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The cryptocurrency market is notoriously volatile. But traders might use that volatility to their advantage with this crypto project.
Ribbon Finance (RBN) aims to combine options trading and cryptocurrency. It's an Ethereum-based decentralized finance (DeFi) protocol offering a way for crypto investors to earn yields on their holdings.
Through structured products and protocols, RBN is helping minimize risk in one of the most volatile markets around, and investors want to know where it's headed.
Let's take a look at Ribbon and how it works. Then we'll share a few relevant Ribbon Finance price predictions.
What Is Ribbon?
Ribbon (RBN) is an Ethereum token on the decentralized finance protocol Ribbon Finance.
Ribbon Finance aims to optimize a portfolio's risk-return profile by mixing options, futures, and fixed income. RBN is the protocol's token used to make proposals and cast votes on the platform's future.
Although it was first launched on Ethereum, the goal with Ribbon was to create something platform-neutral. The creators wanted to offer something that could be available on all chains and allow any community to utilize it.
Like most successful, newer crypto projects, Ribbon was created to solve a problem.
After the rise of DeFi last year, decentralized finance was known to offer potential three-figure yields. However, these yields are generally not sustainable in the long term and usually come from yield farming, where protocols distribute their tokens in exchange for liquidity.
Yield farming can boost early growth, but it can't incentivize users forever. That's what led Ribbon CEO Julian Koh and his team to design a solution.
Options strategies are generally nonexistent in the crypto world right now, and Koh thinks it's a way to bring in sustainable high yields.
He explains, "Finding a sustainable source of yield is the bread and butter of Wall Street trading firms. People in DeFi want high yields, but the only way to do that sustainably is through options strategies."
Some people are worried Ribbon can't scale because of the relatively small size of the on-chain options market, but they aren't restrained to the on-chain market.
To avoid the bottleneck of the crypto options market, Ribbon works with market makers and professional options traders who can expand their trading as well. The other side of the trade is large options trading firms that have huge appetites and deep pockets.
In short, Ribbon's vaults are a short option against crypto volatility.
That doesn't mean assets are safe from volatility in Ribbon's vault. When the entire crypto market crashed in May, the vault's users lost 15% of their funds as the price of ETH crashed below the option strike price.
However, as long as the market doesn't experience that degree of volatility, Ribbon's vaults should continue to flourish.
How Do Ribbon Vaults Work?
The protocol uses financial engineering to create structured products with long-term return. Its first product is a yield-focused automated options strategy known as Theta Vault.
The vault earns yield on its deposits by running an automated options selling strategy. It reinvests the yield earned back into the strategy, combining the yields for depositors over time.
The Theta Vaults run two options strategies to generate yields. There are covered calls where the vault writes out-of-the-money covered calls, and put selling, where the vault writes out-of-the-money puts.
Theta Vaults come from the idea of a set-and-forget play. You deposit your assets into a vault and earn a yield on them.
This helps with gas and energy problems too. Rather than making 3-4 transactions a week, the vault will manage 3-4 transactions per week for thousands of users at once. The user experience is very straightforward and relatively cheap.
You deposit, wait for yields, and withdraw.
Compared to other vault-based DeFi protocols, Ribbon is unique. While its yields are some of the highest in DeFi, they still come with a risk.
This is key to Ribbon's strategy - higher risk, higher rewards.
Each Theta Vault earns yearly returns from 19% to 35%. Since April, investors have put in over $100 million into Ribbon, which has paid out over $4 million in dividends.
Now, here's where the RBN token could go in a few years...
RBN Price Prediction
RBN is up 16% over the last month and currently sits at $2.34.
The coin has already outperformed Tech News Leaders 2021 end-of-year prediction of $1.57. TNL anticipates RBN reaching up to $6.37 and as high as $7.64 by 2025. It's even more bullish on its 2030 prediction, with a high/low of $48.38/$38.87. That's a potential 1,967% gain by 2030 from where RBN is priced now.
PricePrediction isn't far off from TNL. While RBN is higher than its 2021 end-of-year prediction of $1.51, it predicts the coin to reach $6.72 by 2022 and as high as $47.10 by 2030.
Digitalcoin isn't so bullish on Ribbon. It has the coin moving from $4.37 in 2023, up to $5.13 in 2024, but back down again in 2025 to $4.74. Its 2028 end-of-year prediction is a little more bullish, up 114% from 2025, but much lower than TNL and PricePrediciton, ultimately settling at $10.16.
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