Last week I saw TermMax’s TVL surpass 100 million and its daily active addresses ranking second among lending protocols. My first reaction wasn’t excitement—I instead thought of another issue: behind these growth numbers, how much of it is driven by Pre-mine points as short-term behavior?
It’s not hard to understand why the data looks good. FT Holders accumulate TMX based on their daily balances, while Order Makers earn rewards based on trading volume. These rules do bring activity closer to real market participation than simply spamming interactions. But after the TGE on August 25, what happens? Do the users who received the airdrop continue to hold FT, create Range Orders, and stay involved—or do they just cash out and leave?
What I’m more concerned about is the stability of liquidity provision. TermMax’s fixed interest rate isn’t created out of thin air—there must be LPs willing to accept fixed returns. Traditional banks can offer fixed rates because deposits are insured and the central bank stands behind them. But LPs in an AMM pool are profit-seeking. When floating market rates jump into double digits while their capital is locked in fixed-yield orders in the single digits, the rational choice is to withdraw.
So here’s the question. On the surface, the protocol “locks” the borrower’s interest cost. In reality, that “lock” only holds if LPs are willing to stay in the pool. Once large-scale withdrawals happen, queued borrowers will find that their orders are still posted—but nobody is taking them. The “fixed” fixed interest rate instantly turns into “fixed with no liquidity.”
So when I look at TermMax now, I’ll treat TVL and daily active addresses as lagging indicators. What truly needs to be observed is LP retention under extreme market conditions. In a favorable scenario, anyone can produce pretty numbers. It’s in a downturn that you find out whether the mechanism design is actually stable. Of the users attracted by Pre-mine, how many truly convert into long-term participants? That conversion rate matters more than the price on TGE day.
@TermMax #TermMax
It’s not hard to understand why the data looks good. FT Holders accumulate TMX based on their daily balances, while Order Makers earn rewards based on trading volume. These rules do bring activity closer to real market participation than simply spamming interactions. But after the TGE on August 25, what happens? Do the users who received the airdrop continue to hold FT, create Range Orders, and stay involved—or do they just cash out and leave?
What I’m more concerned about is the stability of liquidity provision. TermMax’s fixed interest rate isn’t created out of thin air—there must be LPs willing to accept fixed returns. Traditional banks can offer fixed rates because deposits are insured and the central bank stands behind them. But LPs in an AMM pool are profit-seeking. When floating market rates jump into double digits while their capital is locked in fixed-yield orders in the single digits, the rational choice is to withdraw.
So here’s the question. On the surface, the protocol “locks” the borrower’s interest cost. In reality, that “lock” only holds if LPs are willing to stay in the pool. Once large-scale withdrawals happen, queued borrowers will find that their orders are still posted—but nobody is taking them. The “fixed” fixed interest rate instantly turns into “fixed with no liquidity.”
So when I look at TermMax now, I’ll treat TVL and daily active addresses as lagging indicators. What truly needs to be observed is LP retention under extreme market conditions. In a favorable scenario, anyone can produce pretty numbers. It’s in a downturn that you find out whether the mechanism design is actually stable. Of the users attracted by Pre-mine, how many truly convert into long-term participants? That conversion rate matters more than the price on TGE day.
@TermMax #TermMax