Aura Finance - Supply Squeeze

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We've seen explosive growth from @AuraFinance and it is just getting started. Let's dive into what drove this growth, current catalysts, and why this squeeze might continue. I'll hit on the angles most of the public has missed. Free Alpha ⬇️ 🧵 ⬇️

I've released several tweets on @AuraFinance over the past few weeks if you haven't been keeping up with my content. I'll leave them here for those of you who want to catch up on my original thesis. Original Thread: twitter.com/SmallCapScience/status/1540093151410475009?s=20&t=e91tKRT-vR491mwxaDIiaA

This was my first time doing a deep dive of @BalancerLabs so unfortunately some of my numbers were a bit off due to dated content or misunderstanding of numbers from new tools like Token Terminal. Here are some of the corrections: twitter.com/SmallCapScience/status/1540398178293276675?s=20&t=e91tKRT-vR491mwxaDIiaA

Since this original call @ $.70 per $AURA the token has done 495% in just over two weeks. On top of the reasoning in my original threads regarding fees, liquidity, and a bear market launch that helped lead to this run-up. Let's dive in deeper on why this is relevant...

$AURA launched during absolute peak fear. This chart is from their blog titled "Against All Odds: AURA’s LBP Recap and Your Next Steps" you can see a chart of ETH falling 40% from $1800 > $1100 during their launch, alts performed worse.. BLOG: mirror.xyz/0xfEE0Bbe31345a7c27368534fEf45a57133FF3A86/CwfMJeqnu7TxgrrUC-VNLQc3M3-jpsDNXB-Ktm0qwZA

They raised ~1k ETH, most of which was used to bootstrap liquidity. A $1M raise on a legit DeFi project is sad, but the market was a mess and now that it has turned around, $AURA has gained attention. That $1M for liquidity is now not enough to support the project demand.

No one saw this as an issue because it was expected an $AURA gauge would be passed on @BalancerLabs for liquidity rewards. That's when curveball #2 occurred, some bad-acting selfish whales (imo) voted the gauge down to hoard $BAL rewards for their LPs. snapshot.org/#/balancer.eth/proposal/0xf4059ffd4dd7bec9bac4440a778226b6b7c827770769e3f115d615336f25bb45

Due to this, you now have a project with exploding interest, extremely thin liquidity, and governance wars picking up. Liquidity has grown but it's in an 80/20 AURA/ETH LP meaning there is really only $1.3M ETH in the main LP

Outside of price/liquidity, why has $AURA gained so much attention? Recently a $BAL proposal passed called "Core Pools" which includes some extremely pivotal changes to $veBAL. I warned you - twitter.com/SmallCapScience/status/1542626557096632320?s=20&t=e91tKRT-vR491mwxaDIiaA Twice... - twitter.com/SmallCapScience/status/1543248655909638145?s=20&t=e91tKRT-vR491mwxaDIiaA

This proposal states that $BAL protocol fees will be going 25% to the Bal DAO and 75% will be going directly into Hidden Hand for Bribes. That means that unlike $CVX where all $veCRV earnings go to $cvxCRV, all $veBAL earnings end up with $veBAL / $vlAURA holders through bribes

It allows for any protocol that earns more than 20% of $veBAL to have bribes pushed directly to it, currently, this is only AURA with 26% of $veBAL. This means 26% of the fees pushed to HH will go to Aura directly, currently, fees averaged $1-2M monthly.

That means $vlAURA would be earning $3.6M from BAL fee bribes alone yearly. Outside project bribes only increase that amount. Core Pools also proposed these bribes only go to specific pools that earn the largest amounts of trading fees for the Balancer. Extremely smart imo

$CREAM, for example, votes for BAL rewards to their LP which has near-zero trading fees. Now that this passed, they will still be able to vote for rewards for CREAM LP but they miss out on the $veBAL protocol fees that are pushed to the core pools. No more *FREE* reward leeching

This means that those $3.6M+ in fees only go to $veBAL / $veAURA holders who vote for the cool pools with the largest bribes. Flywheel will be in full effect and anyone voting for these core pools should print imo. Oh Ya, and bribes will be paid out heavily in stablecoins 👀

A secondary revenue stream for $vlAURA is from LPs. $vlAURA also earns 11% of all the $BAL farmed by the LP's on @AuraFinance. Currently, this is about $82M in TVL and these rewards are paid in $auraBAL.

Current $CVX has about $3.4M of TVL compared to $5.2M on Curve Finance. 65% of CRV TVL is on Curve Finance by this estimation. This is rough math to make a point, it's not perfect due to things like vlCVX staking not happening on CRV. Do the math here if you want perfect #'s

@AuraFinance has $100M of TVL compared to $1.2B of TVL on @BalancerLabs. Larger capital will make the shift to AURA as trust is built At the same levels as $CVX, Aura would have $812.5M (65%) farming in those LP's which is 8x more than today, all earning for $vlAURA.

Now that you have an understanding of the bullish sentiment around $AURA let's shift the sentiment back to the main issue at hand, the reason for this thread, and the immediate catalyst, $AURA liquidity.

Lately there have been huge headwinds in the liquidity with 50/50 gauges getting passed for both $AURA & $auraBAL. AURA - snapshot.org/#/balancer.eth/proposal/0x220eb8dc6f09ae0a89481590978fe69bdaca7d1afaf9586d51bdc9dc6fc7af18 auraBAL - snapshot.org/#/balancer.eth/proposal/0x113b565b39737b810cec5ef98371c437a656a07c2aed13c83d0b5e38ec5963fd

There rewards for these LP's are set to go live on July 12th. There are even hefty bribes for the $AURA / $ETH LP and currently voting numbers reflect that.

In the rules of $BAL gauges, 50% of AURA's $veBAL is the cap for any given LP. With the heavy bribes, we will assume that this LP ends with 50% of the $veBAL voting for $AURA emissions. This is where things get a bit crazy, hang on tight...!

From the Balancer Docs, current emissions are 145k $BAL per week to be voted on by $veBAL. Currently, $AURA owns 26% of $veBAL so assuming that 50% of their vote goes to $aura/$eth that means 18,850 $BAL are allocated to that LP ($96,135) veBAL - forum.balancer.fi/t/introducing-vebal-tokenomics/2512

On top of the $96k of $BAL rewards, AURA docs show that for every $BAL distributed there will 3.9 $AURA distributed. That's 73,515 AURA for the AURA / ETH LP worth $246k on top of the $96k $BAL rewards... ALL IN THE FIRST WEEK!

Thats nearly $350K of rewards at current $AURA prices assuming a 50% vote. Insane earnings are incoming. This means that the liquidity challenges for $AURA won't last, what they have happening right now is a supply squeeze caused by $BAL governance and launching in a bad market.

$AURA has a circ supply of around 6.6M tokens but that number actually includes 3.6M AURA that are locked for $vlAURA. That leaves 3M AURA unlocked...

Of the 3M $AURA unlocked, 1.6M of them are in the 80/20 LP (project owned). That means there is actually only about 1.4M AURA ($4.6M) on the market today that will farm $AURA / $ETH LP launching in a few days.

$4.6M worth of AURA earning $350k in WEEKLY rewards is massive! Paired with ETH leads to about 200% APR by my calculations at current prices. If whales continue to lock and accumulate more AURA, LP is currently the best strategy to heavily stack early on.

IMO this means when these farms launch, $AURA supply squeeze will be in full effect and prices will head much higher. It's a perfect storm for a supply squeeze as everyone fights for influence over the @AuraFinance + @BalancerLabs ecosystems.

Unfortunately, I didn't see this coming and most of my $AURA is locked for the long term. I'm farming + buying $AURA here and keeping it unlocked to use to farm after the launch of the rewards.

Whales/DAO's are still sidelined as they aren't able to scale in due to liquidity challenges. With that said, I'm expecting the first few days after rewards go live to be crazy volatile in both directions. It's near-inevitable at this point.

I'm currently working on a governance proposal that allows some holders/DAOs that have been boxed out to scale in through bonding. I'll release it in a few days as I finish but ideally, the project still needs DAO's to be able to accumulate, not just retail

With that said, I couldn't be more bullish on @AuraFinance and am super excited to see how this plays out over the coming weeks. It's been exciting to see a project thrive in such a miserable macro environment for crypto.

Disclaimer - None of this is financial advice and please do your own research. This is for my own records because I have the memory of a goldfish. Hopefully, you enjoyed the content, and look forward to hearing your feedback. GL 📈