Gold crude oil surge, how to hold hedge on the chain traditional assets?

The tension between Russia and Ukraine in recent days has touched the pulse of the capital market, global risk assets continue to fall, energy, gold rose rapidly. In the crypto market, the Bitcoin digital gold narrative continues to be tested without a gold-like rally.

For crypto asset investors, how to conveniently hold a richer exposure to traditional assets has become a problem that interferes with investors' profits. The Synthetic Asset Protocol provides investors with a more accessible alternative to the traditional institutional complexity of KYC certification. If you don't have the luxury of opening an account on a traditional Commodity Exchange, or want to take full advantage of crypto liquidity, buying synthetic assets that anchor commodity prices on the chain can also provide you with good returns during these turbulent times.

How to hold traditional asset exposure on the chain?

Synthetix

Arguably one of the best-known synthetic asset programs, Synthetix allows users to combine a wide range of assets through collateral, from stablesoins that anchor fiat prices to crypto derivatives. Similar to Uniswap's automated market model, synthetic products can be traded frictionless through the Synthetix exchange platform without counterparties.

In 2020, Synthetix was the star project in DeFi market, but the popularity, transaction volume and lock-up volume of the subsequent project are all facing continuous decline.

Synthetix launched brent anchor sOIL (Oil bullish), iOIL (oil bearish) tokens back in late 2020. The token price is provided by Chainlink. Users can foundry and trade it on Synthetix to hold on to the abundant, open oil in the chain.

Unfortunately, the token was later removed by Synthetix. Users can no longer trade crude oil exposure on Synthetix.

Looking at Chainlink's data stream, we found that a search for "oil" yielded no results. Chainlink may no longer offer any pricing services for traditional assets in the oil market.

With Synthetix, the best-known synthetic asset platform, users don't have exposure to traditional assets such as gold or crude oil, but the DeFi world continues to evolve and users still have other platforms to choose from.

Mirror

Mirror Protocol is a synthetic asset protocol built on Terra. True to its name, "Mirror", the agreement creates mAssets of world prices under the price anchor chain using crypto assets as collateral, allowing the crypto natives of the world to more easily hold exposure to traditional assets without permission.

MAssets can be traded on Terraswap while providing farm incentives to liquidity providers. Similar to THE STO (equity tokens), mAssets allow trading outside of stock market trading hours, providing investors with a round-the-clock trading service. If the mAsset price diverges too far from the replicated asset price, an arbitrage approach is used to incentivise users to pull the price back.

Mirror offers mAssets, mostly synthetic assets anchored to NASDAQ stocks, as well as mAssets anchored to USO (U.S. Oil Index Fund), which also provides crypto investors with a way to gain exposure to crude oil assets.

Unlike Synthetix, Mirror does not connect to Chainlink, but instead uses the protocol's built-in predictor.

Twindex

Twindex is a synthetic asset protocol built on TOP of BSC, powered by ChainLink predictor feed pricing, which provides users with 7*24 permissive synthetic asset trading anchored to traditional assets.

The synthetic asset on Twindex uses the applied fractional algorithm (FAA) and its token value is supported by KUSD Stablecoin. In addition, Twindex's synthetic assets can also be used at the DEX income farm to generate income for investors.

Like Mirror, Twindex's synthetic assets are mostly ANCHORED in U.S. stocks, but Twindex also provides users with tXAU tokens that anchor gold prices.

More protocols and CEX

The synthetic asset protocol as a racetrack is no longer in the air, but there are still several protocols under development that have not yet come online.

In Cosmos Ecology, the synthetic asset project Comdex is a synthetic asset that supports a variety of traditional assets such as anchor deposits, silver, crude oil, and the DEX also developed a separate chain for it using the Cosmos SDK.

Synthetify, based on the Solana chain, has anchored a variety of crypto assets and has yet to announce whether it will add traditional assets.

Fsynth(formerly Fabric) is another Solana-based synthetic asset project, which is unique in the simultaneous adoption of Pyth, Chainlink, and Genesysgo.

In addition, some CEX trading platforms also provide investors with the anchor of traditional assets. FTX, for example, offers investors exposure to Tether's XAUT (Teda Gold) and STO (Equity token) -backed USO (U.S. Oil Index Fund).

The market for such synthetic assets continues to grow slowly but steadily. Although the track leader is no longer sought after by the market, innovation and development of the track continues.

End of synthetic asset narrative?

In today's volatile situation, crypto investors have a growing need to invest in safe assets, but the lack of traditional asset investment vehicles in the chain world has left investors in a bind. The once hot synthetic asset project has also run into trouble because of various problems. Leading Synthetix's quiet removal of gold and oil assets could be a sign that the circuit is in trouble.

The first is the issue of vendor liquidity in the synthetic asset itself. There is not enough incentive for the creator of a synthetic asset to be willing to make that asset, and holding an asset that does not earn interest is not an attractive option for DeFi players.

Moreover, the divergence between mechanism design and market sentiment has further exacerbated the sell-side liquidity crisis in synthetic assets. When the market sentiment is depressed, the demand for the exposure of traditional assets to hedge, but because the market is facing greater risk of decline, so that the use of crypto assets casting synthetic assets is facing greater liquidation risk. As sentiment improves and liquidators reduce liquidation risk, buyers tend to prefer higher-yielding crypto assets rather than synthetic ones.

Being born at the wrong time may be another reason for the track's woes. The jump up of synthetic asset track was earlier than the outbreak of new public chains, and most protocols were built based on ETH main network. In the current popular EVM compatible chain, compared with gas of the new public chain, the high transaction cost of ETH main network also dissuaded a large number of users with low capital level.

Remember the other side of the story?

The on-chain world is never closed, with ease of use and liquidity far superior to traditional assets. By anchoring synthetic assets of traditional asset prices, the chain world will define the price of traditional assets when the market is closed, and further compete for pricing power with traditional assets when the market is open, ultimately redefining the price of traditional assets. In the grand vision of the synthetic asset narrative, markets will eventually turn around and the crypto world will dominate pricing power for traditional assets.

There was a time when the synthetic asset narrative was hotly pursued. After a period of excessive market speculation, people's expectations of this track seem to have been overdrawn. This has led to a continuous lack of development and funding for the track over the past year. While the track's needs have yet to be fully recognized by the market, it remains to be seen whether synthetic assets will be able to deliver their own grand narrative in the future.

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia