After the Fei protocol fell below expectations in early April, a lot of ink was spilled on the doomed FEI stablecoin design and possible avenues to recovery. The latest findings from Covalent in the bi-weekly newsletter from Cointelegraph Consulting complement the discussion by using the numbers to take a closer look at how the post-genesis drama of the Fei Protocol has developed.
Three weeks ago, at the end of the Genesis event, the Fei protocol raised 639,000 ethers (ETH) worth around $ 1.3 billion. The data shows that the event drew 17,567 unique users but turned out to be heavily whale dominated. In fact, 241 addresses, each worth more than $ 1 million, together contributed 63% to the total value of the ETH genesis.
Retail investors with $ 500-5,000 in their wallets make up the largest group in terms of number of contributors. They make up 43% of the contributors but only 1.24% of the contributions. The third largest group by number of contributors had 2,667 investors who combined contributed less than $ 1 million.
The data suggests that despite the modest contribution from investors with less capital in their wallets, investors have committed larger portions of their portfolios to FEIs. The whales meanwhile rely less heavily on the Fei protocol.
Was the demand short-lived?
The Fei protocol introduced a new stablecoin, FEI, which uses a dynamic burning mechanism to maintain the correct pin. Simply put, the key feature of the protocol is that it includes a system that prevents users from selling FEI when the stablecoin is being traded under the bond. The protocol launched a decentralized, autonomous organization with TRIBE governance tokens.
The emergence of the Fei protocol triggered excessive demand in the market due to the two intertwined factors of the binding curve design and the TRIBE governance token airdrops. Hoping for a quick return, many users tried to buy FEI for a bottom line price while also receiving TRIBE tokens as a reward. However, those users who rely on the long-term development of the project were also allowed to exchange any percentage of their Fei-Genesis allocation for TRIBE.
Larger participants who exchanged their Genesis assignment from FEI for TRIBE behaved differently than smaller addresses. The data show that larger contributors received roughly double the FEI / TRIBE compared to smaller addresses. Whales were hungry for the protocol governance tokens and got what they wanted.
Nearly three weeks after the Fei Genesis event, the data suggest an impairment held by Genesis participants in each group. Despite significant cremation penalties, the Genesis addresses no longer hold the tokens, provide them with liquidity or sell them.
All groups sold between 40% and 60% of their Genesis value, an overall decrease of 56%. Its users, whose addresses ranged from $ 100,000 to $ 500,000, were the largest contributors to post-launch FEI sales pressure, at roughly 65% of their Genesis value sold.
Notably, the group with the smallest wallet size came second when exiting the protocol. Overall, users with less capital (Groups 5 to 10) were more likely to not hold FEIs than whales (Groups 1 to 4).
A comparison based on Genesis shows that FEI struggled to restore the tenon from the start, while TRIBE fell off the rails at $ 1.33, a 43% decline from its April 4th high.
After nearly three rocky weeks for the Fei Protocol, the overall Genesis Participant Score has dropped significantly. It is important that the distribution has stabilized in relation to the wallet size, so that there are not as many clear outliers as during the Fei genesis.
In particular, the Fei Protocol raised $ 19 million in March from major venture capital firms in the industry, including A16z, Framework Ventures, and ParaFi Capital. There have also been many donation rounds for DeFi projects over the past two weeks, raising around $ 31 million in seven rounds.
With a total of around $ 245 million raised across 10 VC funding rounds across the blockchain industry, only one deal accounted for 49% of the total allocated capital. Overall, there was a decrease in the inflow of VC funds in these two weeks, which decreased by 43% compared to the previous two weeks.
Other factors overshadow the Fei drama
In terms of the trends driving the development of the digital asset industry, Coinbase stole the show last week by going public on Nasdaq on April 14th. With the stock’s opening price 1.5 times higher than the reference price for the listing, the crypto exchange outperformed traditional exchanges like ICE and Nasdaq by market capitalization on the first day of trading. The debut proved rocky, however, and the discussion about Coinbase management outsourcing its stake added fuel to the fire.
The race to register an exchange-traded Bitcoin (BTC) fund in the U.S. has stalled as the Securities and Exchange Commission scrutinizes filings. In the meantime, the Bitcoin ETF from 3iQ from Canada went live on the Toronto Stock Exchange. Canada also went all-in on Ether (ETH) ETFs as regulators approved three ETFs from Purpose Investments, Evolve ETFs and CI Global Asset Management.
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Cointelegraph’s Market Insights Newsletter shares our knowledge of the fundamentals that drive the digital asset market. With market information from Covalent, one of the leading analytics providers in the industry, the newsletter provides the latest data on sentiment in social media, on key figures in the chain and on derivatives.
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