Does SBF really have confidence in AVAX? Let's take a look at his on-chain operations

Author: 0xMaxi, Rhythm BlockBeats

Recent Statements from SBF

SBF, the founder of Alameda Research and FTX, is undoubtedly a successful investor, having accumulated over $22.5 billion in wealth during the four years from 2017 to 2021, earning a spot on Forbes' 30 Under 30 list.

In an interview with Decrypt on January 18, 2022, SBF expressed his optimism about three sectors: the Solana chain, the Avax chain, and cross-chain asset tools, for the following reasons:

• The scalability of Solana can reach an industrial revolution level.
• Avax is a true blockchain, with a professional team and the potential to become a massive field.
• Cross-chain assets: BTC remains the core of the cryptocurrency ecosystem. Synthesizing BTC and mainstream tokens like ETH for cheap and quick transfers across various blockchain networks requires deeper research.

Everyone knows that SBF has always been a supporter of the Solana ecosystem; he not only co-founded Serum but also opened the door for Solana ecosystem projects to launch on the FTX trading platform.

At the same time, in multiple public statements in 2020 and 2021, SBF has positively evaluated the capabilities, products, and ecological prospects of the AVAX team. In SBF's words, the AVAX ecosystem is often compared to the "Ethereum killer" alongside the Solana ecosystem.

So, does SBF really have confidence in the AVAX ecosystem, or is it just short-term speculation for profit? Let's take a look at SBF's participation in DeFi projects on Avax over the past year.

SBF's Participation in the AVAX Ecosystem

Although SBF had clearly expressed his optimism about the AVAX network before the AVAX token launched in September 2020, there was no sign of SBF's related team (Alameda/FTX) in the public information regarding AVAX's multiple rounds of financing.

On-chain data shows that SBF has been very active in participating in DeFi mining projects within the AVAX ecosystem.

• In February 2021, he participated in liquidity mining on the decentralized trading platform Pangolin.
• In August 2021, under the $180 million incentive program Avalanche Rush by the Avalanche Foundation, SBF mined on BENQI and Trader Joe.
• At the end of September 2021, he participated in mining for the cross-chain bridge project Synapse.
• In January 2022, he participated in mining for the stablecoin swap protocol Platypus.

As of January 22, 2022, two wallets marked as Alameda by Nansen had total assets of $1.04 billion in the AVAX ecosystem, with the funding situation of the two wallets as follows:

Wallet One: Total assets of $1.398 billion, with AVAX network assets of $940 million, accounting for 68%;

Wallet Two: Total assets of $946 million, with AVAX network assets of $100 million, accounting for about 11%.

It can be seen that DeFi projects on the AVAX network have become the focus of SBF's current mining investments.

The current funding for the DeFi projects SBF is participating in is as follows:

• BenQi, lending protocol, $256 million
• Aave, lending protocol, $231 million
• TraderJoe, decentralized trading platform (DEX) liquidity pool, $80.3 million
• TraderJoe, lending service, $64 million
• Blizz, lending protocol, $84 million
• Synapse, asset cross-chain bridge, $59 million
• Platypus, stablecoin swap protocol, $195 million

Summarizing SBF's mining activities in these pools, several characteristics can be observed:

First-Mover Advantage: Because the early yield rates in mining pools are relatively high.

Adhering to the "Mine, Withdraw, Sell" Principle: After the token production stabilizes, SBF's team almost converts the harvested platform tokens into value tokens or stablecoins every 1-2 days.

Maximizing Gains: Among the AVAX ecosystem projects SBF participated in mining, the only publicly known investment by Alameda is in Aave. The benefit of mining in pools of projects invested by other institutions is that there is no burden of "Mine, Withdraw, Sell" affecting the price due to locked tokens.

No Additional Investment: Although SBF invested $195 million in mining on the Platypus platform, he did not purchase $PTP tokens in the market to stake for higher APR; instead, he reinvests the harvested tokens to improve yield.

Risk Control: SBF's team carries large amounts of capital to mine on various platforms, and the biggest risk is being donated, thus the platform's security needs to withstand evaluation.

Using Stablecoins for Mining as Much as Possible: Since SBF holds a large proportion of USDC, USDT, DAI, and other stablecoins for liquidity mining on various platforms, the impact during recent market crashes has been limited.

So how are SBF's returns on these projects? Taking the recently participated Platypus project as an example:

The total reward quantity for the helper pool token is 60 million tokens, and SBF's investment accounts for about 32% of the project's TVL. Assuming the TVL remains stable, SBF's harvested token quantity at the end of a year of mining is approximately 19 million tokens, with an estimated token value of $66.8 million at the current token price of $3.5; the annualized return rate is 34%. Of course, this is just a theoretical estimate, and the yield will fluctuate significantly with changes in TVL and token prices.

Due to the mechanism design of Platypus, which requires staking PTP tokens to obtain APR assistance, SBF continuously reinvests the mined PTP to obtain higher APR assistance and has not yet sold the mined PTP tokens.

However, making a profit from investments is only a matter of time, as determined by the nature of investment behavior; one can glean insights from SBF's previous investment actions.

SBF Shorting DeFi Tokens

In early September 2020, after SushiSwap founder Chef Nomi ran away with donations, SBF confronted him angrily, and Nomi simply transferred the management rights of Sushiswap to SBF. Soon, the excited fans of SBF were slapped in the face by their hero, as SBF continuously "mined, withdrew, and sold," driving the price of SUSHI down.

In October 2020, SBF was reported to have shorted by heavily collateralizing FTT, SUSHI, and SRM on the decentralized lending platform Cream Finance, while borrowing $24.5 million worth of ETH and USDT, as well as various DeFi tokens like UNI, MTA, CREAM, and LINK, to profit from shorting on trading platforms.

He explained that there is a significant bubble in DeFi mining on Ethereum, and his shorting of certain tokens is not out of malice but simply because he believes they are overvalued. When the market crashes, he would buy what he considers undervalued assets from panicked sellers, which has led to much criticism.

SBF's "Mine, Withdraw, Sell" Strategy

According to reports, in May 2021, SBF carried $4.3 billion to mine on the BSC and Polygon chains, with $2.5 billion bet on platforms like Venus, PancakeBunny, Belf.fi, and Mdex on the BSC chain, earning $2.3 million per day.

SBF's consistent "Mine, Withdraw, Sell" approach has been seen as a behavior that drains projects, causing project token prices to plummet, leading to dissatisfaction among many BSC ecosystem investors, with some netizens even claiming, "The entire BSC is going to be dug down by SBF!"

After mining ended and the project token prices were nearly crushed, SBF almost completely withdrew the funds he had previously invested in various liquidity pools in the BSC ecosystem.

Conclusion and Insights

As a seasoned player in the DeFi space, SBF's investment behavior attracts the attention of many investors. On one hand, people have significant confidence in the safety of the projects SBF participates in; on the other hand, they worry and criticize his actions that lead to price crashes.

In the face of investment in the cryptocurrency space, everyone must take responsibility for their investment decisions. Although opinions on SBF are mixed, placing heroic expectations on others or fantasizing that large investors will show mercy when profiting from price crashes is itself a sign of immaturity.

Ordinary DeFi players can learn from and observe the investment behaviors of large investors like SBF, allowing them to participate early in quality projects and withdraw profits in a timely manner before large investors crash the prices.