True Freeze: Optimal ETH Freezing Duration, or How Long to HODL?

    Disclaimer: This is an analysis of past price trends, profits, and losses, and it is not financial advice.

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    frETH Rewards, by Duration of HODL:

    1 frETH = reward for freezing 1 ETH on True Freeze for 1 year.

    Current frETH market price: Nomics.

    How to read the charts in this section:

    🧊 These charts show the US$ PnL (profit/loss) amount from

    • a user having purchased 1 ETH,
    • holding it for N days,
    • and then selling on the selected date.

    🧊 Each chart shows a different HODL duration: from 1 day to 2 years.

    🧊 The pink bars show “pure” profits and losses: e.g. from holding ETH in a wallet.

    🧊 The green bars show the same amount plus the dollar equivalent of frETH rewards at the current frETH price: the PnL of HODLing with True Freeze. This reward enhances the profits, or in case of a loss -- offsets some of the losses.

    For example: on August 11, 2022, HODL duration of 1 day for 1 ETH would bring the user a $169.8 profit without True Freeze (e.g. hold in wallet), or $170.5 profit in True Freeze (an extra ~$0.7 is from frETH ‘patience reward).

    HODL durations: 1 day & 1 week

    🧊1-day ETH hold duration (chart above and to the right) is volatile. From looking at the visualization, it appears that picking one day to hold can be similar to a coin toss (unless the user makes a more informed guess based on other factors: broader market movements, news triggers, etc.). The frETH reward is not high for freezing ETH for just 1 day. At the current price, 1 frETH/365 days is ~$0.72.

    🧊1-week hold duration (chart directly on the right) sees the volatility smoothing out. There are clearer blocks of upward and downward price action in the past two years. HODLing for a week also brings frETH rewards of $5.

    🧊 1-month ETH hold duration, over the past 2 years, had longer bull and bear cycles that potential HODLers could be part of. For example, selling 1-month old ETH between July to September 2021 would have brought a profit, and in October 2021 - a loss. If this ETH was frozen on True Freeze, the additional reward at current prices would come to almost $22.

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    🧊 HODLing ETH for 6 months would have brought a profit before 2022, and mostly a loss in 2022 so far, based on historical price action. 

    Freezing with True Freeze at this hold duration can become more rewarding with $132 in frETH rewards (albeit hypothetical, because True Freeze did not exist before June 2022).

    🧊A 1-year HODL would also be bullish until the end of 2021, and loss-making in the 2022 crypto winter.

    Profits would be enhanced, or losses smoothed, with a $265 (1 frETH) in rewards for hypothetically locking the same ETH on True Freeze.

    🧊 For users who are really in it for the long haul, an 18-month HODL of ETH (starting between May of 2020 and August 2021, based on available data) would nearly always be profitable.

    This is especially the case for a (hypothetical for now) True Freeze locking of your ETH, which would add an extra $400 in frETH if the ETH is not unlocked early.

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    🧊 A 3-month hold duration brings much more predictability and less risk.

    Much of 2022 so far, for example, would have been loss-bearing if holding for 3 months at a time. Freezing with True Freeze would have smoothed some of the bear periods however. At 3 months of successful HODL, the frETH reward becomes $66 (but you have to decide and commit on a time period ahead of time!).

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    🧊Based on historical price movements, HODLing ETH for 2 years (starting between May of 2020 and August 2021) would have been a win no matter what (apologies for the FOMO if you might be feeling any right now!).

    In the future, this length of HODL on True Freeze could possibly yield ~$600 rewards (at the current frETH price, feel free to change it in the Parameter field at the top of this dashboard).

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    How to read and interact with this analysis?

    🧊 This analysis looks at the price movements history for ETH. We use ETH and Wrapped ETH/WETH interchangeably in the data and interpretation, because for the purpose of this analysis they represent the same underlying asset.

    🧊 Here we calculate hypothetical PnL (profit-and-loss) of purchasing 1 ETH to HODL, and then selling it N days later: after 1 day, week, month, 3 months, 6 months, 1 year, 1.5 and 2 years.

    🧊 The charts will show PnL being volatile, ebbing and flowing with ETH price volatility, bull and bear markets. A preview of this can be gleaned from the visualization above ⬆️, which shows the median daily ETH price across time.

    🧊 The analysis also illustrates the difference frETH rewards make -- the longer a user HODLs, the more their profits are padded, or losses offset, by the length-of-time-dependent frETH rewards amount. This is calculated at the current frETH market price, which you can change at the top of the dashboard using the parameter. ➡️➡️

    🧊 Although True Freeze can lock ETH for up to ~3 years (1,100 days), this analysis goes back only 2 years, because the available data in the dataset starts from around mid-2020.

    🧊 Due to dashboard size and the amount of data presented here, some visualizations may take time to load. This is normal; thank you for being patient while the charts are rendering.

    What is True Freeze protocol?

    🧊 True Freeze is a protocol that rewards user patience for HODLing ETH. “Freezing” an amount of ETH (or more specifically WETH) grants the user a True Freeze NFT redeemable for ETH at the end of a selected timeframe, plus an upfront “patience reward” in frETH tokens. “Unfreezing” ETH before time carries an “impatience cost”.

    🧊 To go beyond this Cliff’s notes version, see additional analysis I created of True Freeze:

    Why this analysis?

    🧊 This analysis centers around the question:

    > Based on the past price action of $ETH, what would be the best duration for users to freeze their ETH using True Freeze?

    🧊 But why is it important?

    True Freeze launched in June 2022, and at the time of this writing is 2 months old, with only 36 ETH deposits ever put “into the freezer”. Its target users are those who want to HODL their ETH and reduce risk, degen temptation, and opportunity cost. But for users like these, locking ETH involves decisions and assumptions to be made. When to freeze ETH and for how long? How safe is it to assume that the redemption period won’t be in the middle of crypto winter, ether price slashed compared to the time it was locked? If the user base is to grow, insight into these types of questions is valuable.

    How to use the parameter for frETH price?

    🧊 This dashboard contains a parameter functionality. To change the value of a parameter, sign in or sign up for a Flipside Crypto app account (go to to access the sign up screen).

    🧊 The reason this analysis contains a changeable parameter for the frETH token price in US$ is: to allow adjustment for the changing market price of 1 frETH (aka “tokenized patience”, aka how much users would like to be compensated for giving up access to 1 ETH for 1 year).

    🧊 You can find the most recent price of frETH at the time you are reading this analysis on Nomics here, and then enter the updated value at the top of this dashboard (remember to Apply All Parameters in order to apply this update).

    Introduction

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    Profits/Losses, by Duration of HODL:

    Optimal HODL/freeze duration for ETH?

    🧊 On average (using the median value as the metric), 1 and a half years has been the most profitable length of time historically to HODL ETH (without DeFi, liquidity providing, or any potentially risker actions — this would imply simply keeping ETH in a wallet). Between 2020 and 2022, this duration would net over $2,400 in profit. Before that, the profits increase with duration, and after that begin to decrease with duration.

    🧊Does this distribution change if we include frETH rewards for patience? As we’ve seen earlier in this dashboard, those rewards increase steadily with the HODL duration. 

    About

    • Author: mar1na (catscatscode) - reach out to me on Twitter with any feedback!
    • Date: 12 August 2022
    • Data Source: Flipside Crypto
    • Disclaimer: This dashboard represents the author’s best effort at interpreting the available data. It is not financial advice.
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    🧊 The chart on the right reveals that even frETH rewards, at current frETH price, do not displace 1.5 years as the optimal historical duration of ETH HODLing! WIth frETH rewards included, the profitable durations historically started generally around 6 months.