One of the larger positions in my portfolio is $FISH (Polycat Finance). It also has the highest risk reward. However, based on my current knowledge, if I would start from scratch today, I would allocate a smaller part of my portfolio to it.
So why am I not reducing my position today? Well three reasons. Number one is the limited liquidity, reducing my position would result in significant slippage. Point number two is that I don’t manage my defi portfolio in pure isolation. I own a larger stock portfolio, so while it is a large part of the defi portfolio, it is significantly smaller when looking at my total assets. Lastly, one of my improvement areas is not to get married with my positions, I guess I am with $FISH.
The majority of the value of Polycat Finance sits within their Dividend Vault Fund. A fund that was build up during the bull market and is currently deposited into yield farms. The yield from these farms is distributed to $FISH stakers, currently yielding 30% APR. Tasty.
The composition of the yield farm can be checked on Dune Analytics.
MATIC-BANANA, MATIC-DAI and MATIC-USDT are deposited on Apeswap.
IS3USD is deposited on Iron Finance.
So having the majority of funds in MATIC-USD pairs, basically makes it a MATIC derivative.
The total net asset value of the Dividend Vault Fund is c. $0.58 per token, compared to a current $FISH price of $0.19 per token. So $FISH is trading at a 67% discount to net asset value. No new tokens are issued (they are even burning small amounts of $FISH with protocol revenue).
On top of the Dividend Vault Fund they have a auto-compounding vault service and DEXes. However, the value of these services is limited due to low trading volumes and value locked.
So why is $FISH trading at a discount?
The platform made initial moves to transform into a DAO to, amongst others, manage the Dividend Vault Fund, however no progress has been made for months. The money is managed suboptimally, even leaving c. $293k on Iron Finance of which the website is no longer available (the smart contracts haven’t changed as far as I know, so the funds should be available to withdraw). On the flipside, the majority is invested in MATIC-USD pairs - so it is likely that this continues to be the case, making $FISH a real $MATIC derivative (less need to worry about malinvestments, if you are bullish $MATIC).
The project has one smart contract developer which went away for a long time and returned later than communicated to the community managers. People logically got worried whether he would return. The dev never communicates in the telegram channel, so all communication goes via the rest of the team (community managers etc.), who are great people btw!
Will Polycat ever move towards a DAO? Will the dev ever start to build again? Does the dev still has access to the multi-sig to move the funds in the Dividend Vault Fund? I simply don’t know (high risk). I made the majority of my investment under the assumption that the Dividend Vault Fund would be actively managed by a DAO by now.
The positives:
Polycat has been around for a long time (one of the first DAPPS on Polygon)
The team / dev is trusthworthy and operates with a high level of integrity. Notably, the dev continues to pay the team from his own pockets! A rarity in crypto.
The dev is a highly skilled based on what I heard from others (I am not a developer myself, so can’t properly judge this).
Polycat has brand value - a lot of people on the Polygon chain do know Polycat.
The token is in the accumulation phase. All large holders have been accumulating for a long time (see Dune picture below).
There are a couple of scenario’s in which I expect $FISH to trade up significantly.
If the $FISH holders get control over the Dividend Vault Fund allocation, I expect the token to quickly re-rate to a price closer to net asset value (x3).
If the dev returns to further build the platform (and thereby increase revenue streams) it could go significantly higher.
As $FISH has been under accumulation for a long time, price movements can be quick and steep.
So overall there is a good bullish case to be made, but the risks are significant.