Where the Whale Things Are

GH0ST08 is back to ponder the implications of the upcoming Membrane launch, and how it will open the floodgates for institutional capital entering DeFi

Where the Whale Things Are

Good Evening Pilots!

Events in the Tokeverse are coming in fast one on top of another! It’s easy to get caught up in all this excitement but I took some time this week to venture out into the far stretches of the Tokeverse. My objective, Membrane

What is Membrane?

@0xParadigm wrote a wonderful piece deep diving the history of Membrane and what purposes it would serve in DeFi and Web3. I’ll put a brief description that serves this article, but I highly recommend reading Insane in the Membrane for a better understanding and a great collection of data on the subject.

Insane in the Membrane
0xParadigm speculates on the secretive Tokemak sister-project “Membrane” and breaks down the problems it can solve in the institutional crypto trading market.

In a recent [REDACTED] AMA, Liquidity Wizard stated that Membrane would be an OTC trading, lending, and clearing platform. Participants would earn the $BRANE token for platform activity which could serve as a fee rebate token. Liquidity Wizard also leaked that this $BRANE could be used as credit which opens a whole new line of speculation both inside and outside the Tokeverse.

The appeal of this OTC would be in allowing large trades with minimal slippage directly between buyers and sellers. In short, it opens up the DeFi doors to entities with lots of capital looking to make large trades who in the past may have been limited by breaking up trades on DEX’s or by a third party like Coinbase Custody. How will Membrane have the liquidity to service these large transactions? Surely by now you are familiar with the liquidity blackhole that is Tokemak. 😉

Into the Belly of the Beast

With the pairing of Tokemak and Membrane in mind lets take a quick look at 2 pieces of data in 0xParadigm’s article:

Depending on who you ask, daily OTC crypto trading volumes are anywhere from 2-3x that of spot markets. Excluding decentralized exchanges (DEXs), this puts daily OTC volumes at well over $110 billion based on the most recent exchange volume data
via The Block
Institutional OTC crypto lending has also taken-off, as evidenced by the data provided by Genesis, the leading institutional-focused lender, reaching close to $4 billion at the end of last year
via Arcane Research

In web3, saying that “we’re still early” has almost become compulsory but considering the data above we really are. We have yet to see the levels of activity and orders of magnitude that the Membrane/Tokemak combination could bring.

We could almost liken the level of activity and availability of liquidity currently in DeFi to that of a bay and that the opportunities opened by Tokemak and Membrane would be like venturing out into the ocean.

There's Always a Bigger Fish

We have certainly seen some crypto whales and large activity relatively speaking but imagine if there was more liquidity to play with and the option to execute larger trades with little to no slippage! This could entice a whole new wave of entries into DeFi – and they won’t be small. Institutions could bring their weight and strategies into DeFi causing a surge of activity and disrupting the current dynamics we have grown accustomed to.

A quick review of the recent action on 2 prominent OTC markets reveals that not only has usage been on the rise but the average daily share volume in the first half of 2021 on the OTCQX was 107.7 million and for the OTCQB was 362.9 million! By October of 2021 trading of OTC stocks had surpassed $552 billion! This still is not the limit of activity on OTC markets as the derivatives market was valued at $640 trillion in 2019!

Keep in mind that As of November 2021 there was only about $274 billion moving throughout DeFi...

Imagine the waves throughout DeFi as the gates and limitations of DEX's and liquidity are lifted and if even 1% of that value flows in... Add to that speculation on what the credit worthiness and possible OTC fee accumulating token $BRANE might offer holders and you have yourself a major catalyst.

Buckle Up Pilots, it's Gonna Get Bumpy!

As resident degens in the web3 land we would have some home field advantage, but we shouldn’t underestimate these TradFi Goliaths and new entrants. There would likely be a period where the two sides “collide” sparking a new wave of innovation. The capital, activity, and talent that could explode from this event would be incredible.

As fast as things move now, I believe we will all experience an even more extreme “time warp” feeling as our feeds become an unyielding torrent of announcements.

Until next time...

❄☢ Stay Frosty Pilots ☢❄

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