Cheong sees SNX rallying multi-fold from current levels amidst renewed momentum across the Ethereum ecosystem.
Introduction
As an early cryptocurrency adopter and former portfolio manager at DeFi platform Celsius Network, Arthur Cheong brings over a decade of digital asset investment experience to market analysis. His large Twitter following looks to commentary for timely insights across blockchain projects.
Recently, Cheong shone the spotlight on Synthetix Network Token (SNX) as an overlooked altcoin within the Ethereum DeFi subsector ready for substantial gains after long consolidation.
"SNX is poised for massive gains in its ratio as it breaks out of 4 years of compression against ETH."
He points towards favorable technical and on-chain dynamics supportive of the decentralized derivatives liquidity protocol regaining traction after prolonged underperformance.
Background on the Synthetix Protocol
Synthetix functions as a derivatives liquidity platform within the Ethereum DeFi ecosystem offering on-chain trading of synthetic assets tracking the value of real-world benchmarks like currencies, commodities, indices and more. Users can readily trade long or short exposure on cryptocurrency prices, gold, stock indexes, fiat forex pairs and additional synthetic tickers without needing to hold the underlying asset.
The protocol's native token SNX plays an integral role securing the network by collateralizing debt positions that collateralize the system. SNX token holders stake their coins as part of the "synthetization" process that mints derivative synths against value deposited into pooled collateral. Users also receive trading fee dividends from their locked SNX serving as the foundation for Synthetix's synthetic assets.
This model that aligns SNX holder interests with platform growth makes the cryptocurrency an index for gauging adoption and usage of Synthetix over time. As more activity occurs across the decentralized derivatives exchange, additional staking and trading demand applies upward influence on SNX prices.
The Case for an SNX Breakout Rally
Interrogating Synthetix on-chain data, shifting momentum appears underway offering an edge case for an SNX breakout. Total value locked in the protocol recently bounced out its year-long range according to DeFi Llama, suggesting renewed user activity.
Additionally, SNX token holder patterns strengthened considerably in recent months. The number of addresses holding 10K+ SNX recently tagged 16-month highs, indicative of accumulation by long-term focused investors.
When filtering the lens towards whales with 100K+ SNX balances, that cohort similarly extends its count of large SNX shareholders to heights not seen since 2021. This return to higher levels of concentrated ownership points toward revived conviction by trend-setting crypto power users.
On the technical analysis front, Arthur Cheong illustrates the altcoin consolidating in a narrowing price channel against its ratio trading pair with Ethereum. This tightening wedge formation typically resolves with strongly directional breakouts.
Historically, when SNX's valuation compressed this significantly against ETH it prefaced powerful upswings during 2017 and 2021 bull runs. Cheong expects similar behavior with the current technical posturing anticipating an upside resolution.
Combining recovering activity metrics with bullish chart patterns, the ingredients unite for traders seeking discounted exposure into an Ethereum DeFi bluechip project on the cusp of rallying after years of muted trading.
Fundamental Developments Supportive of SNX Growth
While technical and on-chain dynamics paint an increasingly constructive picture for positioning in SNX, meaningful developments continue shipping across Synthetix products to boost infrastructure stickiness and usage.
In 2022, Synthetix launched Lyra Finance, an options trading protocol that enables trustless, peer-to-peer trading of options contracts settled in SNX and Synths. Lyra aims bringing sophisticated volatility exposure tools to DeFi traders beyond just simple spot holdings.
Additionally, the protocol recently unveiled Synthetify, a token minting platform for deploying Smart Contract Enabled Synths on Ethereum L2 scaling network Optimism. These SCM Synths optimize gas costs and time delays for traders needing to mint synth derivatives.
Such infrastructure expansion increases utility dimensions available for SNX stakers and Synth traders, offering new use cases catering to more advanced financial services. Attracting additional liquidity providers perpetuates further ecosystem stickiness amidst already improving volume measures.
Recent Synthetix Product Launches:
- Lyra Finance: On-chain options DApp
- Synthetify: L2 SCM Synth minting
Also on the scaling front, Synthetix plans bridging SNX and Synths supply between Ethereum mainnet and Layer 2 sidechain Optimistic Ethereum using token wrapping architecture. This builds pathway for activity migrating onto cost-efficient L2 infrastructure without liquidity fragmentation.
Besides these product enhancements, in late 2022 the protocol reduced SNX staking rewards from 0.3% to 0.2% weekly, enticing further staking participation to hit target staking ratio thresholds keeping the system overcollateralized. This change made SNX holder yields more attractive relative to risks.
When coupling attractive staking incentives with new functionality aimed at advancing composability for different decentralized derivatives trading strategies, Synthetix's growth narrative compels. Arthur Cheong's optimism around oversold conditions reversing makes sense against this backdrop.
The Broader DeFi Market Opportunity
Zooming out from just SNX itself, the wider DeFi ecosystem appears primed for renewed user traction amidst improving crypto market structure. Exchange data shows retail and institutional participation indicators early into recovery phases.
For example, futures open interest across major crypto assets rebounded out of year-long ranges, showcasing renewed conviction by more sophisticated traders expecting upside ahead. Additionally, popular exchange FTX lifting withdrawals restrictions hints worst panic selling finished for this cycle.
These dynamics argue favorably for scaled blockchain adoption growth resuming as macro conditions stabilize into 2023 following last year's carnage. Such an environment lifts boats broadly across DeFi protocols like Synthetix positioned with still largely untapped potential despite pioneering traction years ago.
Cheong himself emphasizes, beyond just SNX specifically, naming DeFi and staking tokens as an investment mega-theme for this market cycle akin to how NFT and metaverse mania dominated last bull run's peak.
"DeFi and staking tokens will be a dominant investment mega-theme this market cycle."
If that thesis holds, SNX boasts appeal as an anchor DeFi protocol with room towards recapturing its historical peak valuations on pace with the wider segment revival.
Conclusion
In summary, while risks around market volatility always remain a factor, Arthur Cheong builds compelling justification behind rally prospects for SNX as both a leading DeFi derivative primitive and an index for gauging institutional capital rotation back towards Ethereum applications like decentralized trading tools and staking programs.
Technically speaking, SNX consolidates at profound discounts to its historical valuations during high optimism phases. Fundamentally, ongoing development keeps Synthetix positioned as a top valuable and network with sustainably high staking yields that compound usage and fees.
As traders rebalance DeFi exposure and more complex crypto investors renew interest towards staple applications like on-chain derivatives, underpriced protocols with proven sticking power such as Synthetix offer appealing risk-reward tradeoffs for allocating portfolio weights.
Arthur Cheong's observations on suppressed valuations for SNX now facing reckoning matches analytical assessments on Synthetix's integral role offering financial services guaranteeing a thriving ecosystem granting long-term confidence.