I really try to find positive things about DRIP network these days, but it is hard when the numbers disagree!
I've been trying to dive into the DRIP Reservoir to better understand the price movements of DRIP. The reservoir is DRIP's own DRIP/BNB liquidity pool.
Disclaimer: I am not a web3 dev or a blockchain expert, so take these numbers with a grain of salt!
As you probably know a liquidity pool works by forming a liquidity pair which simply put are two bags of similar value, one containing the first token, the other containing the second. These bags are paired to form what is called an LP Token. The reservoir works with DROPS, which is the DRIP/BNB LP token.
In reality, the inner workings of the reservoir are quite complex, with several pools and logic, and can be hard to understand. I found an excellent video explaining this very well, in case you want to dive in:
But for this post, I will try to simplify as much as possible, by looking at two main factors and how they contribute to the DRIP price: The BNB balance, and the DRIP balance.
Very roughly explained: If you buy DRIP tokens or add liquidity, you are increasing the BNB balance and decreasing the DRIP balance. And if you are selling DRIP tokens or removing liquidity, you are decreasing the BNB balance and increasing the DRIP balance. But the DRIP balance is also affected by claiming DRIPS, and indirectly by hydrating, which will later lead to DRIPS being claimed down the line.
I also found a DUNE dashboard with some interesting data about the reservoir:
If we look at the DRIP Liquidity and price chart, we see something interesting:
If we divide the BNB balance by the DRIP balance and multiply it with the BNB price, we get the $ price:
5309.8 / 508272.07 * 303.81 = 3.17
The figure says 3.17, but the discrepancy can probably be attributed to using a different BNB price (I don't know the time of day/timezone when the chart was created, or exactly what the BNB price was, but it's close enough)
So now we have a tool for calculating the DRIP price based on the circulating supply, the BNB balance, and the BNB price. It's dangerous to assume anything in this volatile crypto world, but let us still assume that the BNB balance and price will remain constant. This leaves us with the DRIP supply. Is it possible to estimate anything with regard to how that will develop? I think so.
Disregarding liquidity changes, the major factors that affect the DRIP supply are:
Tax vault buybacks
Buy/stake
Claim/sell
Taxes
Tax vault buybacks
It is hard to know how much tax vault buybacks that will occur. Since buybacks are done manually I have not even been able to figure out exactly which of the deposits to the tax vault are buybacks, and which are regular tax transactions.
I even created my own DUNE query to see if I could spot the buybacks from the biggest deposits:
Although I have some suspicions, I am not sure. So instead I will use some guesstimation based on the balance. Looking at the chart, I would strongly expect the upticks to be caused by buybacks.
Using this logic, I would guesstimate the following buybacks:
42k on Nov 2nd
37k on Nov 7th
44k on Nov 9th
This gives a total of 123k, for an average of 11.2k per day. Maybe a little optimistic to think this will continue, but let's try anyway.
Buy/stake
It is also hard to guess how many people will buy DRIP. But let's use an average since Nov 1st. I first created my own chart to try to calculate the buys, but the numbers were surprisingly high. Then I realized that the fountain was probably used for buying DRIP when adding liquidity as well, and distinguishing between that and regular buys was beyond my competence. So I eventually found this chart that seemed to have taken that into consideration.
Using that chart, I found that 377,102 DRIP were bought in the period between Nov 1st - Nov 11th. This gives us an average of 34,282 per day. This implies taxes of 3,809.
Claim/sell
Then we have claims. There are two types of claimers: The casual claimer, who claims because they feel like it, and the whale claimer who has reached 27397 DRIPS in their faucet and hence has no motivation for hydrating.
Using the same chart, I found that 2,027,859 DRIPS were sold in the period. This implies 450,635 in taxes (10% + 10%). The average is 184,350/40,966
We can assume that the claiming behavior of players will remain more or less the same in the short term, but with one major exception: Those who are about to become whale claimers will drastically increase their claiming once they reach 27k. So it will be useful to try to calculate how this will affect the price.
For example, there are currently 17 players in the 26k-27k range. For simplicity, let's assume they all have exactly 26k DRIPS in their deposits. 1% per day, means they will cross the 27 397 limit in less than 6 days, and start claiming around 246 DRIP every day (274 DRIP minus 10% tax). We also have to consider the sale tax of 10%, meaning the final number of DRIP they will sell is 222.
Let's say we want to predict the DRIP price on Jan 1st, 2023. We can then calculate the added sell pressure from this group. In the 50 days of the period between Nov 11th and Jan 1st, the 17 players will sell 222 DRIP in 44 of them (after 6 days), giving us a total of 166056 DRIP to be sold in the period.
We can do the same for all pending whale claimers and put it in a table:
Range | No of players | Days until start | Days claiming | DRIP sold | Taxes paid (in DRIP) |
26k | 17 | 6 | 44 | 166,056 | 41,514 |
25k | 12 | 10 | 40 | 106,560 | 26,640 |
24k | 26 | 14 | 36 | 207,782 | 51,945 |
23k | 19 | 18 | 32 | 134976 | 33,744 |
22k | 19 | 23 | 27 | 113886 | 28,471 |
21k | 16 | 27 | 23 | 81696 | 20,424 |
20k | 23 | 32 | 18 | 91908 | 22,977 |
19k | 28 | 37 | 13 | 80808 | 20,202 |
18k | 20 | 43 | 7 | 31080 | 7,770 |
17k | 40 | 48 | 2 | 17760 | 4,440 |
16k | 39 | 55 | 0 | 0 | 0 |
Total | | | | 1,032,512 | 258127 |
Summing this up, we have:
Current circulating supply: 519,933
Tax vault buybacks: -11200*50 = -560,000
DRIP bought: -34,282*50 = -1,714,100
Taxes from DRIP bought: -3809*50 = -190,450
Added supply from current claimers: 184,350*50 = 9,217,500
Taxes from current claimers: -40,966*50 = -2,048,300
Added supply from new whale claimers: 1,032,512
Taxes from whale claimers: -258,127
Total estimated supply Jan 1st: 5,998,968
With a BNB supply of 5309 and a BNB price of $296, we can do the final calculation:
BNB supply / drip supply * BNB price = 5309 / 5,998,968 * 296 = $0.26
Are you ready for a $0.26 DRIP price?
I was expecting the new whale claimers to contribute more, but actually, the biggest contributing factor here is the claims from the current claimers. I have heard rumors that people have hoarded DRIP before the AF launch and then sold it to get capital for the AF farms. If that trend stops and the current claimers reduce their claims by 50%, we instead end up with a price of $1.13. Maybe not great, but still a lot better.
You can also take comfort in the following:
I'm not an expert and have probably miscalculated something along the way
The bear market may turn, causing higher BNB price and a more positive sentiment
More people than anticipated may buy DRIP
Fewer people than anticipated may sell DRIP
Tax vault buybacks may increase from more Animal Farm users
The release of new features in the ecosystem may cause an injection of fresh capital upping the price
But no matter what happens, it might be good to take a solid dose of common sense and adjust your expectations. I am always astonished to see the DRIP maxis predicting DRIP prices of $100, $500, and even $3000. They must live in a different reality than me, but I guess it is good for getting subs. But even in my doom and gloom scenario, it is important to point out that it is still very possible to make money. It is becoming more and more important to reach that 27k level, and when you do that you will make 222 times the DRIP price every day. And if my prediction comes true, it means $51 (or $250 in the more pleasant scenario) for you - every day. It might not buy you that Lambo, but it is still a decent pocket change for little effort.
We will see on Jan 1st if I'm right or not. Until then, stay calm and DRIP on!
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