Last year, we spotted a protocol early in development and flagged it as a contender to snatch a piece of the ever-growing crypto options pie. Back then, we pegged it as a possible 30X winner.

Options are an essential feature of all financial markets, and the crypto options sector is ripe for the picking. If you identify winners early on, you’re set to make massive returns!

But sometimes things just don’t go to plan… 

Does this project still have 30X potential? Or will we be pulling out? There’s a lot to discuss, so let’s dive in…

 

Disclaimer: This is not investment nor investment advice. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

 

TLDR: Too Lazy, Didn’t Read

• We still believe Premia is a great protocol in a high-potential market.
• However, the issue is its current pace of delivery. The projects that will succeed have been building the bear, and are ready to take advantage of the upcoming bull market. Delays are a big red flag. 
• The current risk/reward ratio for $PREMIA isn’t ideal by any measure.
• We’re removing exposure to $PREMIA for the time being.
• Instead, we’re looking to allocate capital to dYdX and Perpetual Protocol.

 

 A 30X option

The protocol we’re talking about is Premia. All the Cryptonary OG’s will know about it.

We discovered it in February last year, first discussing the platform in our Don’t Lose the Option report. The aspects that made us so bullish on Premia were:

• vePREMIA (meaning vote-escrowed, tokens that are staked and locked for a certain period, which allow holders to take part in governance).
• 2 DeFi Options Vaults (DOVs) directly integrating with Premia (providing liquidity to sell options to the protocol).
• V3 had many exciting upgrades.
• Launch on other blockchains (including Fantom and Optimism).

Of the four, the big daddy, and most important, was V3. It was set to allow liquidity providers to choose a price and date range in which to sell options. This was huge for the protocol, as this would allow other protocols (such as DOVs and structure products) to build directly on top of Premia, provide specific liquidity, and generate high yield.

Premia V3 aimed to:

• Allow permissionless creation of options markets for any asset with a price feed (data feed that can pull the price).
• Give liquidity providers a choice of range (price and settlement date) they would like to sell options in.
• Create a lending market allowing option purchasers to borrow against their positions, making them more capital efficient.

Other improvements were to include:

1. Delta hedging in vaults (risk of loss removed/reduced for liquidity providers).
2. Complex orders (stop loss, take profit, etc.).

In our Premia Deep Dive, we covered some caveats – things we had to see for Premia to succeed.

This highlighted the importance of V3, a step up in marketing, and successful DOV integrations.

So, what went wrong?

Delays… and more delays…

V3 was set to launch around June 2022. We remained in constant contact with the Premia team. They explained the upgrade was being peer-reviewed, and unexpected complexities arose.

Delays continued, and the paper outlining V3 was only released in January 2023.

Had there been some ground-breaking and impossible-to-compete-with features in V3, we would be understanding. Whilst there are very complex aspects to it, and some exciting improvements, the six-month delay was unwarranted.

With V3 still yet to be released, at this time, Premia sits at a sub-optimal risk/reward ratio.

The resurrection?

Conviction can, of course, be restored. We still believe Premia is a great protocol in a high-potential market. It offers an impressive user experience and is still better than 90% of the junk you see in crypto. 

The issue is the current pace of delivery. The projects that will succeed have been building the bear, and we’ve seen some massive releases, including from options competitors such as Hegic and Lyra.

For us to come running back to Premia, we need to see the following:

• The successful release of V3, with strong adoption afterwards. For this, we would want to see volume reaching at least $1m per day on average, and total value locked (TVL) reaching $15m.
• A step up in delivery from the team – consistent adaptation and improvement. This includes partnerships and integrations.
• Better marketing. This would go hand in hand with the above, as community marketing is effective when a team is delivering.

Simple. But not easy.

Cryptonary’s Take

Our issue is simple, delivery. The projects that will succeed have been building the bear, and we’ve seen some massive releases, including from options competitors such as Hegic and Lyra.

It’s entirely possible that in four months, we’ll publish a report on the successful launch of V3, and we’ll look to buy in again.

At the current moment, though, the risk-reward ratio is too high.

In the coming months, we’ll see the results of Premia V3 (hopefully), Lyra’s move to Arbitrum, Ribbon’s Aevo (a new options competitor), and Hegic’s “stake and cover” liquidity model. By that time, we’ll have the clarity we need to choose our winner among the pack.

One sector for which we’ve already found our clear winners is the perpetual futures (perps) market.

Since the collapse of FTX, users have been flocking to DeFi for their perps trading. The golden goose of crypto, perps are set to explode before options, so we’re looking to position ourselves in perps. We’ll move to options when the time is right.

We have two clear winners in the perps sector. dYdX is our number 1. We see it pulling a 7X at least this year, as per our 2023 predictions report. (Note: it’s already 2.5X’d since we made that call, but we think there is plenty of room to go higher!).

Perpetual Protocol has 13.5X potential but carries much greater risk.

Action Points

• We’re pulling out of $PREMIA for the time being, selling our holdings until V3 is released and the risk/reward ratio comes down.
• Instead, we’re looking to invest in dYdX and Perpetual Protocol, putting ¾ of the capital in $DYDX, and ¼ in $PERP.
• Get a brief explainer of each project in our derivatives series, check it out.
• To find out more about dYdX, dig into our extensive deep-dive report.