SHILL Issue 145

While the price action of JUP may not necessarily mirror
the path of JTO, you can draw some assumptions:
• The initial trading day of JUP is expected to be
highly volatile, potentially providing opportunities
for short-term traders.
• The launch of JUP could generate significant
excitement with a potential local peak in the first
week of trading. A rapid increase, surpassing twice
the initial quoted price, might signal a selling opportunity.
• Conversely, a drawdown exceeding 50% from its
initial quoted price could be interpreted as a buying
opportunity.
An “Overbought” Indicator - The JTO FDV / LDO FDV ratio
Jito is like the Lido protocol. Their key distinction is that
Jito is on Solana whereas Lido is on Ethereum. Therefore,
when JTO was launched, a sound approach to pricing the
token involved looking at the relationship between JTO
Fully Diluted Valuation (FDV) and LDO’s (the governance
token of Lido) FDV. This comparison allowed us to gauge
how the market was valuing JTO in relation to its counterpart
on Ethereum.
This is the JTO FDV / LDO FDV ratio over time since the
inception of JTO:
Given that Jupiter operates as the largest decentralized
exchange (DEX) on Solana, with features such as Automated
Market Maker (AMM), DCA, perpetual trading,
and launchpad opportunities, finding a single project on
Ethereum with a comparable scope is challenging. Consequently,
I decided the combination of Uniswap, dYdX, and
DAO Maker can be interpreted as the closest peers for JUP.
Hence, their Fully Diluted Valuations (FDV) can be summed
for comparison. At the time of writing, the combined FDV
of their respective tokens: UNI, dYdX, and MKR is around
$10,04 billion.
We can utilize this combined FDV figure, along with various
key levels of the JTO/LDO FDV ratio, to estimate the JUP
price in different scenarios.
Source: Binance
By employing this same relative valuation analysis, we can
have these key price levels to improve decision making
upon the airdrop:
However, it is important to note that the daily Beta of JTO
to Solana is relatively high at 0.86. Hence, JTO price movement
closely follows that of Solana, and it is likely that
JUP will follow the same pattern. Therefore, the current
market conditions can significantly influence the hype
generated by this airdrop.
At the time of writing, Solana is trading at $80-82, down
from the $120-130 levels. This represents a dip of more
than 30%, signalling that the market conditions may not be
as bullish as during the JTO airdrop.
We observe that upon its launch, JTO quickly traded above
LDO FDV, reaching a ratio of nearly 1.9, indicating double
the FDV of LDO. However, this spike likely reflected a peak
of euphoria and the market quickly repriced JTO to lower
levels. In the subsequent weeks, the JTO to LDO FDV ratio
trended downward until the 0.4 mark where it rebounded
strongly to the 0.7-0.8 levels. By now, it seems that the
market has finally settled on a fair value around this range.
This aligns closely with its average over the past months,
which stood at 0.9.
We can conclude that for JTO, a ratio of over 1.6 represented
a clear overbought signal whereas 0.4 represented a
strong oversold signal.
Applying this Valuation to JUP
In the same way that LDO served as a relative peer for
JTO, we need to find an anchor of comparison for JUP on
Ethereum.
When comparing the month prior to the JTO airdrop to the
recent SOL price, it is evident that the market conditions
have changed. Therefore, it seems reasonable to argue
that this could have a negative effect on the price of JUP.
Potential Airdrop Reward