Is Celestia another Ponzi? Detailed explanation of the supply and demand dynamics of TIA tokens

Author: Humble Farmer Army Newsletter Source: substack Translation: Shan Oppa, Golden Finance

Before you get mad at me, I want to clarify that I am not saying Celestia is a Ponzi scheme. In fact, I think this is one of the most important technological advancements we've seen in a long time. This article only explores the supply and demand dynamics of the $TIA token and why I believe it has similarities to the OHM (3,3) narrative that was so attractive to the retail industry during the 2021 bubble.

This report will be completed in multiple parts:

• What is Celestia?

• What is the narrative of the $TIA token?

• What are the similarities between $TIA and $OHM and (3,3)?

• What’s the next plan?

What is Celestia?

This report would become lengthy if I tried to explain Celestia in detail, so I'll just recommend the excellent article written by Nosleepjon. In a nutshell, Celestia decomposes the blockchain stack and focuses on the data availability layer. This makes it easier and cheaper for new projects to deploy new rollups and blockchains. For example, Manta Network achieved a 99.8% fee reduction by using Celestia’s data availability instead of Ethereum!

What is the narrative of the $TIA token?

I think Celestia is the purest investment in the airdrop narrative. It is built using the Cosmos SDK and airdropped tokens to OSMO and ATOM stakers in November 2023. We've already seen two big airdrops in Dymension and Saga.

Celestia simplifies the process of starting a new rollup. These rollups should airdrop part of the supply to TIA’s stakers. L1/L2 tokens generally command a premium in the market. So the logic behind this narrative is: "TIA's price doesn't matter because the airdrops will make up for the losses."

Now, this statement could be both true and true Yes, it may be wrong. Through my TIA staking operation, my DYM airdrop has covered the initial cost basis of my TIA purchase. So, in theory, if I sell my airdrop when DYM goes public, I basically get my TIA position for "free" so to speak. Of course I wouldn't do that because I believe DYM also has a strong narrative, but that's another topic.

One ​​of my big criticisms of the Cosmos community is that they are really bad at communicating their value proposition to the crypto/normal people community. They live in their own bubble, and as a result both the token price and the community suffer.

Ironically, airdrops solve this problem. Developers can make generous airdrops, and the entire community of holders can figure out what the narrative behind the token is. This is beneficial for everyone involved because the community will do all the work for the developers. Developers can develop and the community can tout it. This is why small airdrops from teams make people bearish.

The above tweet is a bit of a joke, but it’s also serious. The SAGA team and VCs are doing their best to make the airdrop as difficult to obtain as possible, such as taking a snapshot of TIA stakers on 12/1 with a minimum stake of 23. The purpose of the airdrop is to reward the community. Do they really think a Celestia community will form less than a month after the launch of the TIA token? The Celestia community is only starting to form now, so future projects should stop killing airdrops midway through very early snapshots. SAGA’s airdrop team and venture capital firms pushed it dramatically toward the middle curve.

DYM, on the other hand, is an egalitarian airdrop with a snapshot on 12/19 and a minimum TIA pledge of 1. This means you can stake $20 of TIA and receive an airdrop worth around $1,000. They also airdropped tokens to the Pudgy Penguin and Solana NFT communities. You only have to search “$DYM” on Twitter/X to see a strong community even before the coin launches! This is the way it should be done. There is a great discussion here about how much DYM should be worth.

I am extremely bearish on SAGA and extremely bullish on DYM.

Why Celestia is new (3,3)

You may realize this is A reflexive narrative. The stronger the Celestia community, the greater the incentive for the team to airdrop to the $TIA community. After all, that’s the ethos of the Cosmos ecosystem, isn’t it? As the market anticipates more airdrops, there will be more price-insensitive buyers. And if you stake TIA for the airdrop, why would people sell it...?

Therefore, TIA’s valuation can be understood like this:

Price (TIA) = data Availability layer value growth + TIA currency premium as "modular currency + all future airdrop values"

Now, no one knows how to calculate value growth and currency premium, Because it just started. So, people naturally cite the value of the airdrop as a reason to hold $TIA. The reason why the DYM airdrop was huge is because people were bearish on it. But as more airdrops are announced, people will buy TIA to stake (remember, there is a 21-day unbonding period for staking TIA). Do you want to guess when DYM claims will go online?

Translation:

Obviously, airdrops will be diluted over time. However, Celestia is only two months old, so I'm guessing we're still in the early stages of the airdrop narrative. In fact, most cryptocurrency players trade on centralized exchanges and don’t even know how to stake Celestia. Therefore, it is reasonable to be bearish on them. There will come a time when it makes sense to unstake TIAs, but I don't think that time is now.  

The fact is, retail investors love the airdrop narrative. What's wrong with this? The promise of $100 for $100,000 looks like the future of finance. Look at the number of views this video has received! If you expect retail investors to come back via YouTube, they will buy and stake TIA. As TIA continues to airdrop and rise, there will surely be a new wave of YouTube vloggers and TikTok users who will repeat fallacies similar to those seen with OHM: “OHM can go down 99% in price because the APY will make up for it.” "TIA's price doesn't matter because the airdrop will make up for it." 

Do you see? Of course I believe TIA is one of the most important innovations of this cycle, but that doesn’t mean that number will always go up. I predict this will happen again because human greed is predictable and the temptation for influencers to promote their audiences is inevitable. Of course, you can call me one of them. But I also believe that staking TIA during the early stages of a bull market can be very profitable. I'm just warning you of what might happen so you can be prepared. That's why I'm writing this to remind myself that 12 months from now I need to stay humble and profit, even if the narrative seems impenetrable. Here's how I think TIA prices will change in the upcoming cycle:

It took me 30 seconds to draw this chart. Of course there will be pullbacks and I could be wrong. I think TIA would be an amazing holding during a bull market, but also an incredibly painful bear market position because people would sell off once they realize the valuation doesn't make sense. The 21-day unbonding period will make this situation even more severe.

So what’s the plan?

I will be staking TIA in the next cycle. I will hold some of the airdrops and I will also sell some of the airdrops. I expect this will generate revenue. But when do I sell? To be honest, I have no idea. My current plan is to start reducing my TIA position once Coinbase hits #1 in the Apple App Store, or the mainstream coin reaches an all-time high.

I also want to remind you that today is January 13, 2024. If you see this post in the future, my opinion may have changed. I'm also very bad at predicting short-term price movements. Only time will tell!