1/ https://www.delphidigital.io/reports/nexus-a-sleeping-defi-blue-chip-public/

New public post on @NexusMutual Full disclosure, Delphi Ventures and members of our team hold NXM positions. This is not investment advice.

Let's dive into the data

2/ Over the past 30d, ETH increased +88% while NXM & wNXM rose +90% and +84%. This lock-step appreciation is due to the ETH in Nexus' capital pool. As the value of ETH held and controlled by the protocol increased, so did the token which has claim on it.

3/ We view NXM as a form of "levered" pass-through exposure to ETH. If ETH represents beta exposure, then NXM's perf. in excess of it would be alpha.

NXM's recent gains are entirely from its beta comp., as the $ price rose while the bonding curve price, denom. in ETH, was flat

4/ Now, the NXM bonding curve $ price can be somewhat misleading; it’s a price which you can buy NXM from the bonding curve at but not one you can sell at right now cause MCR % is currently at its floor of 100%

5/ For true price discovery, it's better to analyze wNXM, which trades on the open market rather than being priced on a bonding curve. Ideally, when bonding curve redemptions aren't frozen, both NXM and wNXM should trade at parity or an arbitrage opportunity exists

6/ However, since bonding curve redemptions are currently frozen, these prices have decoupled in recent months. There's also a third way to value the token - it's book value. This can be calculated by dividing the value in the capital pool by NXM's total supply

7/ An interesting event happened as the price of ETH rose while bonding curve redemptions stayed frozen. Namely, the book value of NXM has actually converged with the market price.

To show just how unusual this is, we've charted the market price's premium & discount to BV

8/ A token that had once traded at 5 to 6 times its book value is now trading at an ~11% premium. In fact, for a few days recently, the price of wNXM actually traded at a discount to its book value before savy investors bought spot

9/ This is remarkable for a few reasons. To start, with a fully diluted market cap of $225m, adjusted using the wNXM price, it's trading at a level that is almost entirely "collateralized" by the $200m in the capital pool. That's better than most new stablecoin projects lately.

10/ However, we should clarify that, with ~$117m of active cover currently underwritten, the $200m in the capital pool is not sitting idle but rather is being used to fund ongoing operations.

11/ This capital-at-risk could be netted out when analyzing BV but cover payouts are typically rare & would likely be a fraction of that amount. If Nexus were to cease operations, NXM holders would have claim on the $200m in the capital pool net any residual cover payouts

12/ The market is pricing NXM's value in excess of the capital pool at almost nothing despite consistent demand, minimal competition, an increasing % of total supply staked, a warchest that's bigger than ever & rising DeFi TVLs which should be a leading indicator for cover demand

13/ In addition, for those familiar with the BC math, the MCR is now frozen and won't grow again until there is 779,639 ETH of active cover. Since MCR growth is a detractor for the bonding curve price, and with only 94,987 ETH of active cover, this is a favorable situation

14/ When ranking the top DeFi tokens by their FD market caps, using data from CoinGecko and adjusting for the wNXM price, Nexus just cracks the top 50, despite almost the entire market cap being "cash" on the balance sheet. How many projects valued higher can say the same?