Market commentary and the incredible opportunity ahead

Published on
July 31, 2022

Macro developments are largely out of anyone's control; therefore, at Parcl, we direct our energy toward the incredible opportunity ahead. In fact, we continue to think that our opportunity is larger than ever. It has become abundantly clear to us that the general population wants access to liquid real-estate exposure (a time-tested inflation hedge) and the crypto markets want less volatility and better stores of value.

We’re working to create immense value by developing novel markets and data structures for the largest asset class in the world. We aren’t levered to market direction, only utility, and usage. Additionally, via the crypto ‘rails’ that our friends at Solana have created, and via the industry at large, we are open to users worldwide.

Crypto is here to stay. We are confident that the builders in the space will continue pushing the limits of what is possible. We are excited to usher in new applications that will reach a broader audience and welcome a whole new wave of crypto users.

Real estate market needs more options, period

Fundamentally, real estate markets are inaccessible to most people in the world; getting exposure to real estate requires large amounts of capital and better than average credit. Furthermore, there is effectively no way to capture directional movements in real estate outside of direct or pseudo-direct, property-level investment. This is a massive opportunity for innovation - and for Parcl.

What is most notable about Parcl’s opportunity right now is that real estate volatility has never been more pronounced.

Below is a chart of the median price per square foot in Miami, FL. In the last ten months, it has risen over 40%.

Beyond owning a physical property or having institutional investor-type access, you can’t participate in any of these movements. Even worse, you could be renting, making you implicitly short the neighborhood you live in (your rent is rising much faster than your income.)

Parcl Price feed for Miami chart.
Miami Parcl Price Chart

Parcl is creating a way to gain exposure to real estate and create investment opportunities for everyone. We do so by leveraging our price feeds, which track the price per square foot of real estate on the ground. Parcl’s blockchain-based protocol (built on Solana) allows you to trade the Parcl tokens (denominated in square ft.) to build and trade your global real estate portfolio. Parcl makes getting exposure to real estate simple and intuitive.

Here is an example of the Parcl trading interface (which you can try for yourself in Parcl Testnet 3.0.).

 Testnet trade page showing a trade of 1,241.56 USDC for a square foot of the Venice, CA Parcl..

For those wanting to get synthetically short (or benefit from the market going down), you would mint (borrow) and offer liquidity.

Here is my portfolio from the Parcl Testnet— I’ve 'invested' the equivalent of ~$5,000, and I have about 6 square feet of real estate exposure across 5 different locations and 4 states:

Parcl Trade page showing Venice, CA, Tribeca, NY, Downtown LA, Miami Beach FL, and Phoenix, AZ.

Crypto needs more stable, economically viable options

As an industry, we have seen severe volatility amongst crypto assets in recent weeks. Some of these crypto tokens weren’t meant to move at all (i.e. the Luna UST ‘stablecoin’). A global tightening of liquidity has exposed the critical flaws of riskier models (undercollateralized tokens, etc.)

It's often tempting to take excess risk—we have frequently been advised to add more risky functionality to the mechanisms underpinning the Parcl smart contracts and Parcl protocol.

However, we are focused on creating an economically viable offering that will stay around for the long-term. This requires stable, durable, financially viable mechanisms (i.e. overcollateralization) and a paramount focus on security.

Addressing these items in order:

1) Stability

A) Intrinsic: Real estate is a relatively stable asset that can provide uncorrelated returns, plus it's a well known inflation hedge.

B) Parcl specific: to maintain representativeness of our price feeds (which are accurate to any third party benchmark and can be verified) we are using concentrated liquidity and have recently implemented a price stability module to allow arbitrage back to peg prices.

2) Overcollateralization

Our smart contracts are overcollateralized by at least 20% to ensure our system is backstopped by assets. We believe DeFi needs to work as intended under normal conditions and edge case conditions.

3) Security

Our protocol has undergone 3 audits and we will continue to invest in security infrastructure to ensure the highest level of community protection.

We believe the crypto-sphere should have more stable-like assets in which to participate. Having a broader spectrum of volatility profiles can help ensure more balanced, healthier investment portfolios and welcome a broader set of market participants.

Leading in a new narrative

We are incredibly bullish on the crypto ecosystem—particularly the builders in the space who continue to innovate at an impressive pace. We believe that for the crypto industry to reach its potential, it needs to broaden its aperture to more everyday people. This means easier-to-use wallets and more intuitive user-facing applications. Real estate is something that is present within every person’s daily experience, and given this ubiquity, we believe real estate can be the catalyst to mass crypto adoption.

Parcl is extremely well-positioned to capture this opportunity, and we could not be more excited to play a major role in bringing crypto and real estate to everyone.

Shared content and posted charts are intended to be used for informational and educational purposes only. Parcl does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. Parcl does not accept liability for any financial loss or damages. For more information please see the terms of use.

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