How LSTR and SURGE on Base Bring Ripe Opportunities for LeoStrategy to Accumulate More LEO

We're currently working with partners on the Base blockchain to prepare for LSTR & SURGE to launch within their capital markets. This is an exciting time for LeoStrategy's emerging fund. By bridging to Base and launching our tokens there, we are opening ourselves up to billions of dollars in potential capital investors. This also means spreading the message of the LEO Token Economy to these markets as well.

In this post, we'll explore the ripe opportunity of volatility harvesting that this brings to the table for us. By launching with a very specific structure, we are able to create anchor pools (USDC pairs) and also volatility pools (WETH pairs) that are aimed to maximize volatility that can be harvested by our Market Maker while also encouraging capital to be onboarded to LeoStrategy.

Volatility Harvesting

Volatility Harvesting is another way of saying Market Making. Volatility is the lifeblood of a Strategy company. Microstrategy, Metaplanet and other Strategy companies have proved this: the more volatility you have, the more capital you can raise / revenue you can generate.

LeoStrategy is able to create a unique moat around our market making capabilities. This is a moat that simply can't exist for MicroStrategy.

This moat is the bridge between Base <> Hive.

Our Market Maker is in the final stages of testing and will launch in this order:

1. Hive-Engine Pairs
2. Cross-Chain LEO Pairs
3. Cross-Chain LSTR/SURGE Pairs

The first iteration will arbitrage on Hive-Engine as we see a lot of low hanging fruit for the LEO, LSTR and (soon, when the presale is sold out) SURGE tokens.

We'll operate this market maker and use the profits to purchase more LEO and expand our balance sheet. Expanding our balance sheet allows us to scale our products, services and derivatives which means more volatility to harvest which creates a reflexive cycle that allows us to scale market making activities.

The second iteration will arbitrage cross-chain LEO pairs: LEO, bLEO, pLEO, heLEO. This arbitrage will have a moat built around it for us by the LeoBridges. By having a whitelisted (lower) bridging fee, we are able to be the sole arbitrager of cross-chain LEO pairs. Gone are the life-draining arbitrage bots that currently operate on Hive by taking a profit out of the LEO economy and not investing anything into it.

With this moat, our market maker will have a durable edge via whitelisted bridge fees on arbitrage. This will allow us to arbitrage the pair with no real competition. We use the profits to buy LEO and add it permanently to our balance sheet which reflexively grows the LEO Token Economy and thereby increases future arbitrage opportunities (as LEO is worth more in USD terms, the market making profits are also worth more in USD terms).

The third iteration will do exactly what we do with cross-chain LEO pairs but with cross-chain LSTR, SURGE and future derivative pairs. The expansion of LeoStrategy to Base is what allows this. We'll be able to onboard fresh capital into LeoStrategy's LSTR & SURGE tokens from the Base blockchain while also arbitraging any price volatility that occurs between LSTR on Base vs LSTR on Hive and SURGE on Base vs SURGE on Hive.

All of this volatility is harvested for profits which are used to buy LEO, expand our balance sheet and therefore reflexively scale our arbitrage profits (more USD value on the balance sheet = higher LSTR USD value = more USD value for arbitrage.

The Setup of Pools on Base

USDC = intake + truth. WETH = volatility + fees. Together = bigger flywheel → more LEO buys, every Monday.

The way we setup our LSTR and SURGE pools on Base are designed specifically to do two things:

1. Create the best environment for onboarding fresh capital (through USDC on Base)
2. Create the best environment for volatility harvesting

USDC Pools Serve as Price Anchors

1. USDC Anchors = having LSTR/USDC and SURGE/USDC pairs. This allows anyone to buy LSTR/SURGE with one click and very little slippage. Less friction = more capital onboarded
2. SURGE is meant to have a $1 floor price = pricing it as 1 SURGE/ 1 USDC at launch will allow positive price discovery + a seamless maintenance of the $1 floor price
3. LSTR trades vs our mNAV which is a USD concept. The USDC pool allows LSTR to be measured properly against its mNAV and will create positive speculation
4. Aggregators on Base route through USDC by default = more paths through our pools = more volatility = more fee revenue and volatility harvesting potential

WETH (Volatility) Pairs

1. By having LSTR/WETH and SURGE/WETH, we create Arbitrage triangles since ETH is moving 24/7 in terms of price but USDC pools are acting like an anchor keeping LSTR / SURGE at their mNav and USD valuations
2. The volatility created via the arb triangle on Base then changes the LSTR / SURGE prices on Base relative to the price of LSTR / SURGE on Hive. This creates arb opportunities via the LSTR/SURGE Base <> Hive Bridge. We have a moat for arbitraging these pairs. Using revenue to buy more LEO = permanent demand for LEO = price of LEO increases while our balance sheet holdings increase = exponential USD on balance sheet rises = reflexively scales the arbitrage opportunities

Example

Let's illustrate with two examples. The base case is where LEO is at today. This assumes no growth. It also assumes that LSTR and SURGE add little-to-no volume at first. In our minds, the base case is very bearish (assumes no growth in the overall LEO ecosystem, which is counter to what we're seeing already).

Base Case: No Growth, $100k Per Day in Volume

1. $100k Per Day in Trading Volume on LEO (Hive Pairs), LSTR (Hive Pairs), SURGE (Hive Pairs), LEO (Cross-Chain Pairs), LSTR (Cross-Chain Pairs), SURGE (Cross-Chain Pairs)
2. 50% share of trading volume for LeoStrategy (likely to be this or higher as we have a built-in moat because of whitelisted fees)

With $100k per day in trading volume across LEO/LSTR/SURGE (all pairs on Hive-Engine + Cross-Chain Pairs):

If we have a 50% active share (due to our moat on the bridges) and about 0.75% is earned per arbitrage = $375 per day in pure profit to buy more LEO.

The $375 per day at current prices = ~3,700 LEO per day in buybacks for our balance sheet = 1,368,750 LEO per year for our balance sheet (~4.5% of the total LEO supply per year).

Remember, this is a very modest case. $100k in potential trading volume per day on all of these pairs is a very base case. Also, here's a full list of the pairs:

1. LEO/CACAO
2. bLEO/BNB
3. pLEO/MATIC
4. heLEO/HIVE (Order Book)
5. heLEO/HIVE (Pool)
6. LSTR/USDC
7. LSTR/WETH
8. LSTR/heLEO (Pool)
9. LSTR/Hive (Order Book)
10. SURGE/heLEO (Pool when SURGE Presale ends)
11. SURGE/HIVE (Order Book)
12. SURGE/USDC
13. SURGE/WETH

That is 13 different pools all paired with an array of assets who have their own volatility loops. Do you think $100k per day in volume across all 13 pools is possible? We believe we're scratching the surface.

Bull Case: $1M Per Day by Creating Good Volatility Loops, Scale the Volume and Liquidity

We believe our Bull Case is achievable by the end of 2025. Later on, we'll be able to scale volume much higher than this.

1. $1M Per Day in Trading Volume on LEO (Hive Pairs), LSTR (Hive Pairs), SURGE (Hive Pairs), LEO (Cross-Chain Pairs), LSTR (Cross-Chain Pairs), SURGE (Cross-Chain Pairs)
2. 50% share of trading volume for LeoStrategy (likely to be this or higher as we have a built-in moat because of whitelisted fees)

With this level of volume and share = $3,750 per day in profit from volatility harvesting = 37,000 LEO per day at current prices = 13,505,000 LEO per year bought off the market by LeoStrategy = 45% of the LEO Supply bought by LeoStrategy using only market maker profits each year.

Obviously, there simply isn't this much LEO for sale. So what needs to happen? LeoStrategy will have a persistent bid on the LEO price. We'll continue to raise our bids until they get filled. This causes the LEO price to rise and therefore increases market maker (in USD terms) profit. It also greatly increases volatility across the board for all LEO pairs and LSTR and SURGE pairs. This increased volatility reflexively increases our profit which then increases our bids on LEO. This increases the price of LEO further and therefore creates more profits.

It is the ultimate ripple effect.

It all begins with the selling out of SURGE. Spread the word lions. We will sell out the SURGE presale and launch on Base. The LeoStrategy persistent bid on the LEO token has only just begun.

• Buy SURGE in presale at a 20% discount (20% presale discount vs $1 floor when it sells out). SURGE has a $1 floor price and pays weekly dividends every Monday at 0:00 UTC (18.5% effective yield): https://tribaldex.com/trade/SURGE

This week we purchased 158,204.85 LEO for $17,758.82 at an average price of $0.112 per LEO. Our current LPS (LEO Per Share) is 21.452. LSTR is trading at a 0.82 mNav (18% discount).

Posted Using INLEO