Jupiter (JUP)

Jupiter, in simple terms:

Jupiter is a dApp built on Solana.

It is a so-called "DEX aggregator" which differentiates it from other decentralized exchanges (DEXs). 

Let's break down what a DEX aggregator is. 

Jupiter works like a decentralized exchange in the sense that it does the same job for the users: helping them exchange digital currencies.

However, instead of having its own liquidity pool, the platform aggregates liquidity from various decentralized exchanges.

"What the heck does that mean?"

Well, think of it like this: 

Jupiter is like your personal crypto assistant, lets call him "Greg".

When you want to do a transaction, Greg runs around to all DEXs to find the best price.

Similarly, you "hire" Jupiter to find the best price for you.

It searches for the best rates across DEXs to make sure that you get the cheapest price, lowest fees, and lowest price impact.

That is why Jupiter is categorized as a "DEX aggregator".

So when you buy a token, the trading doesn't really happen on the Jupiter platform.

Instead, the order is sent to a number of other DEXs.

For example: If you place an order for BOME on Jupiter and BOME is cheapest on Radium (a Solana DEX), the order will be passed to Radium.

Short deep-dive: 

When you buy a coin, there are often several transactions happening in the background.

Sometimes you have to buy another coin first because a direct trading pair is not available.

Take the following example where I told another aggregator, Kyberswap, that I wanted to buy USDC using 1 ETH.

The order turns out to be quite complex, consisting of many transactions:

Jupiter does the same as Kyberswap automatically to find the cheapest route from one token to another.

We want the route with the lowest fees and lowest price impact.

Jupiter and Competition

The two main indicators that tell us how a DEX is doing are: 

1. Total Value Locked (TVL)
2. Trading volume.

The TVL is the size of the liquidity pool (the store of different currencies on the exchange) and the trading volume is just how much trading is going on on the platform.

High TVL and trading volume are a good thing.

However, as I said earlier, Jupiter has no liquidity pool. So there is no TVL.

The main indicator to compare DEX aggregators then, is trading volume.

Let's compare trading volume for the five biggest DEX aggregators:

At $8,4b, Jupiter is the largest aggregator by monthly volume.

Its closest competitor, 1Inch Network (#1 aggregator on Ethereum), lags about $2b behind.

To give you some perspective, on how large this volume is, we can compare it to Uniswap which is the largest DEX by volume. 

Total volume in 2024 (so far):

• Jupiter: $267 Billion
• Uniswap: $426 Billion

You see that Uniswap handles roughly 60% more volume and that Jupiter is up there amongst the largest DEXs.

And it looks like Jupiter is closing the gap:

If Solana keeps gaining on Ethereum, it is likely that Jupiter will eclipse Uniswap in not too long.

Let's speculate on the future value of Jupiter and find potential price targets.

Future value of Jupiter

We begin by finding a metric to evaluate Jupiter.

Since Jupiter's success is measured as volume, the best way to evaluate it is the ratio between market cap and volume (MC/V).

It's similar to price / earning in the world of traditional finance.

Jupiter MC / V:

Below you see MC / V over the last 8 months for Jupiter:

In months of high volume, Jupiter lies around 0,05.

In July, there was a big drop in volume and the ratio started an uptrend. 

Jupiter dominance

Just as the BTC dominance tells us how much of the total crypto market lies in BTC, we can calculate how large Jupiter is relative to Solana.

Jupiter MC / Solana MC:

When the volume on Jupiter increases a lot, like in March, we see that the market share on Solana also increases.

The ratio has been stable since June at slightly above 0.015. 

We'll use these numbers in the price prediction below.

Jupiter Price Prediction

So, given our two metrics which are MC / V and Jupiter dominance, our prediction on Jupiter will depend largely on what happens to Solana.

For example, if Solana grows by 5X and the Jupiter dominance stays the same, Jupiter will 5X as well.

The good news for Jupiter is that at the tail end of the bull market, altcoin trading volume explodes.

In the so-called "mania phase", small altcoins go crazy, and many of them have to be bought on decentralized exchanges or aggregators like Jupiter.

Therefore, I expect to see volume dramatically increase at the end of the bull market.

Just check out the volume of Uniswap at the two peaks of the 2021 bull market:

The first red ring marks a 2X volume from the month before - the beginning of the mania phase.

The second ring is also a 2X from the prior month.

The final red ring is not a 2X, but a significant increase from the month before.

Based on observing the graphs above, and historical trend in volume in mania phases, let's assume the following:

1. Jupiter dominance peaks to 0.03 (just a bit higher than in March), due to increased volume during the mania phase.
2. Solana goes 6,67X and reaches a market cap of $500 Billion.

If those two assumptions come true, the market cap of Jupiter will reach:

$500B * 0.03 = $15B

The catch

Even though the market cap might go 13X, it doesn't mean that the price will.

The price depends on the inflation of the token supply, and man oh man has Jupiter got lots of tokens coming into circulation.

Currently, the circulating supply is 13.5% of the total supply.

The "fully diluted market cap" at the current price of $0.86 (October) is therefore $8.6 Billion, which only gives us less than a 2X if the fully diluted MC reaches $15B.

Now, there are vesting periods etc. making sure not everything is released at once.

The supply will increase gradually, but make no mistake: the inflation in 2024 - 2025 will be huge.

It is not yet determined, but 100% - 300% is realistic.

Therefore, our MC prediction likely translates to a 4X - 8X in price.

That's still a good return though.

One of the founders proposed to improve the tokenomics, by cutting the total supply by 30%. This would be a huge improvement, and likely a catalyst for Jupiter.

It might be a good play for traders to speculate on.