DAO leader causes cascade across ‘rebase’ tokens after $11M dump

OlympusDAO's recent crash has revealed a high degree of correlation between "rebase DAO" tokens, with even the largest affected.

A string of so-called “rebase DAOs” have collapsed in value after an Olympus (OHM) leader dumped $11 million worth of the token on Monday.

The prominent decentralized autonomous organization (DAO) figure, known as “shotta,” said he was selling out to secure his family’s financial future.

Shotta is also one of the creators of Redacted Cartel, which too issued its own token and describes itself as a “complimentary subDAO” for Olympus.

“This is the bottom signal,” tweeted shotta, implying the price would only increase from here. “Remaining on-risk with the rest indefinitely.”

  • The market immediately invalidated that prediction as OHM tanked nearly 40% over the next two hours.
  • OHM’s daily trading volume exploded from $62 million to over $300 million during that time.
  • About $600 million was lost from its market value, which now sits at just over $915 million.

Olympus ironically markets itself as the “decentralized reserve currency.” The project claims to be building “community-owned decentralized financial infrastructure to bring more stability and transparency for the world.”

Shotta gives his underwhelming explanation for dumping OHM.

“Everyone saying ‘respect 2 u’ [sic] doesn’t seem to understand this person sold a huge bag in ONE TRANSACTION at the bottom,” tweeted one disgruntled onlooker.

“He didn’t have to do that to de-risk. He nuked it and knew it would nuke it. This person should be hated, not revered.”

Wonderland (TIME) — the world’s largest rebase DAO run by popular DeFi devs Daniele Sestagalli and Andre Cronje — followed OHM’s lead and crashed.

TIME currently trades for around $1,300, down 40% from $2,200 early Monday morning.

Rebase DAOs let degens into your crypto wallet

Rebasing is a version of “elastic finance” first conceived by the Ampleforth (AMPL) project, which pledged to “translate price volatility into supply volatility.”

The concept’s core requirement? Users grant a third-party protocol like Ampleforth, Olympus, or Wonderland permission to access their wallet and change their token balance (yes, within their wallet).

A user who stakes into a rebasing DAO can therefore expect to see varying quantities of tokens within their wallet at every rebasing cycle (usually eight hours).

Rebase DAO participants give this permission because they believe the DAO will make good decisions about market dynamics when considering how much to add or remove.

Online crypto communities (usually Discord groups) use rebasing as a marketing tactic to attract capital. Billionaire investor Mark Cuban reportedly bought into Olympus last year.

OHM is still down over 70% since shotta dumped millions worth of the token.

Rebasing DAOs often advertise unbelievably high annualized Annual Percentage Yields (APYs) to stakers — often thousands or even millions of percentage points — in bids to bootstrap treasuries.

Projects like Olympus and Wonderland build up their treasuries by offering discounts to new entrants into the scheme.

It works like this:

  • Outside entrants into the DAO who already hold valuable assets (like Ether or stablecoins) can deposit crypto collateral into the DAO’s treasury.
  • In return, they receive a guaranteed discount — calculated from current prices — on the redemption of another token in the future (the DAO’s staking token).
  • Usually, a new entrant is offered a 3-10% discount off today’s price if they deposit a stablecoin and redeem the DAOs staking token five days later.
  • These substantial discounts attract new entrants to “mint” (also called “bond”) for these five days.
  • Additionally, new entrants can simply buy the DAO’s staking token on the open market (supporting prices across secondary markets), and stake it into the DAO for astronomical APYs (denominated in the DAO’s token, of course).

Through these practices, Olympus’ treasury has amassed a large balance of MakerDAO’s stablecoin (DAI) as “backing” for OHM tokens.

Olympus’ fund managers use this DAI plus other treasury assets to make investment decisions they believe will be accretive to token holders.

Olympus’s OHM still carries a market value beyond $900 million.

Smaller rebase projects struggle to instil confidence

Unlike stablecoins, rebase DAOs don’t explicitly aim to peg their staking token’s value to their treasuries.

They merely claim its value could theoretically rise above their treasury balance if the world believes the DAO will continue making sound investment decisions.

Ultimately, rebase DAOs leverage game theory to incentivize holders to stake tokens as a sign of commitment to the DAO. Incidents like shotta’s sudden dumping cheapen this commitment.

Still, most of the Olympus forks declined in value during December. The sell-off continued catastrophically this month.

The reasons? Many investors thought JADE looked shady. A PapaDAO Discord moderator’s questionable actions led members to believe developers were conducting a rug pull.

In some cases, the development teams simply lost control of the token’s value due to its complicated tokenomics.

‘Original” rebase DAO Ampleforth (AMPL) has faired well since OHM collapsed.

Read more: [OCC chief likens DeFi to credit default swaps in 2000s, warns of crash]

As for Olympus, many investors are skeptical of Shotta’s public reasoning for dumping his personal OHM stash.

Followers accused him of intentionally tanking the Olympus DAO project to escape with profit. It’s often that insider sales precede further declines.

In any case, it directly caused OHM to nearly halve within two hours, leading to cascading dumps across multiple popular rebase DAO projects — indicating high degrees of correlation within this niche corner of the crypto market.

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