OlympusDAO is a fraud. Never invest
If you are not familiar with Defi 2.0, please DYOR and get the git of it.
OlympusDAO, KlimaDAO, Wonderland, etc. are all based on the concept of Defi 2.0 which I will explain why they are fradulent.
Right now, OlympusDAO offers around 7,000% APY. Which seems great.
It was around 14,000% when I staked, so the number is decreasing pretty quick.
But how on earth are they able to give you that much interest?
At a regular Defi project, if you give out that much interest, below is what happens.
People collect high percentage interest.
=> Some sell the tokens received by interest.
=> The number of tokens in the market increases, forcing the price to drop.
This is normal.
But for $OHM, even though a high volume of tokens are flowing into the market but the price is not dropping much.
It is because OlympusDAO is managing the LP.
Let’s make it simple
Let’s say I make a bank called ‘REAL BANK’ and announce that I will offer $REAL as a future currency.
=> If you deposit $REAL, the bank will give you 10,000% interest.
=> $REAL is priced at $100 initially, and for each $REAL token, the bank will have $1 in the treasury.
($REAL is backed by $1 of fiat, but is not a stable coin.)
=> REAL BANK had a capital of 1 billion USD, so they made 1 billion tokens of $REAL.
=>Intial Coin Offering was a success, so the bank got 100 billion USD.
=> With the money in the bank, they bought a large amount of tokens and the token price increased to $1,000.
=>When there are people wanting to buy $REAL the bank sell it at a reasonable price. When there are nobody wanting to buy it, they reduce the price bit by bit.
=>When there are people trying to sell $REAL, the bank buy them at a slightly lower price.
=> If the people trying to sell increases, will the bank eventually run out of money?
NO. The price of $REAL will drop below $1 before they get bankrupt.
You have all seen this stats.
What does RUNWAY exactly mean?
I am not sure how that number came out, but it means that according to the money they have in treasury, it will take that many days for them to run out of money.
What is the end picture of OlympusDAO?
If you read their whitepaper, they aspire that $OHM will someday work as a digital currency.
In order for $OHM to work as a currency, the price should be stable.
Being a stable coin means that for every coin, capital should be backing it at the same price.
Like I said, $OHM is backed by $1.
OlympusDAO only backs $OHM with $1.
The price of $OHM will eventually become $1.
Nobody knows when that day will come.
For now, the DAO has a lot of money. They can buy $OHM at $900.
But as time goes by, more people will sell $OHM, the money in the treasury will run out, and $OHM price will fall.
The high number of APY is attractive. But if you break it down to days, it is not that much.
The magic of compound interest is what hinders people from making rational decisions. Even for 7,000% APY, the 5day interest rate is only 6%.
If you deposit for 30 days, it will give you 41% interest. Are you confident that $OHM will not drop by 41% within 30 days?
At first, I was not really sure what their end picture was.
But as I was scrutinizing Wonderland (another Defi 2.0 project inspired by OlympusDAO), there was this text in their whitepaper.
Do you now see what is coming?
In a very optimistic aspect:
You buy 1 $OHM, it becomes 70 $OHM in one year.
=> $OHM price drops to $20.
=> $600 profit (75% profit)
In a very passimistic aspect:
You buy 1 $OHM, it become 40 $OHM in one year due to drop in APY.
=> $OHM price drops to $1.
=> $760 deficit (95% deficit)
I assume that things will turn out somewhere in between those two predictions.
All in all:
1. Defi 2.0 cannot and will not give you that much profit.
2. The later you invest, the higher chance you have to lose money.
3. 7,000% APY is not that much if broken down to one or two months. You are wrong to assume that you can make a lot of money short-term.
Always, DYOR.