Parsec Weekly #56
Jupuary
Jupuary
-kezfourtwez
gm parsec enjoyers,
Solana DEX aggregator Jupiter’s highly anticipated token $JUP, went live on Wednesday for trading, as well as claiming for eligible users.
The eligibility criteria for this one goes all the way back to their inception in 2022, and volume closer to the November 2023 cut off carried less weight. An admirable way to reward early users, but because of Solana’s reputational issues since the FTX implosion and $8 lows, its user base has been affected and consequently, the pool of users eligible for the airdrop.
The narrative that was making its way through twitter and group chats was:
Fair token launch, no VC’s to dump on the plebs
Not many people who wanted the airdrop got it = more buying pressure
Standard hyped launch airdrop fractal; open high, airdroppers dump it, curl up and break out into fresh highs
Based on the above combined with Jupiter’s status as the number one trading venue on Solana, it felt like an easy lay up trade to many as long as you could get a decent entry.
Before I get into the controversy surrounding the launch; to be fair to the team they were fairly transparent about how it was going to work. If you were following along closely and knew where to look, you probably could have deciphered the outcome.
There was info scattered between the official twitter account, a blog board on their website, multiple AMA’s hosted by the founder on twitch and a plethora of long tweets from his account.
This is all well and good, but when the image below depicts your average crypto participant (it’s me, I’m the average crypto participant), your bound to have a good ol’ case of the “I didn’t read the docs and now I’m mad”.
Most of the outrage stemmed from speculators realising the token isn’t pumping like they thought it would, leading them to wonder why, and most of the reason it wasn’t is because of the launch pool mechanics.
Jupiter used a one sided concentrated liquidity pool to distribute their tokens to willing buyers at the fair market price.
The pool starts at 40c and ends at 70c, each of the above bins had contained a set amount of $JUP, which takes a set amount of $USDC buying pressure to clear and hop to the next bin. The total amount of $USDC needed to clear the entire pool is $135m. The launch pool lasts for 7d, whatever is in there at the end gets pulled by the team and a TBD amount will stay with them and a TBD amount will go towards onchain liquidity. So if the price of $JUP is > 70c, at the end the team gets $135m in $USDC, if the price is < 40c, the team get 250m $JUP tokens back.
That is one thicc liq pool. Briefly, the pool was cleared in the first few hours after launch but the price quickly fell back within the range. Essentially this huge amount of liquidity is intended to be a price stability mechanism, capping volatility in both directions with a huge amount of buying pressure needed to clear 70c and a an equally large amount of selling pressure to drop below 40c.
Something else to factor in is Whales Market. We’ve had illiquid, high funding rate pre market perps for a while now, but never have we had an efficient way to trade spot pre market. Whales market facilitated around $25m worth of $JUP trading before the token went live. Albeit that’s nothing compared to the volume it has/is doing since launch, but it definitely contributed to to a more efficient market than had there been no spot pre market.
So to summarise: Many thought $JUP was on its way to flip its Ethereum based predecessor in the first 24h, that didn’t happen. Speculators then got mad after (not reading the docs pre launch) realizing the price is kind of trapped within that pool for now. There’s also uncertainty around what’s going to happen to the funds in the pool after 7d.
If they definitively said something along the lines of “75% will go towards onchain liquidity and we’ll keep 25% for us and the DAO”, I think people would be all over it, especially with claims nearing 70% and slowing to a halt. But they’ve been pretty opaque about the ratio.
At the end of the day Jupiter is a great product doing mind boggling volume as of late ($16b in December), and flipping Uniswap for periods at a time. They’re feature rich with swaps, limit orders, DCA’s, bridging and perps and personally I believe that all of this will one day contribute to what would currently be considered an astronomical valuation, but until then market participants will continue screaming into the void.
As always we appreciate your readership, if you enjoyed this article please leave a like and share it around. Have a good weekend and we’ll see you next week!
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