The Chief Investment Officer of cryptocurrency investment firm Arca, Jeff Dorman, has revealed the firm believes SushiSwap’s SUSHI token may be the “most undervalued” in the cryptocurrency space based on three main overhands.
In a Twitter thread, Dorman revealed that SUSHI has underperformed other decentralized exchange tokens, including that of rival automated market maker Uniswap. The analyst outlined three main overhangs: rolling six-month vesting unlock from the initial SushiSwap yield farming period, the growth of PancakeSwap, and the hype surrounding Uniswap V3.
Dorman added that as yield farming can help a project gain traction overnight, dilution from it can also affect its value. The same thing happened with Curve’s CRV token, he said and Uniswap’s UNI during their yield farming periods.
Yield farmers “made a killing” after waiting out their six-month vesting periods, and then unloaded their gains on the market, which had to absorb it.
From a value investing perspective, Dorman said, these overhands create “interesting opportunities,” as SUSHI is now “clearly mispriced even on a FDV [Fully Diluted Value] basis after factoring in inflation.” Moreover, the hype surrounding the third version of Uniswap may have led to SUSHI’s underperformance.
To the analyst, however, UNI is focusing on spot trading, while SUSHI is “expanding vertically w/ Kashi & other future Bentobox products.” Sushi’s cash flow now goes directly through xSushi token holders, while UNI’s fee switch is still being discussed.
Finally, he revealed that analysis shows that while Sushi is often referred to as a decentralized exchange of the people because it had no venture capital funding behind it, it’s an exchange for decentralized finance power users and yield farmers.
On-chain data and trading volumes show that SUSHI’s users are cryptocurrency whales and not retail traders, as Uniswap has a significantly larger userbase, but SushiSwap has a much larger trading volume per user.
As a result, he believes SUSHI’s biggest competitor is PancakeSwap and not Uniswap, as the former is an exchange on the Binance Smart Chain that became viable because of the high gas fees on Ethereum. As rewards were bigger on PancakeSwap and fees lower, total value locked remained flat on SushiSwap.
Dorman concluded that these three overhands “have all impacted $SUSHI’s price, but have done very little to impact Sushi’s core business and growth.” Volumes and cash flow to xSushi token holders have “grown at 22% CMGR [Compound Monthly Grow Rate] since the decentralized exchange went live.
SushiSwap has meanwhile kept on expanding to other blockchains, including that of Polygon and is gaining traction. He also added an ongoing Treasury Diversification Proposal could lead to the diversification of the platform’s current SUSHI-only treasury into a basket of DeFi blue-chip tokens to strengthen its balance sheet.
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