Curve DAO As A Slippage-Resistant DEX

A detailed research on Curve DAO backed by market data, social media analytics and developer adoption tracker.

Curve DAO As A Slippage-Resistant DEX

Investment Disclaimer:

  • I am not a registered investment, legal, or tax adviser or a broker/dealer, and all opinions expressed by me are from my research for educational purposes only.
  • Past performance presented here is not an indicator of future performance.
  • This post expresses my own opinion about the cryptocurrency mentioned herein and is not an offer to buy or sell, or a solicitation of any offer to buy or sell the cryptocurrency mentioned in this post.
  • I do hold a long position in CRV as a token holder.

1. Introduction to Curve Finance

1.1. What is Curve Finance ?

Curve is an exchange liquidity pool that is designed for extremely efficient stablecoin trading with low risk and low fees. Centralized exchanges would usually charge higher fees on trading/ swapping of stablecoins, and Curve is a decentralized protocol that is created to solve this problem and enable frictionless transfers and smooth conversions of different stablecoins.

Curve achieves extremely efficient stablecoin trades by implementing the StableSwap invariant, which has significantly lower slippage for stablecoin trades than many other prominent invariants (e.g., constant-product).

In addition, Curve also integrates with Synthetix (a decentralized derivatives liquidity protocol) to allow large scale swaps between different asset classes with minimal slippage.

Curve was originally built on Ethererum blockchain, but it is now offering a multi-chain functionality with integration of Arbitrum, Avalanche, Fantom, Harmony, Optimism, Polygon and xDai chains.

1.2. How does Curve incentivize liquidity providers?

Liquidity providers are incentivized via 3 reward mechanisms:

  • Trading fees of liquidity pools (LP)

All trading fees paid by traders who swap tokens on Curve LPs are distributed among LP providers. Whenever there is a high trading volume, LP providers are rewarded with large trading fees as a result of higher fees generated from voluminous transactions.

  • Staking/ Lending income generated from third-party staking/ lending protocols

While a sufficient amount of liquidity would be reserved for Curve traders, the unused liquidity would be staked/ lent to third-party DeFi protocols like Compound Finance, adding to the rewards that are distributed to LP providers on top of the trading fees

  • Award of Curve governance token, CRV

Curve also incentivizes LP providers with its protocol governance token, CRV.

1.3. What is the usage of Curve DAO token (CRV) ?

CRV could be used for staking, boosting (boost the current rewards earned from LP up to 2.5x of provided liquidity) and voting. These 3 things however, would require CRV holders to first vote lock their CRV tokens in exchange of veCRV. veCRV stands for vote-escrowed CRV, it is simply CRV locked for a period of time. The longer you lock CRV for, the more veCRV you receive. Unlike most of the other DAOs, Curve DAO rewards loyalty by increasing the veCRV distribution to long-term holders.

2. How Curve Performs Relative to Other Cryptos ?

Performance of All DEX Cryptos Under Quantdoge’s Watchlist since 2021 (Sorted by % Return)

CRV has undergone 219.55% return from USD 0.623 to USD 1.9908 since 01 Jan 202. CRV is the 7th best performing crypto assets among others here.

Performance of All DEX Cryptos Under Quantdoge’s Watchlist since 2021 (Sorted by % Change in Market Cap)

CRV’s market cap has increased 600.38% return from USD 111.53M to USD 781,13M since 01 Jan 2021.

CRV is the 6th best performing crypto assets by market cap among others here, with Trader Joe ($JOE) being the DEX leader both in terms of price performance and market cap performance.

Judging from both performance measurements (Market Cap and Price), Curve DAO Token (CRV) is growing on par with its potential as both its growth in market cap and price are going hand in hand.

3. Technical Analysis on Curve

3.1. Volume Weighted Average Price (VWAP)

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VWAP is a technical indicator used by a trader to gauge the overall trend of an asset price movement. VWAP line (orange line) represents the volume-weighted average price (average price here is defined as the average of high, low and close prices) while close price line (blue line) represents the price when CRV is closed at the end of every single day.
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Whenever blue line (close price) is above orange line (VWAP), it indicates that the asset is gaining momentum and being traded higher than its average price level. This would represent a 'buy' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'sell' opportunity, anticipating that the price of CRV (blue line) to fall to its average level (orange line).
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Whenever blue line (close price) is below orange line (VWAP), it indicates that the asset is losing momentum and being traded lower than its average price level. This would represent a 'sell' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'buy' opportunity, anticipating that the price of CRV (blue line) to rise to its average level (orange line).

As of 08 Mar 2022, VWAP is suggesting that CRV is losing a significant portion of its momentum and is now trading way below its weekly and monthly volume-weighted averages.

3.2. Moving Average Convergence Divergence (MACD)

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MACD is often used by trader as a momentum indicator. There are 2 lines that form the above charts, namely MACD (12, 26) lines and Signal(9) line, while the histogram is calculated by subtracting Signal (9) from MACD (12,26). Histogram would fall to the negative territory whenever MACD (12, 26) is trending at a lower level than Signal (9) and rise to the positive territory whenever MACD (12,26) is trending at a higher level than Signal (9).
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MACD (12, 26) is computed by subtracting the 26-day exponential moving average (EMA) of CRV closing price from its 12-day EMA. Signal (9) on the other hand is calculated as the 9-day EMA of MACD (12,26).
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As MACD (12, 26) goes higher away from Signal (9), it signifies that CRV is gaining momentum and whenever it goes trends at a lower level than Signal (9),it signifies that CRV is losing momentum.

As of 08 Mar 2022, MACD is suggesting that CRV is trading within its expected (a.k.a “fair value”) range.

3.3. Bollinger Band

Bollinger band is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. Its chart made up of 4 lines, namely:

  • SMA (20) (blue line), which is the 20-day simple moving average price of CRV
  • Upper Band (orange line), which is computed by adding 2 standard deviations of CRV on SMA (20)
  • Lower Band (red line) , which is computed by subtracting 2 standard deviations of CRV from SMA (20)
  • Close (green line), which is the daily closing price of CRV
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Whenever close line (green) touches the lower band (red), it indicates that CRV is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever close line (green) touches the upper band (orange), it indicates that CRV is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity.

As of 08 Mar 2022, Bollinger Band is suggesting that CRV is trading within its oversold (undervalued) zone.

3.4. Relative Strength Index (RSI)

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Just like Bollinger Band, Relative Strength Index is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. There are 2 psychological levels, i.e. 30 and 70 in RSI. Whenever the RSI reaches 30, it indicates that CRV is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever RSI reaches 70, it indicates that CRV is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity.

As of 08 Mar 2022, RSI is suggesting that CRV is neither oversold not overbought.

3.5. Price and Volume Analysis

CRV’s average daily active trading volume is fading away as its price continues its downward path from USD 4.5 at the start of the year to now below USD 2.50 at the time of writing.

Based on the technical analysis presented above, Quantdoge is neutral on CRV, but I could be wrong, hence please make your careful due diligence before making any financial decision

4. Curve’s Risk Profile

According to Investopedia, Value-at-Risk is defined as:

A  statistic that quantifies the extent of possible financial losses within a firm, portfolio, or position over a specific time frame. This metric is most commonly used by investment and commercial banks to determine the extent and probabilities of potential losses in their institutional portfolios.

Based on the 100-day 95% historical Value-at-Risk (VaR) profile of Curve defined above, CRV seems to trade at a lower risk level on 08 Mar 2022 as compared to 10 days before on 26 Feb 2022, with its biggest pullback being seen at -18.21% on a single day during the last 100 days. However, I could be wrong, hence please make your careful due diligence before making any financial decision.

Thinner tail was observed on CRV’s probability distribution chart of daily returns as compared to 10 days ago, with a lower chance of losing more than 20% on any single day, but also having a lower chance of gaining more than 20% on any single day. This is a sign that CRV’s market risk has been stabilized.

Curve DAO reached its peak in Google Search on 2022-01-30 with a Google Score of 100.

Over the last quarter, Curve DAO’s Google Score has decreased 73.68 % from 30.4 to 8.0.

Over the last 6 months, Curve DAO’s Google Score has decreased 36.51 % from 12.6 to 8.0.

Over the last 30 days, most of Curve DAO’s searches are coming from EU countries, namely Netherlands, Turkey and Belgium.

6. Developer Analytics

Fork

Fork refers to the amount of time where the Github repo of current cryptocurrency is being copied. Higher fork number could mean that this cryptocurrency project is getting more interest in the developers community who likes to explore more on the deep technical of this project.

Curve DAO forks increased 109.92% from 121 to 254 in the past year.

Star

Star refers to the number of developers who bookmark the Github repo of current cryptocurrency. Higher star number could mean that this cryptocurrency project is getting more general interest in the developers community.

Curve DAO stars increased 110.51% from 314 to 661 in the past year.

Pull Request

Pull request contributor refers to developer who has made a successful improvements/ modifications on the Github repo of this current cryptocurrency project. Higher number of pull request contributors could mean that there is a high number of commitment given by developers to this cryptocurrency project.

However, a low number also could mean that the developer community of this project applies a strict standard when it comes to code review, so only developers who have published a high quality code with highly impactful features got approved.

Curve DAO pull request contributors increased 20.0% from 10 to 12 in the past year.

7. Binance Futures Activities

CRVUSDT futures have relatively more buyers than the sellers in this month of March 2022.

CRVUSDT long-short ratios remain consistently higher than BTCUSDT and ETHUSDT futures. After 9 Mar, a lot of CRV futures traders are entering their long positions while CRV’s mark price is dropping, thinking that it’s one of the golden opportunities for them to buy the dip.

Please take note that this long-short ratio however is simply just dividing the number of accounts who are long by the number of accounts who are short, without taking any buy/ sell volume into consideration.

Despite the increasing number of traders taking long positions on CRVUSDT, the sell volumes outweighed the buy volumes still every day for the past 7 days. This could be an indication that although there are greater number of traders who are long CRVUSDT than the one who are short, most of them do not take a large enough position to move the market upwards while liquidation and cut loss continues as CRVUSDT mark price continue to fall.

If you like my analysis and articles, please follow me at @quantdoge for daily updates.

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