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The Rocket Pool Investment Thesis, Speculative Edition

A thesis by PSY_TWEAK

This is not financial advice and you should follow up with your own research.

(source: Reddit - March 13, 2021)

Table of Contents
What category is RPL in?
Why care about it being DeFi?
How high can the price go according to this metric?

First things first, if you want to get an estimate for the minimum RPL price to help better assess your risk. Please read this post first: The Rocket Pool Investment Thesis (original)

Also this isn't financial advise, just sharing what metric I'm looking at.

What category is RPL in?

I believe RPL is a mix between infrastructure and DeFi. From a validators perspective it’s infrastructure which gives additional rewards for validating the network, but from a stakers perspective its another yield farming tool to add to the DeFi collection.

Rocket Pool seems to be DeFi in the eyes of the dev team…

Rocket Pool’s staked ETH wrapper, rETH, is the purest in DeFi. We foresee a vibrant ecosystem of integrations ranging from lending markets to run validators more efficiently to composability for productivity.

… and Coingecko

Why do you care about it being Defi so much sir?

Well because there’s a popular metric within the DeFi ecosystem which is used to value different projects: the metric is TVL/Fully diluted marketcap ratio. TVL is the amount of money staked, lent or locked in some way and fully diluted marketcap is the entire supply (including treasury and dev fund) multiplied by the price of each coin. It’s shown next to every DeFi coin’s price on CMC and CoinGecko.

The ratio of different protocols throughout Defi

Remove UNI and the average ratio is 1.22142

If you expect just 500k ETH to be staking using Rocket Pool then the protocol will have around 0.9B TVL (not counting the RPL validators need to lock in as collateral).

If you then apply the average ratio in DeFi to RPL, we have a $60 price per coin (0.9B TVL/18m supply * 1.2).

500k ETH staked is very conservative too since 300k ETH is currently on AAVE earning just 0.3% per year and the Rocket Pool staking rewards will be more like 5% per year. We can confidently expect a huge portion of the 8 million ETH in DeFi to move over to Rocket Pool staking since it will be the highest and most reliable ETH yield on the market.

How high can the price go according to this metric?

500k ETH staking at $1,750 ETH price

1M ETH staked at $3,000 ETH price

2M ETH staked at $5,000 ETH price

Note: All these calculations do not include validator RPL collateral in TVL for the sake of simplicity. TVL and RPL price would be higher if I had.

Thank you for coming to my TED talk.

Any questions, come ask me on the Rocket Pool Discord. I’m PSY_TWEAK and I’d be happy to send you the spreadsheet I’m using to calculate this metric.