Belgium (CoinChapter.com) — As there are thousands of cryptocurrency projects to explore these days, it can be challenging to gauge the long-term validity of some. For Venus (XVS), there are a few potential warning signs that prove difficult to ignore. Moreover, the token’s value keeps decreasing, which doesn’t look overly promising either.
What Is Venus, Again?
As a protocol on the Binance Smart Chain, Venus aims to provide a decentralized marketplace for lenders and borrowers using borderless stablecoins. Such a concept makes plenty of sense on paper, as stablecoins are risk-free assets capable of maintaining their pegged value. Compared to Bitcoin or other crypto assets, they incur far less risk for investors and speculators. It is an option that can appeal to both novice and advanced crypto enthusiasts.
Venus is also home to a native decentralized stablecoin called VAI. It is backed by a basket of other stablecoins and crypto-assets. While this approach seems viable, some recent issues have highlighted the issues in making sure VAI retains its value. It is far from a stable currency today, and the developers have yet to introduce a viable fix to address these concerns.
Currently, the projected APY for supported assets is decent, although not too earth-shattering. Users can earn between 3.2% and 9.66% APY on their holdings, assuming they want to acquire the XVS tokens. Without, the returns are much lower and virtually unappealing.
Last but not least, Venus lets participants use vToken collateral to borrow from the Venus Protocol directly. Combined with on-demand global liquidity for supported assets, the broader concept seems appealing. However, it is a matter of staying relevant and competitive compared to other projects on the market. This is where Venus is losing a bit of ground lately.
What Has Changed In 2021?
Venus is not a new project on the market, even though the Binance Smart Chain keeps attracting more eyeballs in 2021. Throughout 2020, Venus saw a price surge to $3 yet suffered from a low APY in the early stages. This forced many users to explore the option of minting VAI, as that asset is supported on other platforms and had a better APY. Unfortunately, the rewards hardly ever outweighed the transaction costs involved in claiming earnings, making this approach less than spectacular.
Many people had high expectations for Venus in 2021, yet it remains uncertain fit hat is warranted. Despite noting a massive price spike to $98.9 in February, the momentum has cooled off again. Today, one XVS is worth under $68. Despite this value growth, the APY from providing XVS liquidity is not that much better than last year. Executing good ideas well is a lot more complicated than most developers give it credit for.
All of the above is problematic enough for any platform looking to complete in the DeFi space today. For Venus, however, things are a bit more complicated. The native VAI stablecoin – which is supposed to retain a $1, has gone through a rough patch. Today, it is worth $0.956 again — which is still relatively far off the $1 mark — but things looked very bleak about a week ago.
For reasons unknown, the value of VAI dropped to $0.83. It is possible people were converting VAi to other stablecoins in large quantities, driving its value down. However, the Venus developers did not intervene when prices were dropping to these low levels. Many people saw this as a weakness, although it seems the situation is resolving itself somewhat.
Can Social Sentiment Save The Day?
One intriguing aspect of the cryptocurrency industry is the impact of social engagement. When enough people start talking about a project, it tends to become relevant for better or worse. In Venus’ case, social sentiment is picking up in the past month. Although there is always room for improvement, it would appear things progress in the right direction.
However, with little Reddit volume, no Medium volume, and nothing noteworthy on YouTube, it will be tough for newcomers to discover Venus. There is a fair amount of talk on Twitter, but that alone will not suffice. Similarly, the number of shared links dropped by 18.8% in the past month. All of these statistics confirm things are not looking great for Venus right now.
Closing Thoughts on Venus
Anyone who contemplates investing in Venus has a lot of research to do. The core concept of the protocol is still valid, yet it seems everything else isn’t necessarily appealing. The VAI stablecoin issues, combined with somewhat low APYs, are not appealing to many users. Moreover, the lack of social traction will eventually create problems, although it can be rekindled using dedicated marketing efforts.
It isn’t easy to offer a positive long-term outlook for Venus today. Even though it is a Binance Smart Chain project, that alone will not make it gain momentum. However, if the developers intend to step up their game, interesting things can happen for this project. In its current state, it leaves many questions unanswered.