Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Can Synthetix (SNX) Make money from Derivatives?

Synthetix (SNX) is a derivatives liquidity protocol that can create a synthetic asset from any asset.

A synthetic asset is a tokenized derivative similar to a stablecoin. To explain, Synthetix holds assets in a pool or account. Each Synthetix asset or Synth represents a unit of the asset. For example, the sETH synth represents one Ethereum (ETH) token. Similarly, the sUSD synth represents one US dollar.

Each Synth contains a smart contract that makes payment in the asset when you spend the Synth. For example, the sEURO makes payment in Euros when you spend it.

Decentralized Perpetual Futures

They claim the Synths function as decentralized perpetual futures that leverage Synthetix’s debt pool and innovative liquidity framework. The developers claim Synthetix guarantees the best price execution and offers little or no slippage.

They claim the Synthetix Assets capture the price of assets, such as cryptocurrencies, fiat currencies, stocks, and commodities with zero slippage.

Synthetix has gained some value. Synthetix claimed to have a total locked value of $322.699 million on 23 June 2023.

Meet the Synths

Synthetix (SNX) makes money when Synth trades generate a small fee. The Synths leverage pooled collateral to reduce slippage and create liquidity.

Currently, there are two levels of Synths, Level 1 (L1) and Level 2 (L2). The L2 Synths include Forex (currency trading) and cryptocurrency. Current L2 Synths include sUSD (US Dollar), sETH (Ethereum), sBTC (Bitcoin), sLINK (Chainlink), sSOL (Solana), sAVAX (Avalanche), sMatic (MATIC), sEUR (Euros), sAAVE (Aave), and sUNI (Uniswap).

L1 Synths also include indexes, which function like index funds. The L1 synths include: sUSD, sEUR, sJPY (Japanese Yen), sAUD (Australian Dollar), sGBP (Pound Sterling), sCHF (Swiss Franc), sKRW (South Korean Won), sBTC, sETH, sADA (Cardano), sDOT (Polkadot), sETHBTC (tracks the price of Ethereum and Bitcoin), sDEFI (tracks an index of decentralized finance or DeFi investments.

The Synthetix Ecosystem

The Synthetix protocol powers the Kwenta, Lyra, and Thales platforms. Kwenta claims it can provide leverage of up to 10 times and simulated liquidity. Lyra is a decentralized options protocol. Thales is a Parimutal Markets protocol for sports and other betting. Platforms participating in the Synthetix ecosystem include 1inch, Curve, Dhedge, Paraswap, Yearn, and AELIN.

Synthetix is running enormous amounts of money through its system. For example, Synthetix reported a $657 million Mainnet Market Capitalization, a $130 million SNX Staker debt, and 125 million SNX staked on 23 June 2022. They claim Synthetix had a $2.23 billion trading volume and $7.10 million in total trading fees on 23 June 2022. Synthetix claims 1,008 traders made 2,980 trades on its platform on 23 June 2022.

What Value does Synthetix have?

Mr. Market thinks Synthetix (SNX) has some value. For example, CoinMarketCap named Synthetix, the ninth-most trending cryptocurrency, on 21 June 2022.

In contrast, CoinMarketCap named Synthetix, the 89th largest cryptocurrency, with a Coin Price of $3.04 on 23 June 2022. CoinMarketCap gave Synthetix a $349.010 million Market Cap, a $645.899 million Diluted Market Capitalization, and a 24-Hour Market Volume of $124.145 million on 23 June 2022. They based those numbers on a Maximum Supply of 212.424 million SNX, a Total Supply of 215.259 million SNX, and a Circulating Supply of 114.842 million SNX.

Conversely, CoinBase a $3.05 Coin Price, a $348.9 million Market Cap and a 24-Hour Market Volume of $124 million on 23 June 2022. They based those numbers on a Circulating Supply of 114.8 million SNX. I consider Synthetix is an incredibly unstable cryptocurrency because Coin Base gives it a $28.77 all-time Coin Price.

What Value could Synthetix Obtain?

I think Synthetix (SNX) could obtain enormous value because of the popularity of derivatives.

The value of the global over-the-counter derivatives market was $600 trillion in the second half of 2021, the Bank of International Settlements (BIS) estimates. The global over-the-counter derivatives market’s value fell from $610 trillion in the first half of 2021.

In contrast, the gross market value of derivatives contracts worldwide was $12.4 trillion at the end of 2021, the BIS estimates. In contrast, the value of interest rate derivatives (IRDs) was $8.6 trillion at the end of 2021. Moreover, the gross credit exposure of derivative contracts was $2.5 trillion at the end of 2021.

Thus, Synthetix is creating solutions for a vast market that generates enormous amounts of cash. I think Synthetix could create a moneymaking market that can generate enormous amounts of cash. I advise speculators to watch Synthetix because it is one DeFi protocol that could make money and survive the cryptocurrency crash.