The Terra Network

[brianwalden]

I've been thinking. Mirror Protocol, the guys who do synthetic stonks, also do BTC, ETH, and DOT. When the crypto bear market comes, you could sell all your crypto for UST, put it in Anchor to earn 19% and get aUST in return. Then use that aUST as collateral to short one (or more) of those cryptos.

There's no borrowing fee for your short, you just have to maintain your collateral - and if you use aUST as collateral it continues to earn interest while it's locked up. You can even short farm where Mirror pays you in MIR to short, but you have to wait 2 weeks to get your UST from selling your shorted asset - they don't want you turning around and repaying it instantly.

If you're really sure we're in a bear market, you could take your UST from shorting and run it through the whole cycle again to basically create a leveraged short. But if you're wrong and the asset you're shorting goes up, you're going to get rekt.

[brianwalden]

I loved farming LUNA-bLUNA. For most of the time I was farming I was earning 20-40% with negligible impermanent loss. But the pool has gotten too large and the rate has been below 10% with no respite in site. So I've moved on to a more degen option.

I converted everything into LUNA and deposited it as collateral in Anchor Borrow. Took out a UST loan for 33% of my collateral and sold it to buy more LUNA to create a 1.33x leverage position. I then converted that LUNA into bLUNA and deposited that into Anchor Borrow to reduce my LTV down to 25% (liquidation is at 60%). People who are more brave can take out a higher LTV. The good thing about Anchor is you don't pay to take a loan, you're compensated in ANC tokens for more than the interest you pay on the loan. Currently it's about 11% more. I think leverage on an exchange typically locks you into a short time period because you're paying a high interest rate for it. Here, if I'm long term bullish I can afford to wait out the market fluctuations.

I did that last night, and as always happens when you take up a new position, LUNA dropped almost 10 percent by the time I woke up in the morning. But now it's picking back up as BTC looks bullish, so I don't feel so bad. But I'm glad I got a little nervous because it made me think better.

I'm safe from liquidation as long as the price doesn't dip by more than 58% from where I bought in, so we're talking either major crash or long term bear market. I would hope that with a bear market I would take my lumps and cut my losses once I realize the long term trend. The real scary thing is a crash. LUNA dropped 80% in the May crash, that type of drop would kill me.

I don't really know how to play it from here. I'm earning ANC for my efforts, so what do I do with it? Do I go full degen and buy more LUNA? Do I use it to slowly pay off the loan (I don't think so because the more I pay off the less I earn)? Do I sell it for UST and deposit in Anchor Earn to slowly build up a fund that could pay off my loan in a crash? I don't think there's a right answer and I'm not quite sure what my investment goals are.

[NightJanitor]

26 minutes ago, brianwalden said:

impermanent loss

Hi, I'm old and read real books.  You seem wordy, perhaps you can help me.  What is this "impermanent loss" that all the kids seem to be talking about, lately?  Did it perhaps happen to go by a different name or is it a brand new "thing"?  Or I have missed a memo or skipped an important chapter, somewhere along the line, ages ago?  As best I can tell, the term seems to mean "number went down and I got nervous, but it went back up again" - and people seem to like to avoid it...

Thanks in advance.

[brianwalden]

3 hours ago, NightJanitor said:

Hi, I'm old and read real books.  You seem wordy, perhaps you can help me.  What is this "impermanent loss" that all the kids seem to be talking about, lately?  Did it perhaps happen to go by a different name or is it a brand new "thing"?  Or I have missed a memo or skipped an important chapter, somewhere along the line, ages ago?  As best I can tell, the term seems to mean "number went down and I got nervous, but it went back up again" - and people seem to like to avoid it...

Thanks in advance.

Impermanent loss is what happens when you go into a liquidity pool, say XRP/USD, and lose money vs. if you had held those two coins separately.

Binance of all places had a decent sticks explaining it: https://academy.binance.com/en/articles/impermanent-loss-explained.amp

[JASCoder]

3 hours ago, NightJanitor said:

perhaps you can help me

https://academy.binance.com/en/articles/impermanent-loss-explained

[NightJanitor]

I like the part where they admit that "Frankly, impermanent loss is not a great name."   I also still have this nagging feeling that this concept has existed under some other names, in the past.  It's that nagging "tokenomics" feeling (and eyeroll) in me which pops up, as well, when their article talks about offsetting things with "trading fees" rather than saying "premia."

Is this generational educational failure?  Is this just me not keeping up with the hip, new lingo?  Or is it regulatory arb, via intentional linguistic reframing?  Or is it that a lot of these things are coming out of APAC, now, and the true names of the phenomena are "lost in translation?"  Anyway...  Interesting.  Google Trends shows interest in this "impermanent loss" bit, starting a couple of years ago.  It's odd that I'd have to go to Binance for an explanation (I still have a nagging suspicion).

Anyway, sorry to derail your thread with a tangent, but thanks for indulging (am looking ahead to DeFi regulatory battle).

Meta:  So much of the bullshit and confusion in this space is driven by the lack of regulatory clarity in the US that I think a lot of self-censorship occurs in talking around things, just to avoid anyone in any office anywhere even getting the idea that some things are financial products with "analog" versions.

That'd be one of the benefits of Safe Harbor approach, I guess - people could at least reduce some of the complexity in figuring this stuff out, by removing the pressure to call things by other than their true names.

You know what they say about calling things by their true names...... it's a start!

Edited October 6, 2021 by NightJanitor
hmmmm

[brianwalden]

2 hours ago, NightJanitor said:

I like the part where they admit that "Frankly, impermanent loss is not a great name."   I also still have this nagging feeling that this concept has existed under some other names, in the past.  It's that nagging "tokenomics" feeling (and eyeroll) in me which pops up, as well, when their article talks about offsetting things with "trading fees" rather than saying "premia."

Is this generational educational failure?  Is this just me not keeping up with the hip, new lingo?  Or is it regulatory arb, via intentional linguistic reframing?  Or is it that a lot of these things are coming out of APAC, now, and the true names of the phenomena are "lost in translation?"  Anyway...  Interesting.  Google Trends shows interest in this "impermanent loss" bit, starting a couple of years ago.  It's odd that I'd have to go to Binance for an explanation (I still have a nagging suspicion).

Anyway, sorry to derail your thread with a tangent, but thanks for indulging (am looking ahead to DeFi regulatory battle).

Meta:  So much of the bullshit and confusion in this space is driven by the lack of regulatory clarity in the US that I think a lot of self-censorship occurs in talking around things, just to avoid anyone in any office anywhere even getting the idea that some things are financial products with "analog" versions.

That'd be one of the benefits of Safe Harbor approach, I guess - people could at least reduce some of the complexity in figuring this stuff out, by removing the pressure to call things by other than their true names.

You know what they say about calling things by their true names...... it's a start!

My guess would be that impermanent loss is jargon that comes from market makers - the people who actually trade back and forth across currencies, making a profit on the spread. With the development of automated market makers in DeFi the term entered into more popular usage. But that's just my guess.

[aavkk]

10 hours ago, brianwalden said:

I loved farming LUNA-bLUNA. For most of the time I was farming I was earning 20-40% with negligible impermanent loss. But the pool has gotten too large and the rate has been below 10% with no respite in site. So I've moved on to a more degen option.

I converted everything into LUNA and deposited it as collateral in Anchor Borrow. Took out a UST loan for 33% of my collateral and sold it to buy more LUNA to create a 1.33x leverage position. I then converted that LUNA into bLUNA and deposited that into Anchor Borrow to reduce my LTV down to 25% (liquidation is at 60%). People who are more brave can take out a higher LTV. The good thing about Anchor is you don't pay to take a loan, you're compensated in ANC tokens for more than the interest you pay on the loan. Currently it's about 11% more. I think leverage on an exchange typically locks you into a short time period because you're paying a high interest rate for it. Here, if I'm long term bullish I can afford to wait out the market fluctuations.

I did that last night, and as always happens when you take up a new position, LUNA dropped almost 10 percent by the time I woke up in the morning. But now it's picking back up as BTC looks bullish, so I don't feel so bad. But I'm glad I got a little nervous because it made me think better.

I'm safe from liquidation as long as the price doesn't dip by more than 58% from where I bought in, so we're talking either major crash or long term bear market. I would hope that with a bear market I would take my lumps and cut my losses once I realize the long term trend. The real scary thing is a crash. LUNA dropped 80% in the May crash, that type of drop would kill me.

I don't really know how to play it from here. I'm earning ANC for my efforts, so what do I do with it? Do I go full degen and buy more LUNA? Do I use it to slowly pay off the loan (I don't think so because the more I pay off the less I earn)? Do I sell it for UST and deposit in Anchor Earn to slowly build up a fund that could pay off my loan in a crash? I don't think there's a right answer and I'm not quite sure what my investment goals are.

super creative, I like it.  It seems like selling the ANC rewards for UST and putting it back in Anchor is a safe bet with reasonable gains.  I think overall in the market its possible that Q4 is mostly about BTC gains and it may end up sucking the air out of the room.  Maybe alts take it on the chin or trade sideways for a little while.  Obv no-one really knows but whats your comfort level with that scenario?  I have a friend who's involved in the Apollo project so I dropped a bit of coin into that project.  Its a solid yield mgmt platform and I just went all-in on the Mine-UST autocompounder that's sitting at 136% apy.  I like it cause its passive.  Plus I earn Apollo rewards.  Check it out if you haven't already and let me know what you think.  

[brianwalden]

17 minutes ago, aavkk said:

super creative, I like it.  It seems like selling the ANC rewards for UST and putting it back in Anchor is a safe bet with reasonable gains.  I think overall in the market its possible that Q4 is mostly about BTC gains and it may end up sucking the air out of the room.  Maybe alts take it on the chin or trade sideways for a little while.  Obv no-one really knows but whats your comfort level with that scenario?  I have a friend who's involved in the Apollo project so I dropped a bit of coin into that project.  Its a solid yield mgmt platform and I just went all-in on the Mine-UST autocompounder that's sitting at 136% apy.  I like it cause its passive.  Plus I earn Apollo rewards.  Check it out if you haven't already and let me know what you think.  

Yeah, I was considering putting my ANC into Apollo's ANC-UST pool. We'll see, I'm waiting to get about $200 worth of ANC before I claim it, my hope is to keep the fees from whatever I do with it under 1% of the size of the claim. Right now the network fees are still really high, they haven't lowered then from the Col-5 update yet.

[aavkk]

32 minutes ago, brianwalden said:

Yeah, I was considering putting my ANC into Apollo's ANC-UST pool. We'll see, I'm waiting to get about $200 worth of ANC before I claim it, my hope is to keep the fees from whatever I do with it under 1% of the size of the claim. Right now the network fees are still really high, they haven't lowered then from the Col-5 update yet.

yea, let me know what you do there.  I meant to ask you whether we were receiving additional staking rewards for LUNA yet since the Col-5 update?  I read somewhere that staking rewards were expected to double but I don't think I've noticed much of an increase.

[brianwalden]

38 minutes ago, aavkk said:

yea, let me know what you do there.  I meant to ask you whether we were receiving additional staking rewards for LUNA yet since the Col-5 update?  I read somewhere that staking rewards were expected to double but I don't think I've noticed much of an increase.

I don't stake. Right now I'm all in bLUNA, so all the staking rewards go to Anchor. From what I've seen the network transaction volume is still way down since the update. A bunch of exchanges still haven't resumed deposits and withdrawals. I think once things get back to normal you'll see higher rewards.

[brianwalden]

13 hours ago, aavkk said:

yea, let me know what you do there.  I meant to ask you whether we were receiving additional staking rewards for LUNA yet since the Col-5 update?  I read somewhere that staking rewards were expected to double but I don't think I've noticed much of an increase.

Ok, I'm pretty sure I've got a screw loose. I just borrowed more against my bLUNA collateral bringing my LTV up from 25 to 45%. I kept that all as UST and put it in Anchor Earn to get 19.5% on it. Plus, borrowing more means I get higher ANC rewards on top of that.

Liquidations start at an LTV of 60%, which means I can only absorb a 25% drop in LUNA's price before I start to get liquidated. But on the other hand, I've got 45% of my total loan just hanging out in Anchor - as long as we don't get a flash crash while I'm sleeping, I'll be able to pay my loan down in a dip. I hope to use the interest from Anchor and the ANC rewards to build up my liquid cash to 50% of my total loan.

This is definitely only a strategy for a bull market when you really know what you're doing. I'm not sure either of those are true, yet.

[brianwalden]

It's been two weeks of sitting in the red while leveraged. I'm not cut out for this. Being leveraged is a totally different ball game. When you're merely long you can wait out whatever as long as you think things will eventually go up. I'm still safe where we're at, but now I've lost my cushion against a big dump. If we get another crash like in May, I'm screwed.

Anyway, I'm just holding my position and hoping LUNA gets back above 40 (and hopefully much more above 40). There's not much else I can do.

[brianwalden]

So after a month, LUNA finally made it above $50. I deleveraged myself for modest gains that quite frankly weren't worth the risk. I have a new strategy that I started yesterday.

Nexus protocol launched on Halloween. They manage your position in Anchor,  borrowing against your LUNA and putting your borrowed UST in Anchor Earn for 20% APY with no liquidation risk. Your earnings in Nexus are paid in Psi, their governance token.

I'm actually not using that because I want to earn more than that. But I am farming their nLUNA/Psi (nLUNa is bLUNA you've deposited into Nexus, I know, all of this is confusing) which current pays out over 100% APY, but also exposures you to impermanent loss.

So I put up all my LUNA as collateral in Anchor. Then I'm borrowing 45% against it. This puts me at a liquidation risk but it also keeps my LUNA safe from impermanent loss. I'm taking the borrowed UST and selling it for nLUNA and Psi to farm on Nexus. This is risky because I've now sold my borrowed money for volatile assets, but it also increases my chances for profits.

If the value of my liquidity pool goes above what I owe on my loan I can remove some, giving me nLUNA and Psi back. I can convert the nLUNA back to bLUNA and put it in Anchor. Which will allow me to borrow more UST. Then I can combine the UST and Psi in Spectrum, a farming yield optimizer, to farm it there. This gives me some slightly less volatile funds since half the pool is a stablecoin. The farm there is currently paying over 1000% APY (I know, I know, you never actually earn that much) paid out in their governance token, SPEC. Now I don't trust SPEC, the coin, so I'm just going to sell it for UST as I earn it and deposit that into Anchor Earn. Long term I hope to that this kind of waterfall of funds will result in me having the amount I need to repay on my loan in 3 places, Anchor Earn, Spectrum, and Nexus. But realistically, the end of the bull run will come before I get to that point and I'll hopefully wrap up this scheme before that comes.

So what happens if LUNA goes down. Well hopefully I've had some time to build up some funds first. I first use whatever I have in Anchor Earn to pay down my loan. If I still need more, I liquidate my Spectrum UST/Psi pool to pay back even more. Finally, if I'm really desperate I start liquidating my Nexus nLUNA/Psi pool tokens to pay back the loan.

I realize this is incredibly confusing especially if you don't know what these protocols are. I mostly wrote all this for myself so there will be a record of it if I get rekt in a blaze of glory.

[brianwalden]

This might help explain what I'm trying to do: