Currently, more and more traders on Twitter are buying Altcoin. In addition, many believe that OG DeFi tokens will make a comeback (for example, Aave now).
Personally, I have a ton of Altcoin locked up via OTC or angel rounds, and own a ton of $ETH.
Today I want to talk about a tweet I sent out a few weeks ago:
These three categories are pretty huge, but let’s try to dig into them and see why they are so interesting and why there is so much innovation happening in this space right now.
Imagine this: you wake up to find that your locked tokens are suddenly worth 100x more, but you can’t use them for a year.
Oh, imagine a world where your locked tokens don’t sit idle, stablecoins aren’t boring at all, and you can bet on the future with surgical precision…
Let’s talk about the secondary market first.
1. OTC secondary market
Remember when Binance contributed significantly to the fall of FTX? Yeah, it was an interesting time. There was not enough liquidity in the OTC market, so Binance started selling its $FTT tokens on the market. Investors with vested/staked/locked FTT positions wanted to seamlessly sell their positions to anyone at a lower price.
The incident highlights a big question in cryptocurrency: What do you do when you’re sitting on a potential gold mine (or ticking time bomb) of locked tokens?
Enter the world of secondary OTC markets.
Not just for whales
First, let me give you a little ELI5 introduction.
Cryptocurrency OTC trading refers to transactions that take place directly between two parties outside of traditional exchanges. Historically, this has been an area where big players have made big moves that they didn’t want announced to the world.
But here’s the thing: OTC trading isn’t just for whales anymore. With the proliferation of token sales, airdrops, and vesting programs, there’s a growing need for more accessible OTC solutions.
This is where the secondary market comes into play.
Why is the secondary market important?
Imagine this: you are an early contributor to a promising project. The token’s current fully diluted valuation (FDV) is $10 billion, but you only invested a measly $100 million. Congratulations, on paper, you’ve made 100x!
But there's a catch - you're locked in for another 36 months.
This scenario isn’t just a thought experiment; it’s happening in the cryptocurrency space. Early investors are sitting on potential wealth, but they’re stuck with vesting schedules and lock-up periods. Secondary markets offer a way out — or at least a way to realize some of that value now.
There are currently a few projects trying to solve this problem: Stix, OffX, Http OTC, and Secondary Lane.
How it works
Generally speaking, it goes like this:
1. You present a SAFT (Simple Agreement for Future Tokens) to prove that you actually own the item you want to sell.
2. The platform displays your offer to a group of potential buyers.
3. If interested, you need legal approval (because you know, securities laws and all that fun stuff).
4. You may also need to obtain approval for the agreement itself, depending on its terms.
It’s not as simple as getting listed on Uniswap, but it could be a lifeline for those holding locked tokens.
Tokenized SAFT and Decentralized OTC
Now, things get really interesting.
What if we start tokenizing the SAFT itself or creating other derivatives based on locked tokens? Imagine being able to trade a fraction of a future token allocation. We have liquidity staking, so why not take it a step further and introduce liquidity vesting?
Let’s add a fully decentralized OTC market platform to seamlessly trade these derivatives. No intermediaries, no closed groups — just pure, permissionless trading of locked assets. This sounds great in theory, but the regulatory challenges are… well, you know how it goes.
Yes, secondary markets for OTC transactions aren’t always sunny. They may increase liquidity and price discovery, which is great, but there are some serious problems:
- Insider Trading: What happens when team members start selling tokens before bad news breaks?
- Market manipulation: Due to relatively low liquidity, these markets can be prime targets for pump and dump schemes.
- Regulatory nightmare: The SEC is already skeptical of cryptocurrencies. Adding another layer of complexity isn’t going to make them happier.
The future of the OTC secondary market
So where is this all going? If I had to bet (more on this in part three of this article), I’d say we’re going to see a lot more innovation in this space. The demand is there, and where there’s a demand in crypto, solutions tend to follow — for better or for worse.
We might see:
- More complex derivatives based on locked tokens
- Integration with DeFi protocols to increase liquidity and lending.
- A fully decentralized, regulatory compliant platform that meets the needs of everyone, including institutional investors around the world.
One thing is certain: as long as more and more projects inherently come with token lock-up periods and vesting schedules, there will be a need for secondary markets.
Whether they will ultimately have a positive impact on the ecosystem remains to be seen.
But hey, that's half the fun, right?
So how do you get the vested locked tokens in a contract that is acceptable to both parties? Is this possible without communicating with the DeFi protocol or startup team?
What if you could make a contract (smart contract address) that transfers/withdraws tokens to/from a precise stock ticker at a precise address?
example:
-Bob will receive Monad tokens in 6 months (15% of TGE). Then 85% in the next 36 months. Bob’s wallet address is 0x….. Currently his tokens are worth 5 billion (token valuation) and the book value of all his tokens is $200,000
-Karen wants to buy tokens for $100,000 (50% discount = $2.5 billion valuation) because she has to accept the 36-month vesting terms.
-Bob accesses his wallet where he will receive tokens from the protocol, and then he signs the message from Karen, making all future tokens automatically transferred to Karen. 15% of the TGE and monthly returns for the following 36 months.
Not sure if this is possible today, but it should be possible to create a token standard for it.
risk:
-Bob tells the protocol that he wants to change the payment address. So it is best to contact the team.
Ok, FYI, I don't remember the valuation of Monad, this was just an example.
I'm not sure how this OTC secondary issue will be solved without interacting with the team/legal, but that would be the dream. Make OTC sales as easy as borrowing USDC on AAVE.
If you’re reading this and are interested in taking this idea and solving this problem, let’s chat.
2. Innovative stablecoin platform
Ok, let’s talk about stablecoins. But not the old generation USDT or USDC, but those weird and interesting stablecoin 2.0. Because let’s face it, with the recent 20% daily volatility, it would be nice to use a little more stability in our lives.
Furthermore, stablecoins are the cornerstone of DeFi, a safe haven in a storm, and something you might have wished you were in before the last financial crisis.
But traditional stablecoins such as USDC and USDT have some problems:
- They are centralized, which means there is a single point of failure
- Faces ongoing regulatory challenges
- They are not capital efficient
But we have several projects that aim to address these issues, and may create some new ones in the process.
USDe on Ethena
Let’s focus on Ethena, because these guys are trying to do something… interesting. They call it the “Synthetic Dollar Protocol,” and it sounds like something out of a science fiction financial dystopia.
How USDe works (in theory)
1. You deposit staked ETH (such as stETH) as collateral.
2. Ethena opens a corresponding short position on the derivatives exchange.
3. You will receive USDe tokens in return.
The idea is that the short position hedges against ETH price fluctuations and keeps the value stable. It's like playing on both sides of a seesaw, hoping you don't fall off.
Basically, you can stake your USDe for sUSDe and get the following benefits:
- Earn rewards from ETH collateral
- Financing and Basis of Hedge Positions
Risk (because there is always risk)
- Funding risk: What happens when funding rates are negative for a long time?
- Liquidation risk: If the spread between ETH and stETH becomes too large, things could get messy.
- Smart Contract Risk: Because without the threat of hacking, it wouldn’t be DeFi, right?
Ethena has an insurance fund to cover some of these risks, but in the crypto space, we’ve learned that “insurance” usually means “the first thing to go when things go bad.”
While Ethena is making waves, they are not the only ones trying to reinvent the stablecoin wheel:
Common currencies
Usual’s core positioning is a secure and decentralized fiat stablecoin issuer. They are building a multi-chain infrastructure to aggregate tokenized real-world assets (RWA) from large companies such as BlackRock, Ondo, Mountain Protocol, etc.
The end result? Turning these RWAs into a permissionless, on-chain verifiable, and composable stablecoin, USD0. It’s like they’re trying to build a bridge between the boring (but stable) world of traditional finance and the wild west of DeFi.
USD0 is billed as the world’s first RWA stablecoin that aggregates various US Treasury tokens. Here’s why it could be a big deal:
- Security: Stablecoins are backed by actual U.S. Treasury securities.
- Transparency: Real-time transparent reserves are addressing one of the biggest criticisms facing existing stablecoins.
- Stay away from bankruptcy: Unlike some stablecoins that are pegged to commercial bank deposits (such as USDC during the Silicon Valley Bank crisis), USD0 aims to be truly independent of traditional banking risks.
They also have a “useless governance token”, but it might not be that useless:
- It grants ownership over actual protocol revenue, not just voting rights on proposals that no one reads.
- Staking $USUAL allows you to earn more $USUAL, creating a virtuous cycle for long-term holders.
- There are rumors of future buybacks to increase “real value” — always a popular move in cryptocurrency circles.
Perhaps most interesting is that Usual is allocating 90% of its supply to the community, a bold move in a space where founders and venture capitalists typically keep the lion’s share for themselves.
Challenges and Problems
Of course, it wasn’t all smooth sailing. Usual faced some significant challenges:
- Regulatory scrutiny: Anything involving U.S. Treasuries is bound to attract regulatory attention. How will Usual navigate this complex landscape?
- Competition: The stablecoin space is highly competitive. Can Usual carve out a significant niche?
- Adoption: Will it be different for DeFi users to accept stablecoins backed by treasuries instead of dollars?
Potential impact
If these new stablecoin models actually work (work, as in they actually become relevant and widely used, rather than being a speculative anecdote), we may see some major shifts in DeFi:
- Capital-efficient lending
- New income generating strategies
- Possibly less systemic risk (or just new, more exciting types of risk)
To be honest, when I see these new stablecoin platforms, there’s a part of me that thinks, “Haven’t we learned our lesson yet?” I mean, I lived through the UST debacle, and that was about as entertaining as a drunk gibbon getting a root canal.
But another part of me — the part that’s been hopeful since 2017 — is excited. Because this is what crypto does best: take existing financial concepts, add some complexity and risk, and somehow end up innovating.
In the next issue, I will dive deeper into the stablecoin opportunity. Examining Ethena, Usual, Anzen, Elixir USD, and Mountain USD for yield opportunities and best ways to invest.
3. Gambling Platform/Prediction Market
OK, folks, now it’s time to talk about everyone’s favorite hobby: gambling – I mean “speculative predictions.” Because since you can bet on anything, why limit yourself to betting on price movements?
Imagine if you could bet on the exact date of the last Bitcoin halving, or the color of CZ’s shoes when he gets out of jail.
Welcome to the world of crypto prediction markets, where your random thoughts could make you rich (or, cost you a small fortune).
Prediction markets are not new, but blockchain technology has given them a new lease of life. The idea is simple: create a market for any future event, let people buy and sell stocks based on their predictions, and watch the wisdom (or collective stupidity) of the crowd emerge.
Non-Sports Betting vs Sports Betting
There are two types of crypto prediction markets:
1. Non-sports prediction markets: Bet on anything from rate cuts to whether Vitalik will wear a suit.
2. Sports Betting: When you want to combine your gambling addiction with your love for sports.
Polymarket and friends
Let’s focus on the example of a crypto prediction market: Polymarket.
How does it work?
Just build a market around any yes/no question and allow people to trade based on the outcome. Voila!
Popular markets include politics, crypto events, celebrity gossip – you name it, there’s probably someone keen to bet on it.
But Polymarket is not alone.
Newer platforms like LimitlessExchange and HedgehogMarkets are also looking to get a piece of the action. LimitlessExchange offers markets denominated in ETH, while HedgehogMarkets on Solana is attracting attention with its unique pooled betting system.
One of the most exciting developments in this space is permissionless markets. Imagine a world where one can create a prediction market on almost anything without needing permission from some old guy who never lost money on some obscure memecoin.
The ultimate form of free speech backed by encryption.
Another revelation is the application of artificial intelligence in market decision-making. Imagine a prediction market where artificial intelligence can automatically resolve the outcome of such complex and delicate events without human intervention.
It's like we're constructing an oracle of reality.
physical education
Let’s talk about how to invest ETH in sports. SX Bet, Azuro, and Overtime are bringing sports betting into the Web3 era:
Instant Payouts: You no longer have to wait days to get your winnings.
Transparency: All bets and odds are settled on-chain. No more shady bookmakers.
Global Access: Bet anywhere, anytime.
Some crypto sports betting platforms are seeing daily trading volumes that even small countries would envy.
But this is where things start to get really crazy.
There are signs that there are some pretty high stakes bets in the cryptocurrency prediction markets. Examples abound: LogX Trade is building perpetual futures for “what if” things like Trump’s win. Because regular bets aren’t risky enough, so… anything could go wrong, right?
But don’t forget that there are also low-profile prediction markets in memecoin.
$TRUMP and the $BODEN tokens are little more than proxy bets on the election outcome; holders are little more than speculators, guessing not only who will win, but how others will guess.
It’s like meta-betting, and it’s really fun to observe.
Looking to the future, I ask myself: Will decentralized prediction markets become a standard tool for business and governance decision-making, or will having a child one day require consulting an almighty blockchain for its opinion on fertility issues?
One thing is certain: in crypto prediction markets, the lines between gambling, investing, and forecasting have become very blurred.
The possibilities are both exciting and terrifying.
Predicting the future
So where is this all going? If I had to bet (and I obviously do), I’d say we’re facing a future where the lines between prediction markets, traditional finance, and everyday decision making become very blurry — very blurry. What can we expect?
- Create a market and use AI to solve it: Imagine when markets simply and automatically emerge around trending topics, and AI simply handles everything that determines the outcome.
- Combine this with real-world governance: Can we see prediction markets influencing policy decisions?
- Make micro-predictions about everything: betting on tomorrow’s weather, tweet likes, or whether my crush will finally notice me.
Think of it this way: Another innovative solution includes using yield-bearing stablecoins or even designing a lending protocol that allows users to borrow against their positions.
For example, bet $1,000 on Trump to win and use leverage. The position will not be settled until November. So bet $1,000 but only cost $200 (5x leverage —> capital efficiency). Actually https://www.levr.bet/ is doing this.
Or you can use your position as collateral to borrow money. This approach can make prediction markets more attractive.
Your $1,000 bet on Trump —> $500 loan to use for anything.
The potential here is incredible. We are talking about a world where collective intelligence is combined in real time, information has a price, and can be traded as efficiently as a stock.
This is what would happen if Wikipedia and Wall Street got together and had a child, and that child loved gambling.
But let’s not get too excited, we still have some hurdles to overcome:
- Regulatory challenges: Governments are not too keen on unregulated gambling apps. It’s like magic, isn’t it?
The prediction problem: How do you ensure that bets are resolved fairly and accurately?
- Market manipulation: With greater liquidity comes greater liability and the potential for severe disruption.
The future is unpredictable
The landscape is changing rapidly. From secondary OTC markets providing a lifeline to locked-up token holders, to innovative stablecoins challenging our notions of value, to prediction markets that let you bet on nearly anything — the future of finance is being written (and rewritten) in real time.
Are these innovations the key to unlocking the next wave of cryptocurrency adoption, or are they just more sophisticated ways for scammers to lose money?
Honestly, probably a bit of both.
What I do know is this: the creativity and sheer audacity in crypto never ceases to amaze me. Just when you think you’ve seen it all, someone comes along and creates an AI-powered, quantum-entangled, blockchain-based solution to a problem you didn’t even know existed.
What will happen next? I don't know.
But I’ll be here, buckled up, ready for the ride, and probably making unwise bets on prediction markets and rushing into any new stablecoin that promises me great wealth.
Because in crypto, the only thing crazier than missing out on the latest innovation is missing out on it entirely.
Remember, the future hasn’t been written yet, but with these new tools, we might actually be able to bet on it.
Of course, don't bet more than you can afford to lose. This isn't financial advice -- but then again, in this financial Wild West, what is?
Anyway, take care!
Don't gamble more than you can afford to lose. Of course, this isn't financial advice -- but then again, what is financial advice in this crazy financial world?
Still, stay safe out there!
