In a surprising turn of events, Polychain Capital seems to be opting for liquidating its $6 million position in ROOK tokens via decentralized finance (DeFi) exchanges, rather than partaking in the more lucrative arbitrage play the market had anticipated. This decision by one of the oldest and richest crypto hedge funds has raised eyebrows across the industry, with some speculating about the potential reasons behind the move.
Polychain acquired a substantial amount of ROOK tokens after investing a seven-figure sum in the DeFi liquidations startup KeeperDAO during the DeFi boom in 2020. The project has since rebranded, shed its governing DAO, and turned its governance token into a sort of redemption voucher for holders to claim their share of the project’s treasury. Since late March, the token has rallied over 350% due to activist investors lobbying for a “rage quit” that would return value to disenchanted holders.
The ROOK token is currently trading at around $59; therefore, Polychain’s position, if sold at this rate on the open market, would fetch approximately $5.9 million. In contrast, if Polychain were to redeem its tokens via the “rage quit” smart contract, it could potentially net up to $8.7 million – far more lucrative than merely selling on the market. However, this approach carries a slightly higher risk and depends on whether other holders redeem their tokens or forget to do so before the deadline.
Speculators are currently placing a significant 50% premium on the price of ROOK tokens, largely driven by the belief that many token holders will not redeem their tokens in time. Assuming redemptions stopped right now, each holder would receive around $94.32 per token, a sizable payout especially considering the initial $40.76 collection per token. However, if Polychain were to enter the do the same, it would drive down the redemption value quite considerably.
The redemption mechanism was formulated by activist investors who sought to end their right to govern the ROOK project, enabling ROOK’s community members to claim their proportional share of the $25 million treasury. With the redemption smart contract currently holding $17 million USDC, it has already paid out $7.6 million across 78 different wallet addresses.
So why has Polychain seemingly opted for liquidation over redemption? Some theories suggest the decision could be related to managing risk, maintaining reputation, or even having insider knowledge about the project’s future. In any case, this unexpected decision has certainly raised questions about the potential rationale behind it and the broader implications for the ROOK token and its community.
Source: Coindesk
