OlympusDAO’s ‘Cooler Loans’ Could Mean The End Of A Bull Market Icon

(3,3)

The meme dominated crypto at the height of the bull market. It was an inside joke — one that showed people not only that you knew game theory, but also that you played it in a way that allowed everyone to win.

Now, (3,3) is long gone, the market capitalization of OlympusDAO’s OHM has cratered over 95% from over $4.3B to $190M, and the project has voted to enable a function, called Cooler Loans, which essentially allows it to wind down.

The loans allow holders to borrow 95% of the value of their OHM tokens in stablecoins at an extremely low interest rate of 0.5%. They have a tenor of four months but can be rolled over at any time.

At $154M, Olympus has the third-largest stablecoin treasury in all of crypto. And at nearly $200M in total, the project has the 12th-largest treasury overall. By collateralizing their OHM, users can now access that treasury.

Exit Ramp

The pseudonymous Z33, who was once a paid contributor at OlympusDAO, thinks that it’s likely that Cooler Loans, and especially the low interest rate of 0.5% will mean the project won’t have the same firepower moving forward.

“My worry is that the [interest rate] is probably going to have the effect of shrinking down Olympus a lot,” he said.

Olympus was built around the concept of developing a crypto-native “reserve currency.” The concept boiled down to OHM becoming a medium of exchange and unit of account not directly associated with the U.S. dollar (or any fiat currency). This would help crypto to escape its dependence on dollar-pegged stablecoins and the US-led traditional financial system.

With the advent of Cooler Loans, Z33 thinks that OHM may never become what many community members hoped it would. “[Cooler Loans] make it much less likely that OHM would live up to its initial promise of becoming a reserve currency.”

A Way to Stay Involved

To Z33, Cooler Loans don’t necessarily mean a cashout. “The reason why it's not just outright redemption is it leaves the optionality for participants to return to the system if they want.

Because users haven’t sold their OHM, they could potentially repay their loans and reclaim their tokens, provided they don’t get liquidated.

Z33 added that a product called Inverse Bonds has allowed people to redeem assets from the treasury already, but that Cooler Loans offer a better deal. “Those redemptions have always been available, they have just been at too much of a discount from backing,” he said.

DeFi Innovations

While Cooler Loans appear likely to hamper Olympus’ chances at rising from the ashes, Z33 thinks the project developed many ideas that may still have a strong impact on crypto.

OlympusDAO has already been majorly influential, having inspired dozens of forks and becoming the marquee project of the ultimately short-lived “DeFi 2.0” movement.

It even got to the point where newcomers would enter the Olympus Discord asking whether the project was “The DAO,” rather than one of the hundreds of major decentralized autonomous organizations.

Systems like Range Bound Stability, which makes use of the treasury and additional minting of OHM to maintain a price band, and Boosted Liquidity Vaults, which is a mechanism that allows users to deposit one half of a liquidity pair and yet receive nearly all the rewards, have the potential to become meaningful innovations in DeFi.

Still, those ideas may not solidify their utility as part of Olympus. “At the end of the day in crypto, brands and narratives matter,” Z33 said. “I think, unfortunately, the Olympus brand did become poisoned because of ‘number go down,’ essentially.”

The Road Ahead

That doesn’t mean project development has ceased — Shadow, a major pseudonymous contributor to OlympusDAO, outlined a plan on the project’s forum this week. “By the end of January 2024, the goal is for the protocol to require little to no human intervention to function properly,” they wrote.

Big items include a switch to on-chain governance, migrating liquidity from Balancer to Uniswap V3, and of course, Cooler Loans, which are projected to launch later this month.