Convex Finance

💡 Convex is a yield optimisation platform build on top of Curve Finance. Convex helps users attain better yield on their Curve LP positions with minimum management requirements whilst remaining liquid

Type:

DeFi

Token Strength

Token Utility:

$CVX is essentially a levered ‘wrapper’ for $CRV (Curve finance). The Curve voting power that Convex accumulates is directly passed on to $CVX holders who lock their tokens, known as vlCVX (vote locked CVX).

Demand Driver:

Demand for $CVX mainly comes from the demand for the underlying $CRV & market demand due to yield provided by protocol bribes. As long as Curve maintains market demand and has a stable swap liquidity moat then $CVX should also reflect this demand.

Value Capture:

Convex takes a 16% fee in exchange for its yield optimisation service, which is subsequently paid to stakers. $CVX holders also get bribes from protocols wanting to use the underlying veCRV voting power. Meaning that these bribes are a form of yield for holders. Token demand will reflect this somewhat, thus reflecting value of asset.

Value Creation:

Convex creates value by providing a yield optimisation service for Curve LPs/CRV holders & by also allowing protocols to direct liquidity to their products in a more efficient way.

Our Take

Convex has cornered CRV market by acquiring majority in the veCRV voting power (~56%).
veCRV is never released meaning that even if Convex loses market share the acquired veCRV will linger on as a factor in demand for a long time to come.
~75% of supply is staked and ~73% of supply is vote locked, this shows that the system is working and users see and incentive in staking/locking.
CVX is an attractive alternative for the lay user who wants to be exposed to the Curve ecosystem due to its ease of use and low maintenance.
Bribes are a great source of passive yield which are not emissions and turn CVX into a yield bearing asset with positive cash flow for users who lock.
Recent large unlock shows that decent CVX demand exists since ~65% of CVX that was unlocked was relocked by holders.

Deep Dive

Distribution & Vesting

The below pie chart shows the CVX distribution per group. This is a favourable distribution when comparing to industry standards.

As you can see from the above pie chart, 25% of the distribution is assigned to the Team, Investors, Airdrops & the Treasury. The below chart shows how these allocations will hit the market with their assigned vesting schedules. Note that all allocations have been fully vested.

Issuance & Circulating Supply

75% of the CVX supply has been allocated to liquidity mining rewards (25%) and Curve LP rewards (50%). The below chart shows how this supply has hit the market until this point and subsequently how much is left. Note that this is not circulating supply.

When talking about circulating supply, we consider:

Circulating supply = Total Supply - Locked tokens - Smart contract tokens (LP rewards, incentives, staked, locked, etc). The below table shows the CVX circulating supply currently at ~70%.

Supply vs Demand

Its important to understand the Supply & Demand balance when thinking about token price. The below graph compares previous CVX demand with how supply has hit the market {NOT ACCURATE YET}

Supply & Demand Forecasts

Based on the previous information we can create some estimates and possible scenarios when it comes to how the remaining CVX supply will hit the market and how much demand CVX could have. Note these are purely speculative and based on previous assumptions.

{WORK IN PROGRESS}