This episode details Tiki's high-conviction investment thesis in Maker (now Sky), exploring how the Circle IPO, new staking mechanisms, and upcoming subDAO launches could significantly revalue quality DeFi assets.
Tiki's High-Conviction Maker (Sky) Thesis and Leveraged Position
- Tiki begins by reaffirming his strong bullish stance on Maker (MKR), which has recently rebranded to Sky. He has been vocal about this thesis for the past three and a half months.
- He transparently discloses his personal investment strategy, which includes an on-chain leveraged position. This involves using Maker as collateral to borrow USDC (a dollar-pegged stablecoin), which he then uses to purchase more Maker.
- On-chain leverage: A method of borrowing funds against existing crypto assets directly on a blockchain protocol to increase investment exposure to a specific asset.
- Detailing one such position, Tiki mentions borrowing $660,000 USDC. His overall cost basis for Maker is approximately $1374, and he describes his position as being roughly 1.95x long.
- "On one hand you can argue that this is just pure degeneracy. I just call it trading with conviction," Tiki states, highlighting his confidence despite the high-risk nature of his strategy.
- Tiki's candidness about his significant leveraged position underscores his deep belief in the Maker/Sky thesis and provides a personal context to his analysis.
The Three-Part Bull Case for Maker (Sky)
- Tiki outlines three primary drivers for his bullish outlook on Maker, now operating under the Sky brand:
- The recent Circle IPO.
- The introduction of Sky staking.
- The upcoming launch of Spark, a subDAO, and its associated airdrop.
- Maker/Sky: A prominent decentralized autonomous organization (DAO) in the DeFi space, known for its stablecoin products and governance token (MKR, now transitioning to Sky).
- DAO (Decentralized Autonomous Organization): An organization governed by rules encoded as smart contracts on a blockchain, with decisions typically made by token holders.
Impact of the Circle IPO on DeFi Valuations
- Tiki discusses his earlier prediction that the Initial Public Offering (IPO) of Circle, the issuer of the USDC stablecoin, would positively influence the valuations of DeFi tokens.
- IPO (Initial Public Offering): The process where a private company first offers its shares to the public market.
- DeFi (Decentralized Finance): A sector of the cryptocurrency industry focused on building open, permissionless, and transparent financial services.
- He had anticipated Circle's valuation to exceed $10 billion from its $7 billion pre-IPO figure. The actual surge to a $23 billion valuation, while "optimistic" in Tiki's view, serves as a strong positive market signal.
- Tiki posits that Circle's high valuation provides a crucial benchmark for other profitable DeFi protocols. He notes, "If Circle traded at 5 bill, then you can't really justify the valuations for any D5 tokens right now."
- He draws a comparison between Circle's business model (issuing USDC and earning on reserves) and Maker's (issuing its stablecoin and earning from collateral and other activities). Circle's reported $157 million net income in 2024 at a $23 billion valuation is contrasted with Maker's current profitability of around $107 million at a sub-$2 billion valuation, suggesting Maker might be undervalued.
- Strategic Implication for Investors: The strong performance of Circle's IPO could trigger a broader re-rating of fundamentally sound and profitable DeFi tokens. Tiki believes this re-rating is underway and advises investors to focus on "quality" projects.
Introduction of Sky Staking and its Market Effect
- Tiki explains a significant change in Maker's profit distribution model with the launch of Sky Staking. Previously, all protocol profits were used for token buybacks. The new model allocates 50% of profits to buybacks and the remaining 50% as dividends to Sky stakers.
- Sky Staking: A feature allowing Sky token holders to "stake" (lock up) their tokens to earn a share of the protocol's revenue. At the time of recording, this yield was approximately 13.67% APY, derived from half the protocol's profits.
- APY (Annual Percentage Yield): The effective annual rate of return taking into account the effect of compounding.
- He observed a notable price increase in the Sky token following the introduction of staking around June 2nd/3rd. Tiki speculates that visible staking yields might attract investors more effectively than buybacks alone.
- "Maybe... if they see like a staking yield... it's like wow like maybe there are certain subsets of buyers that say wow like I didn't know they made that much money right and they need to see like an actual APY for them to ape the token," Tiki muses.
- He also considers that staking could encourage more spot market buying and facilitate basis trades, potentially influencing derivatives markets.
- Basis Trade: A strategy aiming to capture the difference between an asset's spot price and its futures price, often involving longing the spot asset and shorting its perpetual future.
- Perpetual Futures (Perps): Crypto derivative contracts that mimic traditional futures but without an expiry date.
- Actionable Insight for Researchers: The shift to a mixed model of buybacks and staking dividends presents an interesting case study on tokenomics and investor response. Monitoring changes in token holder behavior and on-chain staking metrics will be crucial.
The Maker to Sky Token Migration and Potential Supply Burn
- A core component of Tiki's thesis is the ongoing token migration from Maker (MKR) to the new Sky token. He anticipates that a significant portion of the old MKR supply will not be converted by the deadline, leading to these tokens being burned.
- Token Burn: The permanent removal of cryptocurrency tokens from circulation, which can reduce total supply and potentially increase the value of remaining tokens.
- Based on his on-chain analysis, Tiki conservatively estimates that 10% of the MKR supply could be burned due to dormant tokens. He references a Dune Analytics dashboard he created, showing 15,000 MKR tokens that have been inactive for over five years.
- ERC20: A widely adopted technical standard for creating and issuing smart contract-based tokens on the Ethereum blockchain. Maker is one of the earliest ERC20 tokens.
- He cites the Syrup (formerly Maple) token migration as a case study, where 7.6% of Maple tokens were not converted by the April 30th deadline and were subsequently burned. Syrup's token price increased notably after this, though Tiki acknowledges that improving project fundamentals also contributed.
- Another example is Aragon DAO, where 27% of the token supply did not migrate during a treasury redemption event, suggesting that a substantial number of tokens can become lost or inactive over time.
- Strategic Implication for Investors: The deadline for the Sky token migration is September 18th. While Sky's approach involves a "gradual penalty" rather than an immediate aggressive burn, a large percentage of unmigrated tokens (Tiki speculates 10-30%) could lead the market to price in a future supply reduction, potentially causing a price increase post-deadline. Monitoring migration statistics is key.
The Imminent Spark Launch and SubDAO Ecosystem
- Tiki emphasizes the upcoming launch of Spark, a subDAO within the Maker/Sky ecosystem, as a major catalyst. He notes that the anticipation of Spark's launch, along with buybacks, was a reason for his initial Maker investment in July 2023.
- SubDAO: A specialized, often semi-autonomous, decentralized organization that operates under or in conjunction with a larger main DAO, focusing on specific tasks or areas. In the Sky ecosystem, these are referred to as "Stars."
- Spark is characterized as an "on-chain capital allocator." Its function is to borrow stablecoins (specifically USDS, Sky's native stablecoin) at wholesale rates from the Sky protocol and deploy this capital into various DeFi yield-generating opportunities (e.g., Morpho, Athena, Centrifuge, Maple). Spark currently manages approximately $4.9 billion, borrowed at a ~4.09% APY, and earns a rate of ~4.81% on its deployments.
- The "Spark Ignition" airdrop eligibility checker was recently announced, targeting users of protocols like SparkLend, Aave, Morpho, Pendle, and Ethena. Tiki speculates a potential $500 million Fully Diluted Valuation (FDV) for the Spark token.
- Airdrop: A method of distributing new cryptocurrency tokens to the wallets of active users of relevant platforms or communities, often to encourage adoption and decentralize governance.
- FDV (Fully Diluted Valuation): The theoretical market capitalization of a project if all its possible tokens (including those not yet issued or unlocked) were in circulation.
- Tiki explains the strategic purpose of subDAOs: "Instead of like one token to govern everything, let's create like five tokens, 10 tokens, 15 tokens that spins off right from the main DAO... that focus on like one main thing."
- Farming tokens of these new subDAOs will primarily require staking Sky tokens or USDS. This is designed to increase the utility and demand for both Sky's governance token and its stablecoin, potentially boosting Sky's overall profitability as the USDS supply grows.
- Rune Christensen, the founder of Maker/Sky, mentioned in a recent AMA (Ask Me Anything) session his intention to launch at least five "Stars" (subDAOs) within the current year.
- Actionable Insight for Investors & Researchers: The rollout of Spark and subsequent subDAOs could create significant new value accrual pathways for Sky stakers and USDS holders. Tracking the launch, adoption, and economic performance of these subDAOs will be vital for assessing the Sky ecosystem's growth trajectory.
Trading Psychology, Thesis Adherence, and Market Sentiment
- Tiki shares reflections on his trading psychology, emphasizing the importance of adhering to a well-researched investment thesis, even when facing the temptation to take profits prematurely or the fear of losing unrealized gains. "If the thesis is like playing out then like I should just keep holding, right?" he asserts.
- He references insights from the book "Best Loser Wins," which discusses how emotional biases, such as the desire to avoid the "pain" of losses or round-tripped gains, can lead to poor trading decisions.
- He observes a potential shift in crypto market dynamics, where fundamentally strong DeFi tokens (Maker, Hyperliquid, Aave, Syrup) have recently shown strong performance, coexisting with continued speculative interest in meme coins. This may indicate a market that is beginning to better recognize underlying value.
- Tiki also comments on the evolving regulatory environment in the U.S., describing a "crazy 180" from a previously hostile SEC stance towards crypto to a potentially more favorable outlook, citing positive comments about self-custody and stablecoins from figures like Paul Atkins (a former SEC commissioner often mentioned in discussions about future SEC leadership).
- Strategic Consideration for Crypto AI Investors: Maintaining discipline and a thesis-driven approach is crucial in volatile markets. The potentially improving regulatory climate for DeFi in the U.S. could act as a significant tailwind for the sector, benefiting projects with strong fundamentals and clear utility, including those at the intersection of crypto and AI.
Channel Updates and Future Content
- Tiki provides an update on his content creation, noting a reduced frequency of videos on his main Taiky Maeda channel and a pause in his Crypto Market Wizards podcast due to a recent recording not meeting quality standards.
- He introduces a new YouTube channel, "Humble Farmer Tiki." This channel will adopt a more storytelling-focused approach to crypto content, allowing him to explore narratives and themes that may not fit the analytical style of his primary channel.
- This move indicates an awareness of diverse audience interests and content formats within the crypto space, relevant for researchers studying community engagement and information dissemination.
Concluding Bullish Stance on DeFi
- Tiki concludes by reiterating his bullish sentiment towards the DeFi sector. He views the success of the Circle IPO, with Circle trading above a $20 billion market cap, as an underappreciated positive indicator for DeFi as a whole.
- He emphasizes the need for selectivity: "You can't just buy anything, right? You have to buy fundamentally strong tokens." He speculates that the relative scarcity of such high-quality, investable assets in crypto could lead to capital concentrating in these few names.
- His current bullishness is tied to the catalysts he has been tracking: the potential for a stablecoin bill, the positive signal from the Circle IPO, and now the imminent launch of Spark. He suggests that if the market doesn't react positively to these developments, it would be a cause for concern.
Reflective and Strategic Conclusion
This episode underscores how specific catalysts like the Circle IPO and Sky's evolving tokenomics (staking, subDAO launches) can drive significant revaluations in DeFi. Crypto AI investors should monitor these ecosystem developments and on-chain data, particularly migration rates and subDAO adoption, to identify fundamentally strong assets poised for growth.
