Crypto Hedge Fund Polychain Prepares to Sell ROOK Token on Uniswap, Snubbing Lucrative Arbitrage Trade

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What do you do with the millions of dollars worth of ROOK tokens destined to become worthless in just over two months? If you are Polychain Capital, you have two options: dump them in the open market or deploy them through the savviest crypto arbitrage trade, where they could well earn you millions of dollars more.

Polychain is preparing to forfeit player gambling which, in an ideal scenario, could net $8.7 million, according to CoinDesks analysis of on-chain data by apparently liquidating its $6 million position through decentralized financial exchanges ( Challenge).

On Wednesday, the crypto hedge fund moved 100,000 ROOK tokens into a new wallet, raising the possibility that it could soon cash in on its long-dormant hoard of the old governance token. (ROOK recently gave up its governance rights and instead became a sort of redemption voucher for holders to claim their share of ROOK Projects’ cash.) A few hours ago, it approved the sale of these tokens. on Uniswap.

Chain moves radically change the math behind one of the craziest arbitrage games in today’s decentralized financial markets. As speculative traders play million-dollar musical chairs with inherently worthless meme tokens, another group of players methodically emptied some of ROOK’s hoard with redemption tokens that should become eggs. of goose on July 12.

Some of these activist investors had hoped that Polychain would simply forget to redeem its tokens, leaving more of the pie for other holders to claim. I hate to see it, said one watcher of Polychains coming out of hibernation this week.

Polychain did not immediately comment.

Polychain acquired its ROOK bag for investing a seven-figure sum in DeFi liquidation startup KeeperDAO during the heady summer days of 2020 DeFi. The project has since changed its name and product, ditched its governing DAO and neutralized its governance token, which has rallied more than 350% since late March thanks to activist investors who successfully lobbied for a shutdown. rage that would restore value to disenchanted wielders.

ROOK is now trading for $59 a pop, making Polychains a current treasure if sold on the open market for around $5.9 million. On Thursday, Polychain prepared to sell rather than buy back.

In doing so, Polychain, one of the oldest and richest crypto hedge funds, apparently thumbed its nose at a slightly risky arbitrage trade that could end up paying millions more. He is giving up the chance to redeem his ROOK tokens via the rage stop smart contract, where he could fetch at most $8.7 million. This is because those ROOK tokens entitle him to a guaranteed share of ROOK’s treasure, plus the possibility of even more upside if other ROOK holders forget to do the same.

In the open market, Polychain could sell its ROOK for more, but the token needs to continue rallying to $87. And he only has two months left to get there.

Until mid-July, ROOK token holders can redeem their old governance tokens with a smart contract that returns an equivalent number of pROOK tokens, plus $40.76 in USD (USDC) coins per ROOK. Once the date has passed, the smart contract will distribute the unclaimed USDC proportionally among all pROOK holders.

Speculators are putting a 50% premium on ROOK’s price likely on the belief that a fair number of holders will, for some reason, forget to redeem their tokens. If redemptions stopped today, each pROOK would be worth around $94.32, according to CoinDesk estimates. This is a huge payout considering these holders have already collected $40.76 per token.

Polychain is however the fourth largest ROOK token holder. His whale-sized bag would make a huge hole in the upside-down pROOKs and nearly halve his current projected payout. Yet $47.14 in additional cash on top of the $40.76 would still place the redemption value of ROOKs well above the current market rate.

Conceived by activist investors who control half of ROOK’s cash, the buyout method is the product of an agreement between Rook Labs and its community to end their right to govern the project, which is building tools to collect MEV a trading strategy resembling risk-free arbitrage on the Ethereum blockchain. Communities’ ROOK governance tokens became tickets to a $25 million proportional share of ROOK’s treasury.

ROOK’s redemption smart contract currently holds $17 million USDC after paying out $7.6 million to 78 different wallet addresses. The current primary redeemer of an address with the ENS domain solanabeachresearch.eth converted nearly 26,000 ROOK tokens into $1.1 million in USDC. If redemptions stopped today (assuming Polychain does not redeem), this wallet would receive $2.44 million for its pROOK. If Polychain acts, it would get $1.22 million.

Polychains own payout would be an order of magnitude larger. If he redeems his ROOK tokens by July 12, he gets a base payment of $4.07 million from USDC from the redemption smart contract. He would later get another $4.7 million from USDC for his pROOK assuming, of course, no one else redeems.

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