of more than 50%. After our discussion, we believe that AAVE is overbought, and short-term risks are increasing. So we decided to open the clearance mode, starting from 400 US dollars, lighten up in batches, the highest selling is 519 US dollars, AAVE high of 520 US dollars that day.
The total average selling price of Liuyi Capital was US$440, and the position was reduced by 60%, resulting in a profit of approximately US$6,168,700, or RMB 39.5 million.
Aave V2 release time and selling point, 2021-02
Binance’s transaction records, February 5, 2021
After the AAVE lighten up, we still hold 40% of the positions, with a market value of approximately US$3.7 million, or RMB 23.68 million. We will continue to hold this part of the position. After Aave’s fundamental counterattack, it has grown into a white horse project. But with the growth of the blockchain industry, we believe that the Aave project business can continue to develop.
The resumption is here, holding the 1,000 times interest rate and not easily losing a bargaining chip. What we think is important is:
Keep a keen curiosity about new things in the industry, especially technology and business innovation.
Fully understand the development of the project and the industry in which you work, so that you can synchronize or even advance your knowledge and better grasp the project valuation.
Understand and hold! There is often only a thin line between strength and luck. Many people mistake luck for strength, and the result is often that the money made by luck is lost by strength. After reading our review, many friends will inevitably think that we made money by luck. Of course, we will use project review after another to prove: Value investment, strength is more important than luck!
