Analysis date : 2022-09-27

Lyra feels like GMX early on. Offers a new primitive people actually use on a layer 2 (unlike yield aggregators, GMX copies, and the 100th swap service).

I found the traits are very similar to the dev team of GMX.

Founders Traits

• Iterative builders
  • Decent market fit initially → Avalon upgrade : Better market fit (similar to GMX and its iterations from XVIX, Gambit and then GMX)
• First principle thinkers
  • Recent upgrade to Avalon(Jun 1st) improved LP profitability, partial-margin option selling(addition of liquidation engine), increased option maturity selection. All three are large technical undertakings and they are being well received by the market.
  • LP vaults offering delta-neutral-ish **yield on ETH(~4%) and BTC(~4%).
  • Balancing the wants of LPs and retail is hard. Especially the option LP design-space. You need to aggregate liquidity despite options markets inherently consisting of hundreds of small markets. And LPs need to NOT lose money(frequent occurrence in older option protocols). And the pricing needs to be relatively competitive to Deribit. While being somewhat gas-conscious. Read docs for how they did this.
  • GMX also took risks in their perp design deliberately not copying the Bitmex perp model and porting it over like Perp protocol and dydx to some extent.
• Conservative with token emissions

  • Test markets without incentives first, unlike many that rush towards spending tokens stupid things like their LP pool(GMX spent the bare minimum in their LP pool initially almost getting blown out of their UNIv3 LP range when prices shot up, having to privately ask for a liquidity injection; Signaling founder is super frugal with spending)

    

    https://blog.lyra.finance/incentives-launch/

  • Token emission very low on Token Terminal(Not sure of accuracy). Most recently, revenue of $79k with incentives worth $11k. Net revenue being $69k. Annualized thats 25m so a PER of ~1. Big, if true.

    

Project Traits

• Minimalistic UX

  • They did not try and port the Deribit options chain UX. Onchain traders tech first, finance second. So the UX has to be almost bare bones. Focus over functionality seems to work well for UX strategy in crypto. (Same with GMX)

• Strong community

  • Polynomial and Brhama finance both impressive looking structured products using lyra options. Also, Teal finance offers an options arbitrage page comparing Lyra and Deribit. Options analytics sites(GVol) also cover lyra trades. (For GMX : Vesta, Umami, Blueberry club, community-led analytics/calculator pages)
  • Lots of option new-comers learning in the discord. (Similar to GMX. Lots of first-time leverage users there too)

• Healthy Growth in OI

  

  https://stats.lyra.finance/d/wxVeXfUnk/1-global-view?orgId=1

• Healthy Growth in Revenue

  Revenue : 2.2m in the past 30d (+17.8%) Annualized : 27m

  • Key question is whether revenue is sticky and bear-resistant. Personally, I think options markets are bear resistant, similar to perp markets.

  

  https://tokenterminal.com/terminal/projects/lyra

Options Markets

• Tradfi stock options volume overtook stock trading in 2020. This is probably not going to happen in crypto as leverage is cheap and accessible here. However onchain options do offer a 10x in transparency and composability.

• Options markets trade thousands of contracts and so liquidity is the moat. Deribit taking +90% of volume is due to this moat. Currently the options market does about $1b per day in notional. Bitmex and Binance used to do 1b per day in futures. Binance now does 20b. So I believe options markets are still early. I see this market growing at least +30% cagr. Hence the first on-chain options that has market-fit is a good bet too.

  

  

Valuations

**Current Valuations (**2022-09-27)

Price/Valuation : $0.15 / $28.2m (FDV: 152m, 18% circulating) TVL : $22m Revenue : $2.2m in the past 30d (+17.8%) Annualized Revenue: $27m PS Ratio : ~1

Emission Costs : 11k per day(high-side) ⇒ $4m (very rough) Net Revenue : 27m-4m = 23m PE Ratio : ~1.2