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1.2 Labs offers this Art of the Bubble bulletin for educational purposes. Our paid plans make use of the same base algorithm that our crypto hedge fund, 1.2 Capital Management, does.
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Hello Bubble Riders!
Featured below are the 1 day returns on 3 Friend.Tech keys I had and posted (for Premium Subscribers) recently.
This newsletter is part of the cycle focused on bot trading. The first strategy (discussed last newsletter) was to copy trade. The second strategy involves airdrop farming.
But to address airdrop farming, I need to give you a general sense for how to do it intelligently. We'll talk about bot automation specifically in the follow on letters.
Some airdrop farming, such as LayerZero farming, is complex. Friend.Tech farming, however, is simple and I can show you all the items you need to know in 7 points. We'll thus use it as a case study to explain the broader characteristics of the airdrop space.
Stick with me and you’ll see how those returns featured above are part of airdrop farming … and how to get them. But let's start with the more obvious context.
1. What is Friend.Tech?
It’s a Twitter add-on that allows you to gain access to a private channel from someone on Twitter when you buy their key. In my channel, for example, you get alpha about keys like the ones above … and the breakdown of the Crypto Maxi portfolio.
The value of keys increases according to a quadratic equation, meaning that as people buy keys, their value increases quite rapidly. The earlier you get in to buy a key for someone, the more you’ll make.
2. How Do I Set This Up?
If you want a Friend.Tech guide, just read this (it’s by CoinGecko and completely reliable). My job is to explain strategies for earning money, not to produce walkthrough guides.
3. How Do I Make Money With Airdrop Farming Generally?
The reason airdrop farming is vastly more likely to earn you money than day-trading is that the only thing you need to do is interact with the protocol and rack up points. The more points, the more money you earn.
Of course, if the fees for interacting with the points exceed what you’ll earn from those points, then you’d lose money. That’s your risk in this process.
4. Why Does Friend.Tech Look Promising?
We know that Friend.Tech received seed funding from Paradigm Investments, which firm also did Optimism and Blur (source 1, source 2, official X account). This is fantastic news since it means the protocol has enough money to make the airdrop worth your while. They also like to give out generous sums of that VC funding to gain users.
There are two key variables to calculate the value of Friend.Tech points: (1) how much Friend.Tech is worth as a protocol (as measured by fully diluted market cap / value = FDV) and (2) what percentage of their seed funding they will distribute.
Here’s an analysis for the 100m points to be distributed over the 6 month airdrop period (4 months left).
Basically, somewhere between $0.40 and $1.20 a point looks to be about right.
5. How Do You Rack Up Points?
Protocol interaction can mean many things and for many airdrops you never know for sure what’s going to count.
Referring people to Friend.Tech using your referral codes will get you some points. I’m already out of invite codes, though, and I can say that I didn't gain many points for that (ask Dom Viera on Discord for more invites).
Looking at Paradigm Investment’s previous airdrops, we know that they will incentivize usage that results in revenue to the protocol. And on Friend.Tech whenever a key is sold there is a 10% cost.
- 5% goes to the protocol
- 5% goes to the key issuer (influencer)
They want you to buy and sell keys = volume on chain to increase their fees gained.
This means that whenever you have a key that spikes up more than 10%, you can sell for a profit + get the airdrop points!
For example, for CHLS I could sell the key for a gain of 20% (roughly) and gain airdrop points on top of that. I told you the stuff at the beginning would matter ;)
To do this right, you need to find keys that are likely to go up in value and sell. Should they drop in price, you might consider buying them again.
6. How Do You Find Those Keys?
In general, finding Twitter accounts with 200k+ followers that have yet to join Friend.Tech are worth watching.
Even better, find them when they have just joined and their keys are cheap. You could then buy and hope some of their followers join. That’s exactly what happened with CHLS.
You can use sites such as compass.art to track such people.
Alternatively, I drop this alpha in my own Friend.Tech channel and $15 / month+ subscribers will get updates in Discord.
But you can do something else too …
7. Don’t Forget the Industry Indicator
This is a version of Lesson 4 of The Art of The Bubble.
Go to DeFi Llama and check the Total Value Locked (TVL) of Friend.Tech. You will find a screen like the image below which depicts the TVL over time. You can see that Friend.Tech TVL topped out on October 2nd and after a slight drop has plateaued over the past week.
When the TVL is in a steady increase, it’s almost impossible not to make money on Friend.Tech. When it drops off, it’s hard to make money on it.
Of course, you can download that chart as a .csv file and add your favorite moving average indicators (if you can code in Python) and now you have an indicator for when to buy more keys.
Our team has, of course, already done this (and) again it’s available at the $15 / month and up level.
Some Q&A
Q: What about that (3,3) or (Friend, Friend) stuff? In those cases people say they won’t sell if you don’t sell. That way you both earn value as people continue to buy your keys collectively.
A: This didn’t work out well with all those Olympus DAO forks. We’ve seen this one before. More importantly, the strategy outlined doesn’t require it. Please ignore that.
Q: Would it make sense to have many wallets / accounts?
A: No. Paradigm rewards volume of transaction (tx) fees. You can do that with one wallet / account. $10,000 in tx fees will get you the same number of points regardless of how many accounts its spread over.
Q: Do I need to use the Base Layer 2 protocol rather than ETH?
A: No, but you probably should. It’s easier to onboard with ETH, but Base (an L2 on ETH) has much cheaper tx fees. Since part of this strategy turns on many flips you make, keeping those fees low matters. I absolutely wouldn’t do this on ETH. You can go to stargate.finance to make a 1 time bridge from ETH to BASE. If you have a Coinbase account, you can withdraw ETH directly onto BASE.
Q: Do I need to have many followers to make this work?
A: Absolutely not. This strategy assumes you have 0 followers. You make money by transacting with volume, not by onboarding people (which doesn’t make much money anyway).
Q: Would it make sense to flip large accounts rather than small accounts?
A: It would be easier to rack up volume that way. But remember that your capital purpose is to make enough money in a flip to cover your transaction costs. If those flips are market-neutral after the 10% protocol fee, then you will net airdrop points for free. That’s not necessarily easier to do with large accounts than small ones as they can bounce all over the place. Small accounts tend only to go up if TVL increases on the protocol and if those accounts have many Twitter followers.
To Sum Up
Airdrop farming can be lucrative if you understand your play well. Friend.Tech has Paradigm Investments supporting their airdrop so that we know the playbook.
Volume will matter.
To make money with that volume, you need to flip keys that go up at least 10%. That’s easiest to do when:
- You are working with accounts that have 200k+ Twitter followers and are new to the platform and
- The overall platform is trending up in Total Value Locked (TVL)
I’ve told you where to go and find that information (Compass.art and DeFi Llama). If you want to save yourself some time and coding work, our team will give you the info for the equivalent of $0.50 a day. Alternatively, you can buy my Friend.Tech key (@lspurcell on Twitter) for a 1-time purchase.
As a note, we’re changing the name of the DIY-Er subscription to Alpha Rider. It gives you alpha on airdrop farming, coin flips, and yield farming. So, I think that makes sense.
Happy Airdrop Farming!
-Sebastian Purcell, PhD
The Macro Situation
forecast (noun):
- prediction by means of scheming;
- the economic science of qualitative bravado and quantitative disappointment.
― New Entry in the Updated Devil’s Dictionary
Markets were boosted midweek due to a positive forecast concerning Friday’s inflation data. A Bloomberg survey predicted an annual rate of 3.6% for September.
Yet, in real terms inflation remained flat compared to August (3.7%). This data coupled with the Israel-Hamas war meant markets closed mixed by the end of the week—the Dow up 0.12%, the Nasdaq and the S&P 500 down 1.2% and 0.5%, respectively.
Any recessionary concerns for crude oil pricing have been bracketed as the conflict in the Middle East pushed oil to its highest (87.72) since Oct 3rd.
Though the US dollar (106.67) remains strong, Gold (1945.90) also benefited from the uncertainty arising from the war.
Volatility in the markets due to the war has pushed liquidity towards bonds. The 10-year Treasury fell 8 basis points (4.63%) to reflect a lack of confidence. Interestingly, war can have an adverse effect on long-term bonds when it threatens the economic infrastructure of the nation guaranteeing the bonds.
- Todd Mei, PhD and Sebastian Purcell, PhD
AI Sentiment Report
The following sentiment scores use ChatGPT as part of the AI tech stack to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.
The methodology employed is based on this peer reviewed academic article, which produced 550%+ results in back tests over a 2 year time frame. We consider 4 and 5 scores to be positive, but please bear in mind that the AI model is still in its validation phase.
-The Research Team:
Dom Viera, Samantha Russell, Nicole Zinuhova, Aiza Malik
Happy Trading!!
Think About Premium
Our subscriber plans make use of the same base algorithm that our hedge fund, 1.2 Capital Management does, but modified in timeframe so you don’t have to stare at your screen all day.
We have two primary data offerings in cryptocurrencies: (1) AOTB Dynamic and (2) the Crypto Maxi. Here are our returns with comparisons to others (data from Messari.io).
This newsletter is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice. You should consult your own advisors for those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by 1.2 Capital Management. (An offering to invest in a 1.2 Capital Management fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation--all of which should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by 1.2 Capital Management, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
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