Analysis of Recent 3 Major Trends: Over-the-Counter Trading Market, Stablecoin Innovation, and the Rise of Prediction Platforms

Original Title: “Thoughts about OTC secondary markets, stablecoins, and prediction market platforms”

Author: Route 2 FI

Compiled by: Deep Tide TechFlow

I have been seeing more and more traders on Twitter starting to buy altcoins. Currently, many believe that OG DeFi tokens will make a comeback (like Aave now).

Personally, I am locked into many altcoins, primarily through over-the-counter (OTC) trading or angel round financing, while I also have a decent reserve of $ETH.

Today, I want to talk about a tweet I posted a few weeks ago:

These three categories are very important, but let’s delve into them to see why they are interesting and why there is a lot of innovation happening in this space right now.

OTC Markets, Stablecoins, and Prediction Platforms

Imagine this: you wake up to find that your locked tokens are suddenly worth 100 times more, but you still have to wait a year to access them.

Imagine a world where your locked tokens are no longer idle, stablecoins become less boring, and you can place bets on the future in precise ways…

Let’s start by discussing secondary markets.

1. OTC Secondary Markets

Do you remember the significant impact Binance had on the FTX collapse? That period was truly crazy. Due to a lack of OTC liquidity, Binance began selling their $FTT tokens on the market. Investors holding locked/staked/locked FTT wanted to seamlessly sell their positions to anyone at a significantly lower price.

This event highlighted a major issue in the crypto space: what do you do when you have locked tokens that could be a potential gold mine (or a ticking time bomb)?

This is where OTC secondary markets come into play.

Not Just for Whales

First, let me explain briefly.

OTC trading in the crypto space refers to trades conducted directly between parties, rather than through traditional exchanges. Historically, this space was primarily for large players conducting significant trades they didn’t want to make public.

But now, OTC is no longer exclusive to whales. With the surge in token sales, airdrops, and lock-up schedules, there is an increasing demand for more convenient OTC solutions.

This is where secondary markets come in.

Why Are Secondary Markets Important?

Imagine this: you are an early contributor who got in early on a promising project. The current fully diluted valuation (FDV) of the token is $10 billion, while your entry valuation was only $100 million. Congratulations, your paper gains have increased 100 times!

But there’s a catch—you still have to lock it up for another 36 months.

This scenario is not just a thought experiment; it’s happening throughout the crypto space. Early investors hold potential wealth but are trapped by lock-up schedules and vesting periods. Secondary markets provide an escape route—or at least a way to realize some value now.

Currently, there are several projects trying to address this issue: Stix, OffX, Http OTC, and Secondary Lane.

How They Work

Typically, the process is as follows:

1. You present your SAFT (Simple Agreement for Future Tokens) to prove you indeed own the tokens you want to sell.

2. The platform displays your offer to a closed group of potential buyers.

3. If there’s interest, you need to obtain legal approval (because, after all, securities laws and those pesky things).

4. Depending on the terms of the agreement, you may also need to get approval from the agreement itself.

It’s not as simple as listing a trade on Uniswap, but for those sitting on locked tokens, it could be a lifeline.

Tokenizing SAFTs and Decentralized OTC

Now, things get even more interesting.

What if we start tokenizing the SAFT itself or create other derivatives based on locked tokens? Imagine being able to trade shares of future token allocations. We already have liquid staking, so why not introduce liquid locking further?

Let’s add a fully decentralized OTC market to seamlessly trade these derivatives. No intermediaries, no closed groups—pure, permissionless trading of locked assets. It sounds good in theory, but the regulatory challenges are… you know.

And yes, OTC secondary markets are not all sunshine and rainbows. They may increase liquidity and price discovery, which is good, but there are also some serious issues:

Insider Trading: What happens when team members start dumping tokens before bad news hits?

Market Manipulation: Due to relatively low liquidity, these markets could become prime targets for pump-and-dump schemes.

Regulatory Nightmare: The SEC has already cast a suspicious eye on the crypto industry. Adding another layer of complexity won’t make them any happier.

The Future of OTC Secondary Markets

So where is all this headed? If I had to bet (which will be discussed in detail in the third part of this article), I would say we will see more innovation in this space. The demand is there, and in crypto, demand often breeds solutions—good or bad.

We might see:

• More complex derivatives based on locked tokens

• Integration with DeFi protocols to enhance liquidity and lending.

• Fully decentralized, compliant platforms serving everyone, including global institutional investors.

One thing is for sure: as long as there are more and more projects essentially accompanied by lock-up periods and token vesting plans, there will be a demand for secondary markets.

Whether they will ultimately have a positive impact on the ecosystem remains to be seen.

But that’s part of the fun, right?

So how do you transfer locked tokens in a contract that both parties can agree on? Is it possible without communicating with DeFi protocols or startup teams?

What if a contract (smart contract address) could transfer/extract tokens to a specific address with the exact code?

For example:

Bob will receive Monad tokens in 6 months (15% at TGE). The remaining 85% will be received over the next 36 months. Bob's wallet address is 0x….. Currently, his token valuation is $5 billion (token valuation), and the paper value of all tokens is $200,000.

Karen wants to buy these tokens for $100,000 (50% discount = $2.5 billion valuation) because she has to accept a 36-month lock-up clause.

Bob enters his wallet, and the protocol will send the tokens to him, then he signs a message from Karen, allowing all future tokens to be automatically transferred to Karen. 15% at TGE and then transferred monthly over the next 36 months.

I’m not sure if this is feasible today, but a token standard should be created for this.

Risks:

• Bob tells the protocol he wants to change the payment address. So it’s best to stay in touch with the team.

For reference, I don’t remember Monad’s valuation; this is just an example.

I’m not sure how to solve this OTC secondary issue without interacting with the team/legal, but that would be a dream. Making OTC sales simple.

2. Innovative Stablecoin Platforms

Let’s talk about stablecoins. But we’re not talking about the old generation of USDT or USDC, but those quirky and intriguing 2.0 stablecoins. Because honestly, a bit more stability during the recent 20% daily volatility would have been a nice option.

Moreover, stablecoins are the cornerstone of decentralized finance (DeFi), a safe haven in the storm, and something you might want to convert into before the last crash.

However, traditional stablecoins like USDC and USDT have some issues:

• They are centralized, which means there is a risk of a single point of failure.

• They face ongoing regulatory challenges.

• Their capital efficiency is not high.

Nonetheless, we have some projects trying to address these issues, and perhaps create some new ones in the process.

Ethena's USDe

Let’s focus on Ethena, as they are trying to do something… interesting. They call it the "Synthetic Dollar Protocol," which sounds like something out of a dystopian financial sci-fi novel.

How USDe Works (theoretically):

1. You deposit staked ETH (like stETH) as collateral.

2. Ethena opens a corresponding short position on a derivatives exchange.

3. You receive USDe tokens in return.

The idea is to hedge against ETH price fluctuations through the short position, thereby maintaining value stability. It’s like playing on a seesaw, hoping you don’t fall off.

Basically, you can stake your USDe as sUSDe and earn from it:

• Staking rewards from the ETH collateral.

• Funding and basis gains from the hedged position.

Risks (because there are always risks)

• Funding Risk: What happens when funding rates are negative for an extended period?

• Liquidation Risk: If the price difference between ETH and stETH becomes too large, things could get messy.

• Smart Contract Risk: Because a DeFi without hacker threats is incomplete, right?

Ethena has an insurance fund to cover some of these risks, but in crypto, we know that "insurance" often means "the first thing to disappear when things go wrong."

While Ethena is gaining attention, they are not the only team trying to reinvent stablecoins:

Usual Money

Usual positions itself as a secure and decentralized fiat-backed stablecoin issuer. They are building a multi-chain infrastructure to aggregate tokenized real-world assets (RWAs) from large players like BlackRock, Ondo, Mountain Protocol, etc.

The ultimate goal? To convert these RWAs into a permissionless, on-chain verifiable, and composable stablecoin called USD0. It’s like they are trying to bridge the dull (but stable) world of traditional finance with the wild west of DeFi.

USD0 is marketed as the world’s first RWA stablecoin that aggregates various U.S. Treasury tokenized assets. Here’s why it could be a big deal:

1. Security: The stablecoin is backed by actual U.S. Treasuries.

2. Transparency: Real-time transparent reserves address one of the biggest criticisms faced by existing stablecoins.

3. Bankruptcy Isolation: Unlike some stablecoins tied to commercial bank deposits (looking at you, USDC during the SVB crisis), USD0 aims to truly decouple from traditional banking risks.

They also have a "useless governance token," but it might not be so useless:

• It grants ownership of actual protocol revenue, not just voting rights on unread proposals.

• Staking $USUAL can earn more $USUAL, creating a positive feedback loop for long-term holders.

• There are also discussions about future buybacks to enhance "real value"—a move always popular in crypto circles.

Perhaps most interestingly, Usual is allocating 90% of the supply to the community. This is a bold move in a space where founders and venture capitalists typically retain most of the shares.

Challenges and Issues

Of course, it’s not all smooth sailing. Usual faces some significant challenges:

1. Regulatory Scrutiny: Anything related to U.S. Treasuries is bound to attract regulators' attention. How will Usual navigate this complex environment?

2. Competition: The stablecoin space is highly competitive. Can Usual carve out a significant market?

3. Adoption: Will DeFi users accept a stablecoin backed by Treasuries instead of dollars?

Potential Impact

If these new stablecoin models really work (meaning they become relevant and widely used rather than just a speculative curiosity), we could see some significant changes in DeFi:

• Higher capital efficiency in lending.

• New types of yield-generating strategies.

• Potential reduction in systemic risk (or just new, more exciting types of risk).

Honestly, I look at these new stablecoin platforms and think, "Haven’t we learned our lesson?" I’ve been through the UST collapse, and that felt like having a root canal performed by a drunken gorilla.

But another part of me—the part that has been inhaling hope since 2017—feels excited. Because this is what crypto does best: complicating existing financial concepts and ultimately arriving at something innovative.

In the next issue, I will delve deeper into the opportunities in stablecoins. Stay tuned for yield opportunities and optimal investment strategies regarding Ethena, Usual, Anzen, Elixir USD, and Mountain USD.

3. Prediction Markets

Now let’s talk about everyone’s favorite hobby: speculative predictions. Why limit ourselves to betting on price fluctuations? We can bet on anything!

Imagine if you could bet on the exact date of the next Bitcoin halving or the color of CZ's shoes after he gets out of jail—how fun would that be?

Welcome to the world of crypto prediction markets, where your flashes of insight could make you rich (or, in reality, cost you a small fortune).

Prediction markets are not a new concept, but blockchain technology is bringing significant changes to them. The idea is simple: create a market for any future event, allowing people to buy and sell based on their predictions, and then see how the wisdom (or collective folly) of the crowd manifests.

Non-Sports vs. Sports Betting

In crypto prediction markets, we have two options:

1. Non-sports prediction markets: You can bet on anything, from interest rate cuts to whether Vitalik will wear a suit.

2. Sports betting: When you want to combine your gambling addiction with your love for sports.

Polymarket

Let’s take a look at an example of a crypto prediction market: Polymarket.

How does it work?

Just create a market around any yes/no question and let people trade. That’s it!

Popular markets include politics, crypto events, celebrity gossip—anything you can think of, there’s bound to be someone willing to bet on it.

But Polymarket isn’t the only one.

Emerging platforms like LimitlessExchange and HedgehogMarkets also want a piece of the pie. LimitlessExchange offers markets priced in ETH, while HedgehogMarkets on Solana attracts users with a unique centralized betting system.

One of the most exciting developments in this space is the emergence of permissionless markets. Imagine being able to create a prediction market on anything without needing permission from those old guys who have never lost thousands on some obscure meme coin.

This is the ultimate form of free speech supported by crypto.

Another revelation is the application of AI in market resolution. Imagine a prediction market where AI can automatically resolve the outcomes of complex and nuanced events without human intervention.

It’s like we’re building a real oracle.

Sports

Let’s talk about how to put your ETH into action in sports. SX Bet, Azuro, and Overtime are bringing sports betting into the Web3 era:

• Instant payouts: No more waiting days to withdraw your winnings.

• Transparency: All bets settle on-chain, along with the odds. No more shady bookies.

• Global access: Bet anytime, anywhere.

Some crypto sports betting platforms have daily trading volumes that would make some small countries envious.

But things are getting crazier.

There are signs that some quite leveraged bets are emerging in crypto prediction markets. Examples abound: LogX Trade is establishing perpetual futures contracts for "if things" like Trump winning.

But don’t forget, low-key prediction markets also exist in meme coins.

TRUMP and BODEN tokens are merely proxy bets on election outcomes; holders are just speculators on who will win and how others will speculate.

It’s like meta-betting, and it’s fascinating to watch.

Looking ahead, I ask myself: will decentralized prediction markets become standard tools for business and governance decisions, or will the all-powerful blockchain need to be consulted when giving birth?

One thing is certain: the lines between gambling, investing, and predicting are becoming exceedingly blurred in crypto prediction markets.

These possibilities are both exciting and terrifying.

The Future of Prediction

So where is all this headed? If I had to bet (obviously, I have to), I would say we are facing a future where the boundaries between prediction markets, traditional finance, and everyday decision-making become very blurred—really, very blurred. What can we expect?

• Creating a market and using AI to resolve it: Imagine when markets automatically generate around hot topics, and AI handles all the outcome determinations.

• Combining this with real governance: Can we see prediction markets influencing policy decisions?

• Micro-predicting everything: Betting on tomorrow’s weather, the number of likes on a tweet, or whether my crush will notice me.

Another innovative solution could involve using yield-stablecoins or even designing a lending protocol that allows users to borrow based on their positions.

For example: bet $1,000 on Trump winning and use leverage. The position won’t settle until November. So you bet $1,000 but only spend $200 (5x leverage—> capital efficiency). In fact, Levr bet is doing just that.

Or you could borrow against your position. This could make prediction markets more attractive.

Your $1,000 Trump bet—> borrow $500 USDC, which can be used for anything.

The potential here is staggering. We’re talking about a world where collective wisdom connects in real-time, information has a price, and trades as efficiently as stocks.

It’s like Wikipedia and Wall Street had a baby, and that baby has a penchant for gambling.

But don’t get too excited; we still have some hurdles to overcome:

• Regulatory challenges: Governments aren’t too keen on unregulated gambling-based applications. Like magic, huh?

• Oracle issues: How do we ensure that bets are resolved in a fair and accurate manner?

• Market manipulation: High liquidity brings high responsibility—and potential chaos.

The Future is Unpredictable

The situation is changing rapidly. From providing survival opportunities for locked token holders in OTC secondary markets to innovative stablecoins that challenge our values, to prediction markets that let you bet on almost anything—the future of finance is being written (and rewritten) in real-time.

Are these innovations the key to unlocking the next wave of crypto adoption? Or are they just ways for degens to lose money in more complex ways?

Honestly, it could be both.

What I do know is that the creativity and audacity in the crypto space never cease to amaze me. Just when you think you’ve seen it all, someone comes along and creates an AI-driven, quantum-entangled, blockchain-based solution to a problem you didn’t even know existed.

So what’s next? I don’t know.

But I will be here, ready to embrace the challenge, possibly making foolish bets in prediction markets, chasing any new stablecoin that promises endless wealth.

Because in the crypto world, the only thing crazier than the latest innovation is completely missing it.

Remember, anon: the future is not yet written, but with these new tools, we might be able to bet on it.

Just make sure your bets don’t exceed what you can afford to lose. Of course, this is not investment advice—but in this crazy financial wild west, who can really say what constitutes investment advice?