Chainfeeds Summary:
Ouroboros Capital introduced how the Ouroboros DeFi Yield Fund generates returns by identifying and investing in high-quality projects. It focused on the Usual Money project, analyzing its unique token economic model, strong team, and how it captured excess returns by early identification of the project's value and market mispricing.
Source:
https://x.com/ouroboroscap8/status/1868778932532920687
Author:
Ouroboros Capital
Viewpoint:
Ouroboros Capital: In the Ouroboros DeFi Yield Fund, our investment strategy is rooted in identifying and deploying liquidity to the most promising projects. As liquidity providers, we focus on concentrating liquidity in protocols we highly trust. Our belief is simple: quality projects can earn listing opportunities on top CEXs, thereby commanding premium valuations. A recent example is Ether.Fi in the LRT space, which we identified early as high-quality and have seen significant valuation premium. After confirming Usual as a potential listing candidate, we started looking for opportunities to capture mispricing. Very early on, our screening system identified Usual's tokens as significantly undervalued. The PT market had at one point priced the project at less than 15% APY. This implied a $150M FDV and around $20M market cap, while Usual's TVL was around $200M-$300M. Compared to Ethena's 2-3x FDV/TVL valuation, Usual was priced at only 0.5x. We captured this mismatch by shorting USDC0++ on Morpho. USDC borrowing rates on Morpho were around 10-15% (sometimes as high as 20%). While the borrowing costs were high, we believed this provided an asymmetric directional investment opportunity, given our conviction in the project's fundamental mispricing. We persisted in this view and ultimately captured the returns.
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