SUSHI is undervalued while whales are indifferent

SushiSwap was recently noticed by a recommendation from the developer OxMaki. As reported by Bitcoin Magazine, the decentralized exchange intends to raise $ 60 million by selling tokens at a discount to venture capitalists (VCs). It immediately sparked a heated debate and people from the community began to express violent opposition.

OxMaki is offering a 20-30% discount on tokens that are blocked for 18 months. In particular, the “List of Confirmed Strategic Investors” includes prominent names such as Pantera Capital, DeFiance, Blockchain Capital, Coinfund, Spartan and Lightspeed Venture Partners. Suggested Notice:

“SushiSwap has been a favorite of the DeFi community since its inception and at this point we are ready to welcome reputable crypto funds and cement SushiSwap as a DeFi blue chip.”

The proposal has not yet been chosen by the administrator. However, according to a July 15 developer poll, 62% were against and 38% were in favor.

Many people think that the lure of VCs to invest in the SUSHI protocol will undo the concept of decentralization. However, will the SUSHI ecosystem be affected if the proposal is adopted? Does it have a drastic impact on the price of the token? If so, can the price recover from the worst case scenario? In order to analyze what happens next, it is first necessary to understand the current state of SUSHI.

SUSHI undervalued?

At the time of writing, the 69th largest cryptocurrency in the market is trading at $ 7.6 after seeing its price jump nearly 15% in the past 24 hours.

Source: TradingView

At this point it is no exaggeration to say that SUSHI is undervalued. The ratio of MVRV (market value to actual value), which was slipping below zero at the time of going to press, further supports the above statement.

Whenever this metric shows a negative value, it means that investors are losing more value than is usual in the market. The value of -21.9% confirms that the fair value of SUSHI is well above the current price. In fact, the MVRV was at its lowest level since last December.

Right now, tokens are “cheap” and an additional 30% drop would be detrimental for SUSHI.

Ratio of MVRV (yellow) and SUSHI price (green) | Source: Santiment

It should be noted that crypto asset management company Arca holds 7.51% of xSUSHI’s circulating supply. In recognition of SUSHI’s undervalued status, the company’s CIO, Jeff Dorman said:

“Since we firmly believe that sushi is being sold at a price significantly lower than its fair value, we will not ask for an additional discount. In fact, we are paying above the current trading rate. “

Also Amy Wu from Lightening Investments to explain:

“We took feedback from the community and canceled the discount. In addition, we are extending the lockdown. “

Looking at the interests, but not the “desires” of these VCs, it can be concluded that their funds have the potential to add value to the SUSHI ecosystem.

Whale lacking action?

As can be seen in the attached graph, the number of whale trades (> $ 100,000) is relatively low compared to May, in fact, OxMaki’s proposal highlights that the maximum minimum investor size will be $ 250,000. If 21 proposed VCs enter the SUSHI arena, this value can increase.

However, given its undervalued status, there is no guarantee that this move will have a positive impact on the price of SUSHI.

Whale trade volume (> $ 100k – red) and SUSHI price (green) | Source: Santiment

Signs of an increase?

Interestingly, the token’s stock-to-flow ratio is at an all-time high at the time of writing. This is essentially a sign that the new supply coming onto the market is quite small compared to the overall supply. The high ratio is also a sign that SUSHI has a good ability to hold value over time, and the scarcity that arises when VCs buy more tokens can lead to an upward move.

When the above situation arises by itself, the undervalued situation can be resolved by SUSHI.

Stock-to-flow ratio (purple) and SUSHI price (green) | Source: Santiment

Most institutional investors tend to set profits in advance and exit the market when the target is met. The actual consequences of the discount program will therefore only become visible after the blocking period has expired and when investors are sure to sell their holdings.

Not too surprisingly when VCs like DeFiance started selling their inventory to buy back SUSHI at a cheaper price, Twitter account Pepo tweeted.

DeFiance & defimaximalist.eth are already preparing for the raise https://t.co/6t3FZVxsSz pic.twitter.com/HtWoh4rXg0

– PEPO???????? (@Luciano_vPEPO) July 15, 2021

However, the price of SUSHI has protected itself from the recent dumps. Ultimately, this shows that SUSHI is a dynamic long-term project and will continue to exist.

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