Gem Hunting: CAP Exchange

Updated: Sep 30, 2021

Gem Hunting is a series where I compile research on interesting small cap crypto projects.

 

Ticker: $CAP

Launched: July 2020

Market cap: $3.6 million (as of 5/12/2021)

Circulating supply: 100,000

Sector: DeFi / Exchanges



What is CAP Exchange?


CAP Exchange is a synthetic trading protocol built on Ethereum. Traders are able to use up to 20x leverage on a variety of different cryptos and stocks. A decentralized treasury receives trader losses and pays out their profits.


How does it work?


Why is this useful?


CAP has the potential to be a truly censorship-resistant trading protocol. This would eliminate issues like when Robinhood blocked their users from trading GME, AMC, and other stocks due to outside pressure.


What does $CAP token do?


The CAP token is used to vote in governance proposals. CAP holders can vote on system upgrades and how to use treasury funds.


Where can I buy $CAP?


Currently CAP is only available on Uniswap.


Risks


With any low-cap investment, it's important to take risks into account before making a decision. CAP has a few unique risks compared to traditional decentralized exchanges:

  • Risk of treasury being drained

  • Statistically a majority of futures traders are not profitable. The liquidity pool is safe so long as this remains true.

  • Dev owns 54% of supply

  • The developer who coded CAP is currently in possession of around 54,000/100,000 of CAP tokens.

  • Risk level: 5/10

  • Normally this would be a huge red flag for me. I've been following this project since August 2020 and have personally interacted with the developers of this project. From my point of view, they have always acted in the best interest of CAP and seem genuinely committed to it's long-term success. That being said, 5/10 is the lowest risk level I can give this project due to this specific statistic.

  • Devil's advocate: The developers have absolutely zero reason to ruin their own project. They put in serious work developing on GitHub for months and ended up successfully creating a working product around their vision.

  • Weak community

  • This launched at the height of Defi Summer 2020. The initial community was extremely toxic and likely needed harsh price action to cleanse it.

  • As of May 2021, it seems that a majority of the moonboys who first invested in the project have departed.

  • Since launch, the developers have basically made no effort to market CAP. They've allowed the community to grow organically and don't want to orchestrate every aspect of the project in an effort to remain decentralized.


Conclusion


CAP has some of the highest upside potential I've seen in any crypto project to date - especially considering it's a functioning product. In my opinion, the weakest link of this project is transparency. Right now it's anybody's guess what will happen to 54% of the supply. Understandably, there are many potential legal issues that could arise if the identity of the developers were revealed. This is partially why they have tried so hard to remain anonymous and keep the project decentralized. I expect we will see an explosion in price (up OR down) depending on what information comes out about the plans for these funds. Once that bridge is crossed, CAP will have a much easier time attracting community members and generating money for its treasury.

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