In this attached thread, I build on my idea from the quoted tweet thread and present a potential short opportunity. And although it seems like a great trade in isolation, can we perhaps pair this up and identify another asset that holds a considerable upside potential? Let’s see!
When MakerDAO incorporated RWAs, the price of $MKR went from roughly $500 to $1200. I am not saying that history repeats itself, but what if I were to say that there is an easy layup that shares the same characteristics as that of the $MKR trade?
Frax is set to release its V3 later this month. The update will bring treasuries and RWAs on-chain. This would boost protocol yields and stablecoin demand.
frxETH V2, which is a lending market for frxETH, will also soon go live and will LSD efficiency and yields.
This is what the weekly chart of $FXS looks like.
I’m not a big fan of fractals, but it does seem to share some similarities with $MKR before its most recent run-up.
Now, what do we have here? A straightforward short opportunity on $DOT coupled with a pretty strong case for being long $FXS going into next month.
If you were to put up a $FXS/$DOT spread, you not only position yourself to capture the upside/downside on both tokens but do so while remaining market neutral.
So, even if the market were to go up or down in a drastic manner, one is likely to outperform the other such that you have a high +EV setup, something that the crypto market blesses us with more often than any other market.
The FXS/DOT*100 is sitting at 128. It will be interesting to see where this pair is trading by the end of Oct. 23.