In this newsletter, we are profiling The Graph [GRT]. In previous newsletters, we have profiled Bitcoin, Cardano, Stablecoins, Uniswap and many others. Access all our newsletters in our archives at madcapx.substack.com.

The Short of It

The Graph’s GRT token definitely has a good use case with the project being one of the best in the indexing space, but one has to wonder what the founders were thinking when it came to the tokenomics. Not good!

Profiling

The Graph is an indexing protocol used to query data from a vast array of different APIs that have been built by the community. The data can be used in the logic for smart contracts on any system that wants access to it. Launched in late 2019, the project was founded by Yaniv Tal, Brandon Ramirez, and Jannis Pohlmann. The team includes professionals from a handful of successful blockchain projects and was recently acquired in an IPO by Salesforce, Puppet, Redhat and Barclays.

There is a maximum supply of ten billion GRT. The GRT token is mainly an ERC20 on Ethereum but also exists on the Avalanche C-chain as well as the Sora substrate network. Four hundred million token were sold in their initial sale and distribution event. The remaining tokens will be vested to grow the ecosystem and reward participants.

To utilize the network as a smart contract developer that requires to integrate external data into their coding logic, you call APIs on “subgraphs.” You can check out the huge list of subgraphs by visiting https://thegraph.com/explorer/ to see what kind of data is available. Some are calling The Graph the “Google search” for blockchain data. For developers to have access to this instead of running extra servers to get this data is a real time, cost, and management saver. The Graph is an essential tool in decentralized Web3 development and has become a backbone in the broader DeFi ecosystem.

If you want to actively participate in The Graph ecosystem, there are various roles you can consider, namely indexer, curator, delegator, and consumer. Indexers are the ones that run the nodes and stake their GRT to provide the actual query processing services. Curators are responsible for identifying reliable data sources and APIs for indexing. They are incentivized to provide high-quality sources to get a portion of the query fees. Delegators are stakers that do not have the resources to run a full node and instead contribute to the stake pool of indexers. Consumers are the ones that pay fees to use the APIs of the indexed subgraphs. Those fees are the ones that get delegated to indexers, curators, and delegators.

Some examples of the bigger projects that heavily use services from The Graph are Uniswap, Aave, Synthetix, and Decentraland. Some other oracle or data source-focused projects that can be considered competition are API3, Covalent, theapis.io, Kylin, and ChainLink. As their mainnet launched only about a year ago, you can expect to see continued massive growth in usage over time.

Trend Lines

GRT/BTC chart going back to late 2020. In the first few days, there was a bullish spike, with it giving up 75% before shooting up 680% from mid-January to mid-February. Since that peak, it has continued to be bearish up to today. The loss from the peak to the recent bottom reached in October was 81%. You can see the two bearish patterns that have formed. The first steeper decline was five months. The current less steep bearish decline is over five months. If timed correctly, trading within the current trendlines could give 50-70% gains.

On the GRT/USD chart value is close to the bottom of the possible trend. Though with further pressure coming from additional token unlocking this month, will we see GRT trading below $0.50 and even breaking the 2021 summer lows of $0.42.

The below video from InvestAnswers highlights the growth opportunities, cutting-edge technology, but also the bad tokenomics.

The GRT token value could continue to have downward pressure from the large number of tokens that are yet to be released. In December, there will be over 550 million more tokens unlocked, and in 2022 an additional 3.6 billion increasing the supply by 40% next year. Tokens being unlocked will continue into 2025. Will GRT continue to slide further down in value? There is very little supply held by the public and the GRT community.

Image from InvestAnswers YouTube video on GRT

The Other Trend Lines

ETH/BTC pairing since early summer shows it being in this bullish pattern that topped out five days ago. Will ETH head back down to the bottom support in a week or next month. Keep an eye on the potential opportunities for those who are interested in Ethereum.

The BTC/USD on the linear chart going back to 2013 when you could buy it for less than $100. This chart shows the assumption that BTC is still going above $300,000 USD this cycle before assuming there would be a massive 80% correction, as we have seen in the last couple of cycles.

On a more zoomed-in view of BTC throughout 2021, it still holds a bullishness even with the current dips in value. The low of the last dip is at about $40600-40700, so if BTC doesn’t close a candle below those values, we should see a bounce, possibly in December.

As we zoom in further into BTC, we can see that the 200-day moving average (MA) is on the verge of being broken if we close below $46,700. The 128 day MA has resistance at $53,000.

Portfolios

This portfolio section gives you an idea of what sort of return you can get when investing in crypto assets.

BTC/USD FUND is up 335% since October 1st, 2020. Since this is a long-term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long-term hold position as our best stable alternative. This past week bitcoin has been ranging between $45,672 and $51,936 USD in value.

FUND 3 started on November 16, 2020, with $1000 USD in value and was invested into BTC, LTC, ETH, and ADA. The total amount of BTC value from the four coins has had a gain of 84% since the start. The USD fund value is up 417% since the beginning. We will hold these positions to see how well it does against our BTC-only portfolio. LTC is down -27% against BTC. ETH is up 192% against BTC since the start. ADA has a gain of 320% against BTC and 1068% to USD.

BLWX Fund started on February 22, 2021. They all are assets we have profiled in the last few months, and we are interested in how they will perform in 2021 against BTC. BAT has a gain of 90% against BTC since the start; LINK is down -43%, WAVES is up 31%, XMR is down -21%. Overall, against BTC, the fund is up 33% and 14% against USD.

Overall, Bitcoin should be your first choice as an investment in crypto, though many digital assets can give you amazing gains if you manage your risk. As a long-term investor, we see it as our largest portfolio investment. If you are a day trader, there are many great assets to put on your watch list. Look through our previous newsletters to find some.

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About

MadCapX research newsletter is written by the Madbyte Team. You can learn more about Madbyte and MadCapX on our websites.

Madbyte does have its own token called MADX on the Ethereum network and Madbyte on the Waves network. The two tokens are interchangeable on Madcapx.com.

Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.

MadCapX’s Investor Research

The Graph - Issue #58