Is Friend.Tech Undervalued?

FRIEND had a tough debut; is it a savvy buy?
May 14, 20244 min read

Friend.tech's much-anticipated token launch and product revamp both had rocky debuts last week. 

The community faced issues with a buggy token airdrop process, non-functional new features, and a multi-step claim process requiring people to interact with the protocol’s new features. As a result, its token dropped to a low of $0.93 — a far cry from the pre-market price of $10. The token then rebounded to a local top of $3.14 amid a revenge rally that claimed the contentious launch was all part of Racer’s master plan.

Well, the token is now trading around $1.66 with a market cap just above $155 million. On Crypto Twitter, the debate is still raging over whether FRIEND remains undervalued, with strong calls and cases made from both sides. 

While many factors, like the token’s market cap relative to the amount of hype the project has generated, hint at substantial upside, usage data tells a different story. Let's present these cases side by side, undervalued versus overvalued — for you to decide between! Let’s begin 👇

Yes, Friend.Tech is Undervalued

First, let's take the bull case.

The growth case for FRIEND rests on its close ties to Base, its fair launch, the low market cap, strong leadership, and app utility.

  1. FRIEND = Base: Arguably the project that kicked off Base last year, FRIEND can be seen as the most “Base” token – an aggregate proxy to the chain's success. It is the native token of its buzziest app, a social token for the social/consumer chain. For the time being, Base claims that they will not launch a token potentially leaving room for FRIEND's status to grow.
  2. Fair Launch, Low Market Cap: FRIEND has an awfully low market cap (~$155M) for a project backed by Paradigm, one of the industry’s most prominent VCs, with no supply currently reserved for its investors.
  3. Racer = Personality Hire: Most well-performing projects tend to have had strong personalities act as leaders for the community to coordinate around. Racer, friend.tech’s founder, embodies this role as a polarizing online figure with loyal supporters and loud-spoken critics.
  4. Needed for Clubs: Keys for clubs, V2’s new group chat feature, are priced in FRIEND, giving the token a function rather than the “vote in governance” use case so blithely tossed around. 

Together, these factors show FRIEND’s unique position within the Base ecosystem, and make a strong case for the token.

Nope, Friend.Tech Is Overvalued

On the other hand, data suggests a decline in activity on the platform — evident in decreasing token volumes, club creation, and stagnating liquidity.

  1. Token Volume Decreasing: Since its launch, FRIEND volume, a prerequisite to price action as volume signals plentiful liquidity necessary for price increases, has trended down significantly, currently sitting around $1.5M compared to ~$6.5M on the first day. One of the disadvantages of only allowing your token to be traded on one DEX.
  2. Clubs Created Declining: Creation of Clubs, V2's new group chat feature, has stalled. While this may be a sign of clubs maturing and people getting settled into their favorite groups, it also comes amid the release of new features, potentially signaling low demand for this new format.
  3. FRIEND Liquidity Stagnating: As previously mentioned, liquidity proves crucial for token growth and price action. Despite sizable incentives for providing liquidity for FRIEND on Bunnyswap, FT’s native DEX, liquidity for the token looks to have plateaued, potentially signaling a ceiling on price action, at least for now.

These points indicate declining user activity, reduced trading volume, and stagnating liquidity, suggesting that FRIEND may be overvalued despite its initial hated rally.

@whale_hunter on Dune

Building a Narrative

While a qualitative case can be made that FRIEND is undervalued, quantitative factors point to an overvalued token. 

While friend.tech continues to roll out features like fee sharing with Presidents, pinned groups, and new casual bonding curves, these are not increasing activity. Before V2’s launch, Racer teased upgrades like Money Clubs for managing shared treasuries, minting on-chain collectibles, and more dynamic Chatrooms with reactions, tagging, notifications, pinned messages, raffles, and a referral program.

While not yet released or confirmed on the roadmap, meme clubs and keydrops have been confirmed, the former of which could be a significantly bullish catalyst for friend.tech if they allow clubs to launch their own memecoins on Bunnyswap.

All in all, the debate over Friend.tech's value continues. While FRIEND’s status on Base, low market cap, headline-grabbing founder, and increasing use cases for joining clubs all look to be reasons for growth, declining activity, lower token volume, and stagnating liquidity say otherwise. 

As Friend.tech rolls out new features and continues to evolve, its true value could become clearer. For now, the market remains divided on whether FRIEND is a hidden gem or a risky bet. In that case, it could be best to find clubs you like chatting in on the app and use it for, gasp, just that.

Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.

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