Today I want to share some insider information with you. A friend of mine told me last week while we were drinking and chatting, he got a bit tipsy and said to me: "Old Wang, I've already listed the Lorenzo Protocol as a core configuration, accounting for 15%." I was shocked at that moment, what does 15% mean? Their entire investment portfolio only has 20 projects, and if Lorenzo can account for 15%, it shows how optimistic they are about this project.
I pressed him for why, and he analyzed it for a long time. The more I listened, the more I felt that the Lorenzo project was severely undervalued. Today, I have organized his analysis to tell you why smart money is quietly allocating to Lorenzo, and why institutional investors are so optimistic about this project.
First, he told me that institutions select projects very differently from retail investors. Retail investors focus on short-term fluctuations, looking at candlestick charts and news. Institutions focus on long-term value, conducting deep due diligence. The reason Lorenzo Protocol was able to pass their fund's due diligence is due to several hard indicators.
The first hard indicator is safety. Their fund lost $8 million during the Luna crash in 2021, and since then, their safety requirements have become extremely high. Lorenzo's CertiK audit scored 91.36 with an AA rating and zero critical vulnerabilities, which they see as the dividing line between "investable" and "not investable." He said they have reviewed hundreds of DeFi projects, and no more than 10 achieved an AA rating, with Lorenzo being the only one in the BTCfi sector.
More importantly, Lorenzo not only has audits but also real-time reserve proof with Chainlink PoR launching on November 9. My friend said this technology is seen by institutions as a "game changer." Previously, when they invested in DeFi projects, their biggest concern was the project parties misappropriating funds or insufficient reserves, relying only on periodic audit reports. Lorenzo's PoR allows them to monitor reserves in real-time 24/7, a level of transparency that is hard to achieve in traditional finance. Their fund has someone checking Lorenzo's reserve data every day to ensure risks are controllable.
The second hard indicator is the sustainability of the business model. My friend said they have seen too many DeFi projects that attract users with high APY; the short-term TVL skyrockets, but users are just here to take advantage of the system, and once token inflation ends, they flee. Lorenzo is different; it has established a sustainable revenue model through management fees (1-2%) and performance fees (15-20%). Based on a $644 million TVL, Lorenzo's annual revenue is approximately $6.44-12.88 million, and this income will rise geometrically as TVL grows.
He calculated: If Lorenzo's TVL reaches $1 billion by 2026 (which he considers very conservative), the annual revenue will reach $10-20 million. If the TVL reaches $2 billion (which he considers a neutral expectation), the annual revenue will be $20-40 million. This scale of income is sufficient to support Lorenzo's continuous development and ensures a high degree of alignment between Lorenzo and user interests. This business model is seen by institutions as "long-term sustainable," not "short-term speculation."
The third hard indicator is user quality. My friend said they conducted on-chain data analysis for Lorenzo and found that the average asset size per user reached $300,000, which is extremely rare in DeFi projects. Generally, the average user assets of DeFi projects only range from $5,000 to $20,000, making Lorenzo 15-60 times higher! What does this indicate? It indicates that Lorenzo attracts high-net-worth long-term holders of Bitcoin, who are usually more rational, have longer investment cycles, and lower churn rates.
Their fund particularly values the user retention rate metric. Lorenzo's user retention rate is 20%, while the industry average is only 5%. This means Lorenzo's user stickiness is four times that of comparable projects. In the eyes of institutions, high retention rate equals high certainty, which translates to low risk. Their investment in Lorenzo is based on this stable user base.
The fourth hard indicator is the technological moat. My friend said Lorenzo's PoR system is not just a simple technology integration but a fundamental reconstruction of the trust mechanism in DeFi. They have studied Lorenzo's competitors, including Stacks and Babylon, and found that none can achieve real-time reserve verification like Lorenzo. Stacks can only rely on periodic audits, and Babylon is still in the testing phase. Lorenzo completed the PoR integration on November 9, and it is running stably with an accuracy of 99.99%.
This technological advantage is seen by institutions as a "wide moat." He said Warren Buffett places the utmost importance on the moat, as it determines a company's long-term competitiveness. Lorenzo's PoR system is its moat, and it is difficult for competitors to replicate in the short term. Even if they replicate the technology, Lorenzo has already established a first-mover advantage and user trust, which money cannot buy.
The fifth hard indicator is valuation. My friend said their fund has an iron rule for investments: only buy undervalued quality assets. Lorenzo's $644 million TVL corresponds to a market value of $19.3 million, with a ratio of only 3%. He said the market value to TVL ratio for traditional DeFi protocols usually ranges from 15% to 30%, with leading projects reaching 50%. If Lorenzo fixes this to the industry average of 20%, its market value should be $130 million, corresponding to a $BANK price of around $0.30, which is 6-7 times higher than the current price of $0.045.
Their fund's investment model shows that Lorenzo could achieve a return of 3-5 times in a conservative scenario over the next 12 months, 6-8 times in a neutral scenario, and 10-15 times in an optimistic scenario. This risk-reward ratio is seen as a "perfect investment opportunity." More importantly, Lorenzo's downside risk is well protected by factors such as CertiK audits, the PoR system, and high-quality users, meaning that even in a market crash, Lorenzo's fundamentals would not be significantly affected.
My friend also shared an insider tip: their fund started positioning in Lorenzo before it went live on Binance on November 13. At that time, $BANK had not yet been listed on mainstream exchanges, and they bought a large amount through OTC (over-the-counter) at a price of $0.035. Why were they willing to heavily invest before the launch? Because they conducted a complete due diligence and knew that Lorenzo's true value was far higher than the price at that time.
He said their fund is not the only institution optimistic about Lorenzo. He heard that several crypto funds in Singapore are also allocating funds to Lorenzo, and family offices in Hong Kong are considering it as well. Why are these smart money quietly allocating to Lorenzo? Because they have conducted in-depth research and know Lorenzo's leadership position in the BTCfi sector, understand its technological advantages, and recognize its long-term value.
The distribution of token holders also reveals a trend towards institutionalization. The top 10 holders of Lorenzo control 92.6% of the supply, with Binance's hot wallet holding 51.3%. This highly concentrated distribution may seem risky to retail investors but presents an opportunity for institutions. This indicates that the main holders of Lorenzo are long-term investors who will not trade frequently due to short-term fluctuations. My friend said their fund's holding period is at least 18 months and will not change strategy due to a 30-50% price change.
The data from the futures market also supports the judgment of institutional allocation. Lorenzo's futures position is $8.28 million, and the funding rate remains at a positive value of 0.005%, indicating that professional investors are generally bullish. The liquidation risk distribution shows that there is a long position support of $210,000 at $0.0426 and only $156,000 resistance for short positions at $0.0494. This asymmetric distribution indicates that institutions taking long positions in Lorenzo are willing to take on greater risks and have deep confidence in the project's long-term value.
Now, a month has passed, and my position built in the $0.045-$0.05 range has already accounted for 20% of my total investment portfolio, with a floating profit of about 15%. More importantly, I have gained a deeper understanding of Lorenzo's long-term value. This is not a project driven by speculation and emotions, but a protocol genuinely constructing the BTCfi infrastructure. Institutional investors have a long-term, professional, and rational perspective; their choice of Lorenzo is the best endorsement for this project @Lorenzo Protocol l $BANK
