Hello and welcome to The Ether. Today is Wednesday, January 12th 2022. This episode of The Ether is brought to you by Orbital Command, a community validator on Terra dedicated to educating, expanding, and promoting the LUNAtic community. Take advantage of their Terra Luna Intel Report on Telegram, which brings you the hottest news and updates on all things Terra each and every day. Find it using the link in the show notes. You can also support their community efforts by considering them next time you’re delegating or redelegating your LUNA. Find out more at orbitalcommand.io. Today on The Ether, we have a two part Cephii Space. It’s Anchor Borrow Strategies for LUNA Acquisition time. Let’s take a listen.
Hey, guys, good afternoon, I thought I’d spend some time to hang out with everybody. Give a few minutes for people to sort of stroll on in here. The Apollo DAO discussion just got done. And I didn’t really want to get too much into the weeds with them about strategies for their future vaults and whatnot, I just thought I’d talk about some more individualized strategies to start with. Let me kind of get some of you guys on if you want to be up here while we’re chatting. And I don’t know if you guys are waving because you want to speak or waving just because you’re waving. [chuckle] So give me a minute, let me let a couple of people come on here. There was some debate going on between LUNAomics and myself and danku. Everyone was kind of debating where to go as far as, really, the strategies of different ways to essentially efficiently use your borrow power, really is what everyone’s really kind of trying to sort out.
The first, I think, thing to understand when it comes to Anchor Borrow is that right now, its base interest rate to borrow runs around 1%-2%, assuming that you collect the Anchor rewards, and you were to immediately sell them, and therefore, pay off some of the borrower expenses. One strategy specifically regarding borrowing that I do to some effect is when I’m getting those Anchor rewards, one thing to keep in mind is what to do with those rewards. If you’ll look at the Anchor chart, you’ll notice there’s a fairly high cyclicality that to the chart, and that cyclicality tends to be tied to the price of LUNA for the most part. So when LUNA drops, Anchor drops, and when LUNA goes up Anchor tends to go up. Exactly why that is? My suspicion is it has to do with a mixture of things. One of those things is that when LUNA is down, people want more LUNA So they might convert their Anchor Borrow rewards that are paid in Anchor token over to buy LUNA with it. So that’s one reason why it may do that. The second reason why it might do that is because Anchor is available on some exchanges. And there’s a tendency for leverage trading and rebalancer bots and things like this to tend to cause some market correlation. And therefore, when the general market sells off Anchor token also tends to sell off. So this is another reason why that would occur.
There has been quite a bit of cyclicality to it, so what you can do, theoretically, is when Anchor’s price is particularly very low, one option is to hold on to it and either LP it versus UST, sell half of it and LP with UST or you could. You could just simply hold on to it in governance so you don’t have any impermanent loss on the way up. And a lot of people just sell their Anchor token when it’s closer to $4. Right now it’s like $2.60, so then theoretically, even the money you’re paid to borrow you’re profiting on. So actually your interest rate for borrowing effectively, assuming you’re trading this effectively, comes out to be where you’re still paid to borrow. This is especially true if you have your Anchor token in governance because the governance rewards are around 14%, 15% right now. So that mitigates the cost of holding the Anchor while you’re waiting for it to go up, in theory. So some other things that are about to happen, though, with Anchor, if you saw the message regarding bonded Solana and bonded ATOM potentially coming to Terra very soon, as far as possible coins you can borrow off of, all of those new users that are going to come in with bonded SOL and bonded ATOM, they’re going to be receiving Anchor Borrow incentive rewards. And ultimately, those people may be selling those Anchor tokens. So there may be a substantial increase in Anchor token emissions during that time. So the counterpoint to holding those Anchor rewards would be potentially there could be some sell side risk on the actual token itself.
So just some things to be aware of. If you’re concerned about that, like the more conservative but less upside position would be the ANC-UST, which has pretty substantial… You would sell half your Anchor, to UST and to Anchor and then of course, the yield is… It runs pretty high, usually somewhere like 80%-100%. But those incentives are going to be gone in the next, I believe, a couple of months or something like that. So at some point, those are going to be deprecated. So that’s sort of what to do at the Anchor token itself. And then the broader discussion tends to be, “Okay, what are you going to do with your Anchor Borrow to get the highest possible rewards either within the Terra ecosystem or outside of the Terra ecosystem?” Because ultimately, your ability to borrow represents an opportunity. And then it’s like, “What am I going to do with this money?”
What LUNAomics’ intuition is, is that basically, you’re going to have the highest borrowing power when LUNA is at the highest possible price. You may not know where the top is when it comes to the price of LUNA, or for that matter, Ethereum, if you’re using bonded Ethereum to borrow. And therefore, you won’t know precisely when you’re going to be able to borrow the most. So what you theoretically do is if you want to maximize absolutely your ability to borrow off Anchor, the thing to do would be to as LUNA’s price rises, you would theoretically just keep borrowing UST, and at the very least park it in Anchor Earn. And you do that all the way up, in theory. So what will happen is, so let’s say, for example, LUNA goes to $100, and you think that’s the… Or let’s say that becomes the top, in theory, then on the way up you have extracted UST to borrow, you’ve parked it in Earn, you’re making 19.5%, the cost of borrow is actually like 1% or 2%, let’s say, and you’re making a good solid, let’s say, 18%, or something like that right now using the Anchor Earn section on your borrows. So that would be your base theoretical yield, is simply take your borrow park it in Earn, and just farm that.
And so the least aggressive thing you could possibly do is basically just continue to do that all the way to the top. Incidentally, that’s more or less what Nexus Protocol does, except what it does, is it manages your LTV from your bonded LUNA by borrowing off your bonded LUNA, and it basically borrows enough to keep your LTV around 45% at all times. So it’s not going to be as aggressive as you can be on the way down. Because on the way down, let’s say for example, I’m at $100 LUNA, I’ve maxed out my borrow LTV to 45%, and then on the way down I’m okay with letting my LTV go into the red a little bit, because after all, it’s basically in UST and I’m fairly liquid, then I could basically look at options for managing my LTV on the way down once I’ve extracted my max borrow capacity, okay. So everyone’s following that issue so far, basically, your max borrow capacity is at the top price of LUNA. You don’t need to predict the top price because you can just simply keep on extracting borrow power as you go up until you can’t do so anymore and the price tops out. So that’s one strategy is to just get UST and hold it and make that yield. That would be the base concept.
Then the question is, alright, now what are good ways to acquire LUNA with this money if that’s your intended plan, okay. So in order to acquire LUNA, then you would have to have some philosophical idea as far as what you think the optimal way to buy LUNA would be. So let’s kind of just go over the theoretical opportunities that you might have along the way here. So one would be, you’re basically using your borrowed UST and you do a dollar cost average into LUNA. That would be the most simplistic approach, right? Is a DCA. DCA implies that you buy a standard amount of LUNA every day, and you’re collecting that, and then you could theoretically bond it and reprovide that as collateral if you wanted to. And regardless of the price that day, you would basically continue to buy every single day, some LUNA, and you do this in some controlled manner so you’re acquiring sufficient amounts every day, and you’re not overwhelming your borrow power, right. You’re keeping most of your UST liquid, and you’re buying a little bit every day. And then, again, you’re able to sort of borrow more if you want, because you can provide some of that slowly and make your way up along the next couple of years. Because think about… You want to have some plan where you can do this over an extended period of time. So if you use a… There’s some people creating DCA bots. In theory, you could take all of your UST and keep dumping it into the DCA bot. And it just keeps on buying you LUNA every day. And theoretically, even bonding it and provide it for you, if you had a bot that could do this non-stop and you just don’t have to touch it anymore.
And then if you have an LTV issue, technically you would take your UST out, you would dump it back to pay down your LTV, if required. So what other ways generally can you buy more LUNA? Well, the second method, besides DCA would be what I tend to do, which is I tend to buy things with dynamic DCA, which means, so LUNA went to $100, maybe I bought a little bit at the top, and then maybe at $95 I’m buying a little bit larger, $100 I’m buying even bigger. And I’m just basically exponentially getting larger and larger all the way to the bottom. So at $62, or whatever the bottom was, I’m buying a shit ton of LUNA and I’m doing so with my borrow power while potentially paying down some of my LTV using the UST if required. And then whatever I have left, I’m conservatively buying lots and lots of LUNA on the way down. And in a highly volatile market, where these dips are fairly aggressive over a period of just a couple of weeks, you could really get a lot of LUNA on the way down, even if you’re only spending 50% of your UST similar to how you do an LP.
And instead of what a LP does, which is not necessarily buying logarithmically down, it’s almost buying… You do have some impermanent loss to the downside on your UST pool. So you’re not 100% optimized, necessarily. And that’s what danku is sort of arguing about. Ideally, the absolute best solution would be is if you could buy the bottom. Now the problem is you don’t know where the bottom is. So how to aggressively buy the bottoms is something I spend a lot of time on and is pretty much the only thing that matters in crypto, if you really think about it. And doing that correctly is the secret to basically make infinite money in crypto. So really, you just have to have dry powder. Your dry powder in this case might be your borrow power. And what I tend to do, from the top, is I take my borrow power, it’s in UST, and then I just go nuts all the way to the bottom. So if people say… You know how on the way down there’s always someone bitching about something. Everyone thinks the price is gonna go lower than it actually does. So when it’s at $70, people say $60. Okay, it gets close to $60, then people say it’s going to go to $50. It goes to $50, people say it’s going to go to $10. It’s just a fucking circus, basically. No one knows what’s going on. But they basically miss the entire mathematical intuition is that the bottom…
Whatever that bottom is, you need to find it, you need to get a shit ton of whatever asset you’re buying. Otherwise, you’re doing all of this wrong. So if you’re not doing it this way, in some way you have not budgeted for the bottoms. And it doesn’t really matter how low the bottom is, if you want that asset you better be buying the bottom or you’re rekt. You just completely ruin the entire opportunity. And you wasted time watching this go all the way down. I don’t care if someone’s buying $10 at the bottom. The bottom line is you should always be catching those bottoms no matter what otherwise, you’re doing crypto wrong, wrong, and wrong. Okay. You don’t need leverage, you don’t need any of that. And you could use leverage at the bottoms, but you don’t necessarily need to, okay. You can do this fairly safely with reasonable amounts of money, and you could pretty much generate… Like I’ve got to pay for a semester of college next month, and with that LUNA dip that just happened, I just finished paying for that semester of college with one buy in crypto, and within a week, basically, that semester is paid for. Done. So you don’t need to be a genius at this, you just have to basically buy exponentially downward. And that’s the conservative approach, it implies a high level cash position on the way down.
And the beauty of Anchor Borrow is your highest cash position should be at the very top. And your maximum ability to buy is going to be at the bottom, if you have a plan of buying all the way down. You don’t necessarily have to use all your cash, by the way. If a bottom never happens, that’s fine, too. Go back to just a… Let’s say, for example, the price went to $60. And people are thinking, or you’re thinking it’s going to go to $50 or $40, or whatever, it’s okay if you don’t get down to $50 or $40, that’s fine. Your cash position will sit there, you can manage your LTV with it. And if it’s determined that basically you’re… What was I gonna say? So yeah, on the way down, you do a mixture of things. And then if you’re finding like, “Hmm, I’m going sideways now, what do I do now? I think maybe it’ll go down a little bit more.” You can always be DCA-ing some everyday also. So you don’t have to be perfect, you just have to have time in the market. And the lower price goes, you could also do a simple approach instead of buying all at once. You could also do what’s called a dynamic DCA, which is like a daily DCA. So in other words, let’s say for example, every four hours, or something like that, just making up a number here, every 12 hours, I’m buying X amount at $100. But when it goes to $95, I’m spending, let’s say, double that amount every four hours, and etcetera, etcetera, on the way down.
So you could do that sort of thing to where your buys are intermittent but exponential, and then you don’t have to find the precise bottom either, okay. So there are a lot of different methodologies to getting there. But what you want to be doing is almost every single time executing the largest buy at the very bottom. And this really just requires some mathematical patience and some capital that you preserve on the side to do this. And even if it’s small amounts of money, you don’t have to be very rich to do this. You could basically have like, “Oh, I’ve got a budget of starting at $10, $20, $40,” like that, you can go down the line. So in other words, every single crypto dip in the history of crypto dips, you should be buying somehow or another, or you’re doing this wrong. All right, that’s all there is to it. I don’t really care… In other words, just because you didn’t get in into LUNA under $1, or whatever, does not mean you should be done buying LUNA if you believe it’s an asset that’s going to go up, or for that matter, other assets in the crypto space. There’s like tons of different places you can put time in the market to grab bottoms in lots of different things. It’s pretty much that’s all you have to do to do well in the space. It’s embarrassing, actually.
It’s so silly and so stupid, how easy it is to make money in this, that if you’re not doing that very well right now, then something’s gone very wrong. Okay. So think this through what I’m saying here and look at the idea of essentially taking that borrow power and you’re buying on the way down. Now what LUNAomics did is he looked at this idea that, okay, well, if you look at the LP, the UST-LUNA LP has an interestingly high APR, somewhere between, oftentimes, 80% to 100% APY. So the idea would be that while you’re waiting, and you don’t know that necessarily, the markets gonna dip. You don’t know how much it’s gonna dip. You don’t know how long it’s going to go sideways. You don’t any of that, right. So therefore, while you’re waiting, you’re making some APY in that position. The tricky part with that, and this is what danku is sort of trying to allude to is, if I’m at the very top, and I am buying LUNA at the top to produce this LP, then essentially I’m literally buying LUNA at the top and riding it all the way down. Does that make sense to throw all that money in there? Or does it make sense to maybe DCA into the LP so that as the price falls, LUNA’s value drops, and then the LP is going to favor pushing your position towards LUNA, because that’s what LPs do. They’re essentially a type of like 50:50 rebalancer, sort of. And basically, the idea is you can have a self optimizing bot position, and you’re getting the autocompounding from the actual LP rewards, which make it maybe a little bit better than a 50:50 rebalancer bot. And the idea is, is that this is a fairly easy thing for most people to do and understand.
The trick is whether or not you’re using fresh LUNA, right, and adding UST to it, or whether you already have LUNA, and you’re adding UST from your borrow, that’s a very different thing, right. So if I already have LUNA coming out of burns or something, from arbitrage, and I have this UST borrow power, and I can just sort of LP that, so that on the way down, I could basically make… I can get more from that. On the other hand, though, if LUNA is price goes up, I’m gonna get impermanent loss for my LUNA, which might be fine if I’m perfectly comfortable selling some of my LUNA on the way up, which is what your LP will do. So the LP based strategy is interesting, but I would say that the mathematically most aggressive thing you can do, is essentially what I was saying before, is an exponential buying program on the way down with maximum dry powder all the way to the bottom, and then continue to buy LUNA all the way. And you could probably have the highest amount of dry powder available for the very largest buys. And that’s essentially what danku was saying.
So both methods are perfectly fine. Both will achieve some extra LUNA for you. And they’ll both be… My method and LUNAomics’ method will both be at cash conservative position in which you can manage your LTV if the time were to arise, because on the way down, you’re basically both acquiring LUNA which you can then arb to bonded LUNA, and then you can basically immediately provide that for further LTV if you need it. And on the way down, you have plenty of UST to pay off your borrow if your LTV is in a concerning territory. So either way it will work. The difference is when you get to the bottom… With my methodology, the difference is my buys are very large magnitude buys, right. I might be at instead of… So my buys would usually go something like $10, $20, $40, $80, so I multiply by two each successive buys, and then the next one’s $160, $320, that sort of thing. So the deeper the drop, the more I’m basically getting and I usually do that about every 7% from the top. That’s my general approximation in crypto, where I’m very frequently getting to the four and eight level buys. So those are pretty sizable buys. And then I only have to be up… Even very quickly.
So that’s kind of the the theory there. And then the additional fact that you’re basically getting bonded LUNA power, you can essentially use that as well. Sometimes during any DCA process if I see some opportunities, like the ability to throw some of the money… So if I’m in UST and not an LP, sometimes I can throw a big chunk of money in Kujira and get a big bid. Even if it’s a 4% discount, that’s a pretty good dollar cost average. So it makes sense to probably always have some in Kujira when the market is in turmoil. So you take your UST, park it there. Once they have the aUST capacity in Kujira, that should be even better. So you can just leave it there and try to catch a few bids. So you don’t have to be perfect, you just have to have some of these bids captured. You should never have a dump and then not have something in Kujira and get some discounts. I think it’s perfectly good to be doing that.
What else? Besides that… Then the other questions are, what about the use of UST outside of Terra? So what can you possibly do with your money if you send it, for example, to KuCoin? You send it to some of those Pionex bots I was showing some tweets about? The problem was going off Terra is in times of turmoil, if you don’t have sufficient amount of cash sitting on Terra, the problem is that you’re gonna wind up with… During times when networks are very congested, like on KuCoin, people have… Sometimes it takes hours to get back to Terra. And the problem is, is you may have trouble managing your LTV if you’ve got your money all over the place. So that’s something to be sort of aware of when you’re doing that. So you don’t really want to be running things on other locations that you want to be able to quickly bring back. Okay.
Let’s see what else. So in terms of just capital efficiency, the reality is, is that nobody’s going to be able to tell you for sure what the absolute most capital efficient thing to do is, because that’s going to depend on that specific drop, that specific spike, and you’re never going to get it perfect, right. There’s no such thing as perfecting this every single time. But there are mathematically very reasonable ways to make fairly low risk money using the borrow power, while presuming, of course, that like how low can a dip actually go. So it depends, if you don’t plan for in crypto, maybe a 70% dump, then you’re going to have some risk of being liquidated unless you have sufficient cash position to pay off your borrow and such, or something you can sell. One could argue that some people should probably be selling some LUNA as price goes up. Because if you don’t feel like you can weather a 70% dump without being liquidated, maybe the right thing to do for some people is to sell on the way up, like say, for example, every 5% LUNA goes up in value, you have limit orders to just sort of clear some of it only for safety purposes, so that you have LUNA that you’ve sold in profit that you can hold as cash. Therefore, you can pay down an LTV, or whatever if necessary, okay. And if you don’t pay down LTV with it, which you don’t have to, take that cash, park it in Anchor, and then wait for that dump and then use that cash and deploy it on the bottom as well. So that’s another basic tactic to use.
This is why I think it’s important also for someone to build us some decent DCA bots. So that if you do sell, and you want to ease into getting a LUNA position again, you just start a new DCA, a brand new one with the profit you’ve already made. And that way, if the price dumps, you have something always buying you some. I also tend to have some in Stader making autocompounding rewards. And then when Prism comes out, there’ll be all sorts of shit going on in terms of combos we can do where we can basically find even more potential profitable opportunities. We can talk about that a little bit more. So I think this whole game is gonna change a bit when our Prism primitives come out, and then we can make some decisions about how to best deploy our UST on borrows, and how to grab even better outcomes than maybe perhaps just getting regular LUNA. So anyway, another interesting point about Stader’s autocompounder. They did confirm, by the way, that the compounder does have… It does buy LUNA, it doesn’t just mint it out of UST. So because it buys it from the AMMs, it actually contributes to scarcity. But what it’s doing is it’s buying during the dips, so the UST is actually more productive when Luna’s price is down. So your autocompounder is actually buying you more LUNA at the bottom. So just be aware of that. That’s a good thing. So that if are staked in Stader, then you know at least your buys are automatically dollar cost averaging, optimized for the bottoms, and that’s cool. I was trying to get them to maybe produce a dashboard or some shit that showed the actual buys. So we can kind of cover that in… So we can actually see that in action a little bit better. And anyway, let me grab one of you guys to… VLTR’s waiting a bit and then Toxic and kind of get some questions in and we can talk about this a little bit more. Go ahead, man.
Hey, what’s up, man?
Well, good. Yeah, first of all, I just want to say, I really appreciate everything you do for the community. And it’s been funny, the last month or so, a lot of my friends and family are like, “So explain to me what LUNA is.” They’re interested now that things are obviously going up. People were not so interested in LUNA is $10, but now it’s close to $100, more people are interested. And actually one of the key videos that I link people that you might have seen is Hutch’s video, which is called “Why LUNA?” and your talk there is brilliant. I mean, you’re exceptionally well articulated and you put the point across well, and a lot of people have been like, “Do you know what, I’m sold. I’m interested,” [chuckle] and so that’s really cool.
Well, the key to crypto, and this is had been a big missing link in the area is this stupid idea that people shouldn’t provide financial advice, is I give the middle finger to that concept. It’s just stupid. I routinely give financial advice to friends and families who have no fucking clue what they’re doing. Like, seriously. And the reality is, is that like most people are not going to call a freakin financial advisor to sort this shit out. The reality is, is that there are methods to this madness that are mathematically near damn perfect, quite frankly. And my sensibility is, is like in the crypto space is everyone has some stupid theory about what’s going to happen, but no actual strategy that makes any sense, right? This has been the problem all along. And I’ve seen people lose so much money in Bitcoin and other tactics. And it’s been kind of sad to watch, all things considered. So this is kind of like the genesis for some of these discussions. It’s like, it’s just not rocket science. And really, crypto will thrive if people are doing well in it, right. Like, it’s not a… It truly is a we-are-all-gonna-make-it type of game, right.
Yeah, that’s it. And people like you and Hutch, I see Hutch is in the Space now, so shout out to you, man. Yeah, it’s really, really helpful to have and one thing I was gonna say to you that might not be of interest to you, but my profession is I’ve actually been a… I’m a YouTube specialist. I’ve been for nearly five years, I was gonna say that if you did want to have any talks and do your own YouTube channel, then feel free to hit me up. And I’ll help you out with that. No problem. But one thing I was going to say as well, is in terms of the Anchor and the boring, I love the whole concept and the way it works. I’m just scared of losing my LUNA, so I’m extremely bullish on Nexus. And the fact that LUNAomics is working with Nexus to do a different pool where you earb extra LUNA, as far as I understand it, is really cool. Because right now, I’ve got LUNA in there earning Psi token, and it’s great. I mean, is it true that the Nexus Protocol gets the price feed 15 seconds before Anchor? Is that true?
Yeah, they do have a good oracle system that they’re using. And yeah, I’ve spoken to the Nexus team specific to this at length. And basically the goal is, is that more people are gonna want efficient ways to get their LUNA. It’s funny that we have all these other protocols and things but not protocols specifically designed to get you LUNA easily, right. That’s what the ecosystem needs. A newbie needs to be able to push a button, and all this shit I just said needs to happen automatically, right. There’s really no reason for anyone to learn any of this shit, quite frankly. It can be programmed fairly readily, to where you have a rational buying policy. The only thing that Nexus’ system does not do right now is it’s not going to extract the max amount of borrowing capacity for you at the top, right. So if you manage your LTV on your own, you probably will have a little bit better use of your full borrowing capacity. But again, like you said, if there is some kind of weird crashing, market dump, or some wild liquidation wicks, you need to understand that. But at the same time, if you think about it, if you do what we’re talking about, either LUNAomics or myself, you do this well enough, if you do get a little liquidated at some point, you’re probably not going to be too much bothered because you have made so much money by then it won’t matter. You’re so rich, you don’t give a shit kind of thing, so there is some of that. [chuckle] So if you’ve stacked enough, LUNA it becomes sort of irrelevant at some point, if a little bit of error happened, and you lost some, whatever. But you see my point.
Yeah, just one final thing I was gonna say as well. And actually, Hutch mentioned this in his video as well. There’s a behavioral finance decision making in the sense that… I got in around between $10 and $5. My average cost is just under $10. And so I actually didn’t buy any more LUNA for a very, very long time. I just was happy with my stack. But this year, I’ve decided, “You know what, I’m gonna do my best to stack as much LUNA as I can,” make use of these techniques here and checking with you guys on what you’re up to.
I mean, just just as a reference, because I always do it this way, on the way from $70 down to, what is it, $62 or whatever, I kept buying more and more and more. And now we’re at $80. And I could sell it now, right? I could just sell it if I want to and I’ll still be ahead. So I haven’t wasted the time. Time is the key here. Once you realize, “Wait a minute, I shouldn’t have any time where there’s drops in price and I’m not doing this over and over and over again.” It’s really that simple. There should always be some supposed dry powder, even if it’s tiny amounts. You don’t have to be rich to do this. You can work in McDonald’s, or whatever, I don’t give a shit. Bottom line is you should have tiny amounts that you can deploy in this manner. And the fee structure on Terra is reasonable enough where even if it’s small amounts, it’s not eating away too much of your capital with fees and whatnot. So you can rationally buy with small amounts of money. You don’t have to be rich or anything like that.
And you’re actually right, and one thing that you said in the previous Twitter Spaces that’s absolutely true, is the fact that the people that are most likely to change their life for the better through crypto are actually the least likely to use it. [chuckle]
Exactly. Now, that’s 100%… That’s totally true. In fact, if you look at the questions and answers on these Spaces and whatnot, you have reasonably smart people digging deep into these more complex problems. When I was listening to the Apollo DAO discussion just recently, what I’m listening for is, “Okay, how do I tell my normie family member to go play with that, and they’re going to have a reasonably lucrative strategy dialed in, with a relatively low risk technique?” And not to say that you can’t ride the price of something down, that’s just a given, that’s just how volatile assets sort of work. But how do you optimize that to make it work for you? So like, when people say… There’s arguments about whether Bitcoin is an inflation hedge or not, and some some jackass is always gonna make the joke, “Okay, you bought it at $65k. And now it’s like $40k. Whoops. So now it’s not an inflation hedge.” Well, yeah, because that’s not… But then again, you don’t throw your life savings in at the top. That’s not how that works. You either do a dollar cost average, which automatically will typically buy more coin in coin value over the bottoms. Or you do a dynamic DCA, which really is probably technically the ideal strategy for the average person. Because then you’re really hammering the buys on the way down, right, and you’ll find the bottom every time. And you won’t have this problem where you just ran out of capital or something like that.
So building a position is probably the number one lesson people should have. And it actually irritates me that exchanges, especially US exchanges, offer no particular tool for this sort of shit, right. You should be able to get onto Coinbase, you should be able to get on to whatever your exchange is, you should be able to push a button with the amount of money that you want to deploy. And the thing puts in a bunch of limit orders with a dynamic DCA if you want it, or a regular DCA if you want it, and have a strategy where it creates this system for you, and you don’t have to be a rocket scientist to sort this shit out. Why there’s not more of those kind of automated push-a-button strategies, where you don’t have to go to special websites that have bots and whatnot, it sort of boggles my mind. I would think that fucking Coinbase would make way more money if they actually had a button you can push to fill in a whole bunch of orders for you, right? I don’t know why this is not the case.
Well, you’ve been talking about that system being implemented on the Terra blockchain itself, right, there being dApp for that.
Yeah, and there’s lots of different technical methods you can use to create platforms. So a Martingale bot, essentially, what you can find on… I would strongly recommend looking at what that is, and go to pionex.com, P-I-O-N-E-X, and it’s basically a bot platform, and you can download the app and just look at it at least. Just nothing more, just look at it and go, “Okay, what does this thing do? What is a Martingale bot?” And you’ll get a sense of what these things can accomplish for you. Whether or not you use it or not is irrelevant. It’ll at least teach you the fundamentals of, long story short, how to buy bigger on the way down, and kind of have a strategy for this that makes sense. So, it’s just interesting to me that those systems tend to connect to other exchanges. They connect to maybe like Binance is what they’re actually connecting to, but you’re interacting with a front end. It’s interesting to me that exchanges don’t offer more of these platforms, sort of like KuCoin does, to some extent. Why they don’t offer more of these right there so they can generate revenue from them. Some of those tend to have some hidden fees and whatnot, which is why I want to do this on Terra, so that it actually works out more efficiently for everybody.
So yeah, every single person I can talk to in the development community that will listen, I’ve been describing methods of building these things. You just push a button and this shit happens automatically. So for example, I have my Anchor borrowed UST, right. And if Nexus creates a system whereby in the background, they’re basically taking UST. They’re borrowing off of your bonded LUNA or whatever, they’re parking your UST there in Anchor, you’re making your 20% while you’re waiting, and then as the price of LUNA falls, again, it’s buying bigger, and bigger, and bigger all the way down while also paying down your LTV. It’d be like a modified version of the current Nexus Protocol, which is essentially an auto optimization of the Earn vault, right, that’s how that works. And instead you make it buy LUNA. And if you get really wicked with this, now that bonded ATOM and bonded Solana are coming, what you can really do is whichever of those coins is down the most, so for example, once you get a reference point, say okay, alright, ATOM drop the most in the last 24 hours versus LUNA, then get more ATOM with your dynamic dollar cost average, right? There’s no need to necessarily buy the one coin that’s already going up, right? You want to buy the dip, and then you want to ride it up, right? And then ATOM has a 14% interest rate. So if you have liquid staked ATOM, and it’s earning 15%, 14% via bATOM, then while it’s sitting there, that yield can then automatically go towards buying the dip on a bunch of shit too, right? So while ATOM is rising, it’s taking all of its yield and like, “Oh, look, Solana fell.” So it’s going to take the yield off your ATOM and go buy more Solana. And then Solana’s yield is going to be there. And it’s going to, “Oh, look, ATOM fell.”
And so whichever… While you’re UST accumulates from these bonded assets, now that those are showing up, what you can do is the yield from them could actually optimize to buying the cheapest thing that day, not necessarily just automatic, just like standard DCA, right? So even more powerful than dynamic DCA is when you do dynamic DCA on a basket of assets, because then you can find all sorts of shit that’s dipping all the time, right? You’re just basically searching for dips, right? So then you can find them using all these yields 24/7 and you don’t have to do a damn thing. And any newbie monkey can basically make it rich, basically. There’s like nothing to it, essentially, right? You can make mathematically perfect ways to acquire more of the assets you care about. And then divert that yield to get more of it. And what happens over time is, think about it, the more of that asset you get it, and the more efficient you are at getting it, that mitigates any downside volatility of the asset. So if you’ve made 20%, 30% extra of using your yield by optimizing it in diversions, what you end up having is, let’s say, the market drops 30%, you don’t give a shit anymore because you have way more assets now than you did six months ago, or a year ago, right? You see how that works? So the volatility killer is to use the yield to then additionally buy dips in everything you possibly can that has yield. And if you add more assets, like Osmosis or something like that, with wildly hyperinflationary yields, you can then use those mega hyperinflationary yields to buy something hyper deflationary, like LUNA, and you just kind of loop that shit until it just makes tons and tons of money. So it’s actually pretty efficient. Neat stuff. But let me get Toxic on for a second.
It feels good to be on the right side here. That’s the final thing I wanna say. Thank you for your time, man, I appreciate it.
Yeah, no problem. Toxic, yeah, go ahead.
Yeah, what’s up, man? You’ve been kind of saving my day. I’m here in Mexico, and I have Omicron right now. So it’s a little bit boring. [chuckle] So essentially, I’ve been following you for a while now. So essentially, by every dip, right? And to me, I’ve been asking if everything you’re doing right now kind of works on the thesis of saying we get $100 trillion market cap in the next 5-10 years. Because what I’ve been thinking about, even though LUNA… I’m all in LUNA, and it’s an incredible investment, but there’s a very tiny percentage that we might be entirely wrong, right. So I’d love to hear your thoughts on going forward with this super aggressive strategy that if you’re wrong, at least for me, personally, it will be like a huge damage that’s being done, so I’d like to see how you reflect on this.
But wrong in what way? What price of LUNA would you be hurt at, essentially, is the question you have to ask yourself, right?
Well, personally, I think that with the yields I’m generating, it’s just for me a waiting game until it’s pretty much mathematically impossible for me to lose money, which might be a three year game.
I mean, so far this year, I’ve probably… I don’t know, just between arbs, and this and that, and the other thing, I’ve probably doubled my LUNA. So it doesn’t really matter anymore what happens the market, it could drop 100% and it’s like… It would have to go down a lot. It’d have to go down 80% for me to really be bothered by it, but even then it’s just simply a function of, do you believe it’s a market that’s going to… It’s going to come back no matter how low it goes? And if the answer to that is yes, you don’t think the crypto space is going to zero, then you have a situation where it’s just simply a matter of time then. So time preference is always going to be a factor. If you have to exit a position and you have to sell low, that’s gonna be a factor. But then again, it depends on what you need. So for example, when Prism comes out if you’re like, “You know what, I just need cashflow yield, I’m just going to get a crap ton of yLUNA, and I’m just going to basically port that out to UST. And I’m going to save all that UST from my yLUNA, and I’m not going to autocompound it,” you could save your money that way, right? So it depends, if you believe you’re going to have a problem, then you should basically be diverting your yield to cash, not to more LUNA necessarily, right. Because you already have plenty of price exposure to LUNA. And your concern is you’d like to have some cash available if needed, or whatever.
Now if you look at the growth curve of LUNA right now, I mean it basically has the highest velocity curve in crypto pretty much ever. So if you believe you’re going to be in trouble with LUNA, then the rest of the markets completely fucked. I can tell you that right now. The growth velocity of LUNA exceeds pretty much every major coin that’s been in the top… Well, I can’t find a chart that’s more high velocity from that perspective. It’s hitting all of the… Like 350 day moving average multiples at a pace that’s just unheard of in anything, quite frankly. So I don’t know, my bullishness there is completely unfettered in that sense. And I think if you want to diversify into, let’s say, other things that maybe you have a different risk profile for, probably buying BTC, converting some to Bitcoin on the dips is not a bad play, probably. Converting to something that’s a store of value stock, like in Apple, or a tech stock, or something like that, maybe okay. Although, one would argue the stock market’s just crazy overvalued and that may not be a good idea either. Depending on the price of gold, there may be other things you could do to exit into something that’s still a modest hedge against inflation, but then you feel like you’re safer.
So there’s, there’s all sorts of things if you start getting into deciding that, but I would say based on, again, that 350 day moving average multiple chart I showed, that’s already at $220 plus now and it’s rising really fast. So within a couple of months, the trajectory is at like $280. And I think within a few more months, that trajectory… Remember, it’s a log scale chart, the moving average trajectory is literally parabolic on the log scale. So it goes to $400 next, and then $800 next, it really moves very fast that by summer… To where if the moving average multiple’s continuing their current pace, you’re really talking about $1,200 LUNA targets by September or something like that. So to me, I only have one thing I need to do. And that’s acquire more LUNA, period, end of story. If I could find a better chart elsewhere, I just go do it there. But until that time happens, at this point, there’s not an obvious reason for me to focus too much effort on a lot of other things. It’s kind of how I look at it. So and then of course, we have catalyst after catalyst. All of those reasons why I think LUNA do well are great. So really, the focus of my discussion, and LUNAomics, and what danku was talking about really is about ways to potentially optimize the LUNA that you can acquire, and not necessarily… I’m not second guessing it too much. So yeah, if you have worries about this sort of thing, and you don’t have other assets, then that’s a totally different story.
And depending on how much of a drawdown you get worried about. I mean, if you saw my portfolio between $100 LUNA and $60 LUNA, you’d be impressed. Like, wow, that’s a lot of money going down, right? Like, you’d go, “Hmm.” So soon as you start measuring the value of things in the UST terms, and in the terms that you’re going to spend this shit, your mind starts have going into this spiral of like, “Oh, I’m getting poor.” You really have to be in an accumulation mindset when you do this sort of thing, which is, “How do I measure…” In other words, if I have X amount of LUNA today, and I can get X+10, LUNA by tomorrow, then I’m personally pretty happy. My goal is to measure my wealth in the asset that am I acquiring, not measure it in, say, dollars, or what kind of cheeseburgers I’m gonna buy with it or whatever. So that’s a very different mindset. It’s the only mindset you can have to be able to exponentially buy the dips. Otherwise, what will happen is every time it dips, you’ll be like, “Ooh, maybe it’s going to go down more,” and then what happens is, is you wind up getting… You get psychologically upset because your position is down so much, but the second thing that happens is you will not buy the dips in the magnitude that I’m saying that you ought to. You just won’t. You’ll just won’t push that buy button, you’ll just sort of look at it. And then everyone has a big circle jerk about how LUNA is going to go to $10. What the hell is that nonsense about, right? There’s zero evidence for that kind of thing. And so yeah, the FUD typically will affect you most near the bottoms when the noise is the most. And that’s the reason why it makes more sense to have these conversations while price is going down, as opposed to when price is going up, right? Because that’s when you want to be… So anyway, that’s kind of my thought on it.
Yeah, I mean, fair enough. I mean, I gotten to LUNA in July, I pretty much leveraged my net worth a couple times by friends and family loans, which was probably very risky, but in hindsight, it worked out great. So I’ve been buying more LUNA, and recently bought more Kadena with my borrowing power. But what I started to do now was, for example, Astroport was at least hugely profitable for me in just US dollar amount. So I’ve been… From all these LP things, and those drops and the profits I made, have been taking 10%-20%, and just I put it into another wallet that’s just Anchor Earn, just kind of as a safety cushion that I’m trying to build up on the side.
Think about it this way, guys, if you don’t mind… Depending what your tax situation is, and if you don’t mind selling, the reality is, is that like LUNA has 5% intra week… Like within three days, your candle sizes on LUNA are very big. And the odds that if you sold 5% of your portfolio on the way up, as each 5%, the price goes up, the odds that you’re going to be able to buy back on the way down are pretty damn good. So part of what you can do is, take tiny fractions and trade it, and then rebuy on dips, and that’s fine too. So if you don’t have sufficient capital to be playing around too much, that’s one of the things you can do is you can sort of take little profits on the way up, and then just buy more on the way down, which just works out fine. That’s what frickin, Galaxy Digital, and whatnot, or market makers are doing so don’t think that you have to be the only one to HODL shit when everyone else is trading against you, right? There’s grid bots running 24/7, rebalancer bots running 24/7, trading against the HODLers essentially. And so there is some potential opportunity cost in some instances to buying and holding. So with LUNA, at least, you could’ve literally the entire year sold a little bit every 5% it goes up, and you probably would have been able to buy it back on a 5% dip almost every time most of the year… Most of last year, I’m sorry.
So that’s a pretty reasonable thing. You don’t even have to get very greedy about this, by the way. You could just simply buy the position back immediately after it drops 5% again, right. You don’t have to wait till it drops 30%, 40%, you just simply just grid bot it but you do it manually, where you basically sell a little bit on the way up, and just go ahead and just buy it back, even if it drops a little bit. Even if you’re making a few percentage extra here and there, that works. The only thing is depending on your tax situation, or whatever, you may end up incurring a lot of useless short term capital gains and that kind of thing, which makes it sort of inefficient. So if you’re doing this within a tax protected situation, then you could trade more aggressively, in theory, like a hedge fund would. But that’s why some of these architectures, like grid bots, and like rebalancers, and things like that, I want to bring those on-chain to where the protocols, build them as vaults, so that you and me don’t have to incur a bunch of tax nonsense. We can just insert this into the vault, it sits there and prints you a bunch of money, you exit, and then you pay tax at that time if you want to. But if you do proper rebalancers, or you build, for example, infinity bots, or things of this nature, you can actually have these things running 24/7 for the rest of your damn life. And you can even set them up to where they eject UST periodically, so that some of the profit comes out so you can spend it and live your life with it. And then you just use the UST and just pay income tax on it and call it a day, right?
There is perfectly good ways to design these things. So you can just live your life off the volatility, literally. You don’t have to sell a majority of your position. You don’t even have to rely necessarily only on the staking yields. You could get the arb volatility yields on top of staking yields and just live your life with it. So a lot of interesting tactics ultimately, so that you don’t have to worry any more about what happens in a bear market, or bull market, or whatever. You want to be able to have volatility arbitrage opportunity in any market is the way I look at it. Marty. Go ahead. Marty, are you still there?
marty schoffstall 54:35
Yeah, I’m sorry. That’s a lot.
Yeah. But everyone’s hopefully soaking this in a little bit, understanding the principles at least.
marty schoffstall 54:51
Yeah, so I really… I think your observation of I want to buy ATOM when it drops, for some stupid reason, okay. Convert it to bATOM, and post it to ANC. I think, that’s a that’s a beautiful little flare move that I did not consider until you said it. So thank you.
Yeah, cuz when the other bonded assets arrive, you’ll have, again, more dip buying opportunities, essentially, if you think about it. And because you’ll be able to borrow off of them, you could borrow off of, say, for example, bonded ATOM, and then buy LUNA, right. You don’t have to necessarily be exposed the exact same coin all the time. So yeah, there’s some different tactics that will arrive when you have these capabilities. And what’s beautiful about these is that, ATOM has currently a 14%, or 15% inflationary yield at the moment, which is really good. And with shared staking, those yields could go up to 100% APYs, like just nutty APYs in the future, which is why ATOM’s price is rising. And what you might be able to do here is you might be able to just live your life off the ATOM yield, quite frankly. So you take these hyperinflationary yields not so much to make money off the growth of the ATOM token, but because the token pays in kind, as the price of this goes up, you could just do interesting stuff like take your ATOM yield, and then go buy LUNA with it, or vice versa. So there’s different kinds of automations. And my sense is that, there’s probably some mathematically perfect ways to do this, where you’re buying the bottoms, and you even borrow off of it if you potentially get benefit at that point. And then you can buy other things that have dropped, ride those up, sell them, pay off your loan, and things like that.
Definitely more high grade assets within the Terra ecosystem is going to be critical for us to be able to trade without going off-chain. Because right now, the problem is for trading purposes, yeah, we have some different Terra coins. But the reality is, those are just low volume, small scale projects. And yeah, you could LP them and do this and that. But at the end of the day, you need something with high volume, you need something with high volatility, to be able to arbitrage all this price movement, and that’s critical. So the beauty of crypto is the volatility. If you are not fully taking advantage of the volatility, then you’re not doing this right. That’s as simple as that. Mathematically, if you think about why a lot of stock traders come to crypto, it’s because they can play that volatility and make a buck, right? That’s the reason why Bitcoin was designed the way it was. It was designed on video game tokenomics… Not tokenomics, video game sort of mudflation theory. People think all sorts of shit about why Bitcoin is designed the way it was, but it’s not some kind of libertarian wet dream. What it was, is it was designed on mudflation theory with video games at the time. And what the problem was, is that video game inflation was a real issue. And the goal for BTC is for it to remain hyper volatile forever, was sort of the reason why the scarcity model was put into place. It wasn’t just simply… They could have done an inflationary model like Dogecoin, or whatever. But at the end of the day, the reason for that is because of scarcity, volatility forever.
And when you have volatility forever, you attract traders forever, you attract leveraged traders forever. And that’s all good for the ecosystem. That was the whole point. So the entire point of crypto is for specifically volatility exposure. And then the beauty of Terra is for the stablecoin exposure, you have that too right on chain. Both of those are extremely important features. Volatility is not a bug, it is literally a feature and it’s the only feature that matters. So anyone that’s worried about crypto volatility, it’s like go buy some stocks and shit and go do something else. You don’t know what you’re doing yet. [chuckle] So this is the funny thing about… And even in Bitcoin, you can do quite well with just basically a Martingale logarithmic buying strategy, it works quite nicely. And with what happened with Bitcoin is because, the price movements have become not quite as volatile, people started using more leverage to play the volatility with less actual capital, so that you don’t have to wait for BTC to make a 20% move. You can 10x leverage it and have it make a 1% move and this kind of thing. So it starts behaving more like a forex market ultimately, is what’s happened there. But yeah, you’re gonna have a lot of fun on Terra here pretty soon. A lot of cool stuff coming. Hey, Logan, what’s up? You have a comment for a while there. Sorry. Logan, are you still there?
logan shippy 1:00:01
Yeah, I’m here. Sorry. My mic was muted. Can you hear me now?
Yeah, go for it.
logan shippy 1:00:05
Yeah. So I had a couple of questions for you. So how do you personally determine when you think that LUNA is gonna dump? Because obviously, we’ve had some serious run ups, but have you noticed any patterns with percentage gains? Where you’re like, “Yeah, within this range, usually, it’ll run up 5%, 7%, 10%. And then, right after we’ll have a X amount of dump”?
So here’s the thing about… Alright, so quantitative traders have been trying to figure out how to predict the forward price movements of assets since assets have been a thing. And in fact, in order to program a grid bot effectively, you would need to have some concept in your head of what you think the volatility is going to be. And the problem with that is, you’re always trying to predict future volatility based on past volatility. And if you just have ever watched how Bollinger Bands work… If you’ve never looked at Bollinger Band charts, I would certainly recommend doing so. What you’ll find is you’ll have an asset, it’ll go sideways or sort of a narrower band of volatility. And then you’ll have like a volatility explosion, and you have price move rapidly to the upside or the downside. What you do know in crypto is, is things do not go sideways for very long, what even is sideways? Plus or minus 20%? Plus or minus 30%? I would argue that for LUNA, we have been sideways since September. We have not had… You might be rich now. you might be doing really well because LUNA went from $1 to $100, whatever. This is all just sideways movement as far as I’m concerned, on the last six months. In the sense that between $50 and $100, it’s been really an ascending channel of ups and downs, right? The reason why I don’t try to optimize the selling of LUNA, and this is the key here, the reason why is you’re gonna miss the biggest
logan shippy 1:02:16
Well, I’m not saying selling it right? When you’re borrowing, right?
I guess what I meant to say is, yeah, for dumps or when it goes up, it’s the same question here in a sense. How do you know it’s going to make a big drop or a big pop, right. Either direction, technically, would be relevant to people. Well, first off, there’s no way to tell a big drop’s gonna happen. Because obviously markets are correlated, there’s a lot of general crypto market liquidations and such that can lead to large drops in all of the coins. So the ability to predict when a drops going to happen is almost impossible, you just know big drops are going to happen. The idea that we can predict it, I don’t think anyone really consistently does. And but here’s the thing, all you really need to know in crypto is, is that the large upward moves is where you make almost all of the actual money and it happens within a period of like a month or two. So grab any number of like substantial upward moves in early cycle assets, we’re not talking about like 10 years after Bitcoin starts, or 10 years after Apple is out. We’re talking about early one or two year cycle charts, you really see that adoption velocity really aggressive. And with LUNA, we didn’t know that it would have a very aggressive Bitcoin-like move where it quickly moved to the 350 day moving average times 21. And then the second hit was 350 times 13. I mean, it’s literally following Philip Swift’s article of Golden Ratio Multiples perfectly. And each time it hits those multiples, then it confirms that that type of logarithmic or viral growth is… It confirms that the next peak is going to be following that general concept. It just makes it highly likely.
So in my view, the next move for LUNA, as an example, is going to be into the, like $240-$280 range, something along that line. I think the large move, not these just chop moves that are just kind of rising, but the really, really big move, where it’s just FOMO comes on, and you’re telling your family, they’re telling their family, and everyone’s buying LUNA all of a sudden, right? So that move will sort of just emerge out of thin air and it will be so fast you’ll think that, “Hey, I found a local top and I’m going to sell here, and it’s just going to keep going up, and up, and up, and up. And it’s just like, you’re scratching your head going like, “When is this going to stop?” And some people during those times they’re like… Because the higher a price goes, psychologically, the more likely a dump’s going to happen. So right now, we’ve had, yes, this kind of rising chop and we’ve had nice 30%-50% or more corrections each time, which is super bullish, because that means that each time buyers showed up at each of these bottoms. If you have a very, very large FOMO style move, then the question you have to ask is, okay, well, if a FOMO style move happens where we head to $240, where’s it going to go from there? Is it going to go sideways? Or is it going to take a solid dump from there? If you’ve been around crypto for any amount of time, you know nothing goes straight up, and then go sideways, right? It’s just not even a thing. And sideways on a log chart is plus or minus 50%. It’s a pretty big drop from tops. You just don’t know where that top is going to be, nor where the next bottom is going to be.
So all I look for in my life when it comes to assets, I’m looking for the new higher low. I don’t sit there and celebrate that, oh, look, LUNA went to $240, and therefore, I missed the perfect top. I didn’t sell it perfectly. And then I rode it down all the way to, let’s say, it goes back down to, I don’t know, $150. Imagine Solana, look at Solana’s chart as a good example. It went from, what is it $250. And now it’s at $160, or something like that, right. It really made a big move. And, you’re not gonna be able to predict where that new bottom is. But let’s say you own LUNA today, right now your LUNA is worth $80, and let’s say, six months from now, it goes all the way to $240, and it comes down to $200, are you going to be unhappy, really? Not really, you’re pretty fucking happy. You just think about it from the perspective of, as long as LUNA can hit the 350 day moving average times, the next one is times eight, that means it still has viral adoption level growth curves. And therefore even if I hit that peak, and hit another higher low, the odds are that I’m going to hit the next growth curve… Again, it’s lengthening cycles, basically, so it takes longer. But those curves are moving at a breathtaking pace, right. Look at Bitcoin in the early years. It goes from $0 to $100, $100 to $1,000, $1,000 to… And then it has a big correcting period for a couple years and then $20,000, right. So these kinds of moves happen over longer and longer times. And what I’m telling you guys is that how compressed the cyclicality is for cycle one and cycle two peaks for LUNA is just… You’re spending way less time, like half the time it took BTC to do anywhere near that, right. The sheer velocity of the network effect today of how DeFi is just blown up, it’s just no comparison to the previous assets. And so, looking at it a couple years now, if all you had as a two year horizon, you’re going to be probably doing really well, even if they’re mini bear markets along the way. So finding the next dump is really hard, Logan, to answer your question…
logan shippy 1:08:07
What did you do? What did you do at $100? Did you think, “Alright, psychologically, people are probably going to pull out some profit at $100.” So were you kind of ready to pull out some LTV at that point?
I figured they would. But at the same time, I wasn’t willing to miss a move to $240. So I did an exit.
logan shippy 1:08:26
Yeah, so what I did is I took out, I think, like $50,000 worth of collateral right there and brought my LTV up. And I just was like, “Okay, in case it does go to $120, $130 right now and start moving towards $200, I want to make sure that I don’t miss that.” And it’s not enough LTV to where we dumped, which I thought, “Hey, maybe we’ll hit around $80.” We went down to $60, which was a little nerve wracking.
Yeah. My biggest worry, the thing I panic about is not whether it drops or not. I don’t care, that’s just more buying as far as I’m concerned. And it’s more autocompounding time. It’s more LUNA burning time. In other words, we all hold hands together, it’s Kumbaya. What I’m more afraid of missing if I tried to trade that top, is I’m going to miss the biggest moves in the history of the fucking human race. I’m talking about, where LUNA could just jump to $400 out of the blue and you’re like, “What in the holy hell?” That’s the kind of stuff that… That’s the kind of velocity I see with current price movement and network growth in the sense that the amount of money people are pouring into the Terra ecosystem. So that’s what I don’t want to miss, right. That’s the thing.
logan shippy 1:09:39
Yeah, do you think it’s smart, though? So for example, let’s say that we run up to, I don’t know, $200, right. Let’s say that we’re running to that range, should we start running up. Okay, well, let’s say we did have a major, 30% or 40% price increase, and you thin, “Most likely a dip of some sort is coming in.” So I’m gonna take out, let’s say… My LTV went down because price went up. I’m gonna take out x amount in UST, and I’m gonna buy 20% to 30% right now. And then you’re saying DCA, kind of if it does drop, right. If not, I’ll FOMO in a little… If the pump continues to pump, I can buy back in a little bit of a higher price. But for you, if you’re kind of implementing that strategy where you DCA, are you doing, alright, I’m gonna do 50% right now, immediately when I take out that UST loan? Or are you doing… What is your strategy on percent wise, because I know you said you went up in percentage, but what…
logan shippy 1:09:45
I typically start buying again, after whatever local top I see like a 20% or so drop is where I start getting a little bit. And I start building almost a new position in my head, right.
logan shippy 1:10:49
So you’re not pulling out at… You’re not trying to time a top to pull out. You just pull out more when we’ve already dropped because you know hey, this is most likely the bottom?
Yeah, the more UST I’m going to spend, in other words. But if you’re talking about like, so is there a strategy that a person can use a sell on the way up? Sure, there’s a lot of different ways you can do this. If you just look at like crypto volatility, generally, you could probably take a little bit off at 10% intervals, even, and have a good chance of get getting… Even within intraday volatility, you could sell at a 10% up and then buy back 5% lower, right? And just sort of stack that way, if you really want to. This is an essence what a grid bot does. So if people are really, really interested in buying and selling, you almost want to be on an exchange where you can just basically put in a pile of limit orders all the way up and just let them hit, let it sell for you. And then you go, “Oh, look, my stash of UST, or USDT, or whatever the hell it is, just built up.” Or you can go on Miaw Trader, or whatever, and do this, I think, as well. And then you basically… After your cash positions getting bigger, you just pick a limit order, you’re like, “You know what, I’m comfortable if I get this back at $90. I’m just gonna put all my cash in at $90, and I’m just gonna get it all back,” or something like that, right. You want a number where you have a high likelihood of filling that limit order again, right where the price…
logan shippy 1:12:22
I just kind of made not an optimal decision by taking out… I’m glad I leveraged, because I was being kind of a pussy. I wasn’t really using Anchor to what I truly could have. And then I put more bLUNA on there, I took out a loan, but I wish I would have kept like 20% there in case it dipped. Because I had a feeling, “Hey, we’re probably gonna go from $100 to $80. So I think that’s probably my strategy, anytime that I take out a UST loan, I’m going to keep… I’m going to deploy 70% right away into it, and to keep another 20%-30% liquid in UST, not really to pay down the… Well, I guess it would be technically paying down the LTV simultaneously if you’re buying more LUNA and using it as collateral, right?
Yeah, well, I mean, I’m not even that aggressive either, if you think about it. ‘Cause I have like 1/3 of my LUNA is in a Stader LunaX position, right. So it’s autocompounding. I have another 1/3 coming out of burns on Anchor that I was playing arbs on, right. So I’m like diversifying the tactics a little bit, just for the hell of it. But technically, because I have a large amount of my LUNA coming out of burns, almost a third, if I want to sell that LUNA and then try to do a volatility arbitrage, where I just sell and buy back, I could have almost 1/3 of my LUNA ready and waiting to sell if we have a massive impulse move, like I said. So I can start selling on the way up if I really wanted to, and just buy it right back. In fact, I don’t even need to… I’m comfortable with making 10% extra LUNA in that situation. I don’t need to necessarily time the perfect top. I could just on the way up, just sell some then buy right back the moment it dips 5%, right. Like I don’t have to go crazy.
This idea that you have to pick a perfect top and a perfect bottom is not necessary either. If you’re selling on the way up, you could just buy back on the volatility. And that’s essentially what a grid bot does. That’s why I want to bring more grid bots and things like that on-chain, or where protocols are doing this for you. So you just push a button and it does it for you. Like on Miaw Trader or something, you push a button and it just fills all your limit orders in for you. You don’t have to do a bunch of shit and do all the manual work of putting all the limit orders in yourself. And then you can have a strategy in your mind of how you want to buy it back. Because I mean, think about it, even if you made a 5% arb trade, let’s say you sold at $100, and you bought it all back at $95. Who gives a shit, right? You just made a 5% arb trade, what are you worried about, right? But it also depends on how much of it you’re going to sell at each of those intervals. And that’s the thing…
logan shippy 1:15:02
Yeah, I’m not really planning on selling any of my tokens, I just want to continue leveraging as the collateral becomes more valuable, if that makes sense, right. Because I’m not trying to create these taxable events where I sell my LUNA on the open market and have short term capital gains tax. I just want my collateral to increase in value, take out a non taxable loan in UST, kind of wait for an ideal dip essentially. Or like, buy some more, but then hopefully catch a dip. So then I’m stacking off of my current… I’m just leveraging my current holdings to get a little bit more. It’s just like, I never even thought, oh, man, why don’t you just pull out UST and just kind of wait, and see if it dips, right. That’s something that never even really crossed my mind. And I’ll be honest, I had to pull out some… I had some money on KuCoin. And it was like $7,000 or $8,000 sitting there. And I’m like, “Okay, my LTV is getting to almost around 50%.” And I’m like, “Yeah, this is too much money to be having just risking, in a sense,” I’m like, “I don’t want to get liquidated.” So then all of a sudden, like you said earlier, KuCoin was congested, and they were not allowing deposits. And I’m like, “Dude, if we drop another 10% I’m getting…” I mean, I don’t even know what the total liquidation would have been, if it’s partially liquidated, but I was stressed and sweating bullets. I’m like, yo, I was losing sleep because I’m not used to this. I’m a risk taker, but at the same time I’m not a trader. So I don’t really know as much as you do when it comes to these bots and whatnot.
And trading is more about expectation management. It’s not really that there’s these people out there that freakin know exactly how low something’s gonna go. The number of people when I watch all the different calls out there, people say, “Oh, I think it’s gonna go to this price,” and, “That’s gonna go to that price.” Really what you find is, you see more useless calls and stupid ideas than smart ones, honestly. So don’t feel bad if you feel like, “Oh, I’m not a great trader,” or something. Most of us shouldn’t be particularly great traders, there just has to be a mathematically near perfect strategy to win most of the time. You don’t have to be right all the time. You just have to get the big ideas right most of the time, and then have a technique that works for your specific time preference or whatever. That’s the thing.
logan shippy 1:17:32
Got it. Last question I want to ask you real quick, and I’ll let anyone else speak.
logan shippy 1:17:38
So Do Kwon was hinting at something on his Twitter with like the Terra logo and then also like a orange, kind of dotted logo? Could have either been Bitcoin, some people are speculating MasterCard. Do you have any idea what that might be?
lSomeone posted a thing that looks sort of like the Busan logo too, so I don’t know what that means. It’s like a blue circle with an orange circle next to it. I don’t know what he’s implying, exactly. But Busan was coming close too, apparently. So I don’t think it’s a MasterCard tie up. I don’t know… Visa decided to go with USDC, remember? As their primary stablecoin. So it would be interesting if MasterCard decided to go bigger and use that as some kind of payment rail. That’d be pretty interesting. But I don’t know that there’s any facts behind the MasterCard story yet. Or anything like that. Phil has his hand… He’s just waving at me here. He might have some alpha on this subject.
logan shippy 1:17:52
Go for it, guys.
Phildo UST. Baggins 1:17:59
I didn’t actually watch it yet, but I saw the video. I’m getting home in a bit. I just wanted to let you know.
Oh, on the whatever the…
Phildo UST. Baggins 1:18:43
Ot’s called lfg.org or something. Yeah, if you look up dank’s video today, I think it covers it. I saw the logo you’re talking about, that’s the only reason I know.
I thought it had something to do with either Bitcoin, or Bitcoin reserve or money market or something like that.
Phildo UST. Baggins 1:19:03
I think it did. I didn’t watch it yet. But I think it does.
There are several things that are up and coming right now. So who knows.
Phildo UST. Baggins 1:19:12
They said REDACTED, that’s all I know.
Yeah, I do know this though. All of these things do spin nice narratives, which is cool. So it just gives everyone more and more shit to talk about, which is… There’s a memefication effect that goes with each of these things that happen, which is pretty awesome. So you want articles to be written by blogs and all the various crypto media and whatnot. And every single article that shows up is just more searches and all that. So yeah, releasing these things periodically, almost towards social media optimization is really pretty sweet. So we’ll see how it all plays out. But, Caleb, what’s up?
Caleb Oki 1:20:01
Hi, Cephii, thanks for creating these opportunities to speak about LUNA. I just noticed, you mentioned that you’ve already doubled your LUNA so far this year, and I was curious about that. How did you do that? Is it with all these strategies you’ve been discussing?
Yeah, I mean, a lot of it was the arbitrage. The arbitrage opportunities were much bigger before. Sometimes we’d get like 4% and 5% arbs. And, I don’t know, and then between different autocompounding, and this and that. I don’t know. I don’t even keep track of how much… I don’t sit around worrying too much about the exact strategy at any given time, I just sort of like keep taking whatever opportunity I see. And yeah, and some of that’s off of borrow and buy, and then that kind of thing. And some of its based on arbs and different things. So yeah, pretty much most of the things we’ve been talking about, for the most part. That’s about it. But yeah, it’s not going to be as easy to double things. Although I would say some of the Prism strategies are gonna be freaking awesome. I think you guys want to really pay attention to the different possibilities there. I’m still trying to calibrate in my head what I’m going to do with Prism, precisely. So think about it this way, like okay, everything we just talked about today, which is essentially to get a bunch of UST at the top, as LUNA as price goes up, park that in Anchor Earn, have it ready as dry powder. But take that a bit further and say, okay, maybe the right thing to buy is not always to just simply buy LUNA on the dip. Besides the bonded ATOM, bonded Solana that are going to come, those might be useful things to buy in the dip if they are dipping even more than LUNA is. And then additionally, you may be able to buy things like, let’s say, pLUNA or yLUNA if one of those is cheaper for a period of time, right. Or you could do things like, okay, I bought LUNA, but then I immediately Prism refracted it and sold the more expensive version, let’s say for example, yLUNA or pLUNA are higher in value, and then I went and bought the cheaper version, whichever yLUNA or pLUNA are lower in value, and you basically arb that too.
So there’s all sorts of tactics that might emerge here with optimizing the cheapest thing you could possibly buy. But you’re basically always looking for that discount, right, in whatever it is you’re looking for. And then when Prism… Once we have some different ATOM and SOL assets, if we can get the refracted ATOM and refracted SOL, then you get some really nutty ideas in terms of, if you have really high yield things like ATOM, like 14+%, then you could take… Let’s say, for example, one of the questions earlier was like, “Okay, how do I live off of my shit later?” You could basically take all your LUNA, you could sell it and buy… :et’s say, yATOM is not particularly popular at that time, but its yield is like 14%, you can convert the entire amount of stash to, let’s say, I don’t know, 5x the amount of yATOM, and that’s suckers at 14% interest rate. So now, you just got cash flowing out the wazoo at that point. So $1 million might net you $1 million a year in yield output for that matter. So then the price of coins no longer matters to your life anymore. That’s the ideal situation to where your yield is so outlandish that nobody cares about the price of the bull market and the bear market anymore. That is the ideal apex… That’s a status you’re trying to reach, the point where your yield is all you care about is theoretically… And whether you get that through arbitrage bots, whether you get that through on-chain activities, whether you get it through the Prism protocol.
I think Prism is going to basically have a lot of life changing financial mechanics behind it, where people can do really cool shit that matches their financial needs, as opposed to simply always be worrying about purely price action. And then not only that, but let’s say you don’t need all that cash right now. Let’s say you have good yield coming out, you can then take that yield and then direct it to other opportunities, so that you’re always buying dips in something that also gets yield, and then your yield stash is just climbing. And you don’t have to do this for very long. I mean, a couple of years in this market with these kinds of yields. Holy crap, you really should be doing well, in my view. If you’re not then something’s going way wrong. Because you could basically just get the free yield and buy the cheapest thing in any bear market, or whatever, and just keep knocking away at it, and you’ll have a pretty nice position. Stocks never had this kind of obnoxious dividend potential and whatnot, where you could just basically continue to autocompound into things, right. So take advantage of the Web 3.0 magic. And always be kind of figuring out how to optimize, is the way to look at it. Always be learning too. As long as you’re kind of learning new techniques and strategies… You only need really a basket of them, though, to do well. I don’t think you have to go to a dozen chains and sort it out. You can figure this out… Hopefully, we have a lot of great opportunities on Terra so you don’t have to go anywhere. But Joseph, do you have something? Or actually let me get to Ryan first. He’s waiting a long time. Sorry. Ryan, are you there?
Yes, I’m here.
Go ahead. Go ahead.
I guess I could drop a little alpha for you. As far as a protocol that can kind of implement the strategy that you’re talking about, from what I understand, you should be able to do a majority of that through Andromeda Protocol.
Yes, I think you’re probably right. But there are some elements by the way, there are some tactics that… Yeah, like ETF style tactics that Nebula may be doing. There are some tactics though, that I want to see implemented, say, for example, an aUST LunaX Martingale bot or something like that, where you’re just exponentially buying things that are simultaneously rising in value. The only problem right now is that, for example, LunaX has to be sitting in your wallet, it can’t be locked in a smart contract. So the only people that can build that type of product would be something… Stader themselves could build it. Or you’d have like an external bot that you’re running, sort of like Jimmy’s trying to build, where you’re running a bot to do the trades for you, but you have aUST in your wallet and you have LunaX in your wallet. Because the way Stader works is you have to snapshot the LunaX in your wallet to get the yields, right, the extra yield. So I think the liquid stake solutions, like for example, a rebalancer between LunaX, AtomX, and SolanaX would just completely just rip as far as money making. I mean, that sucker wouldn’t make much money, you would just defy the imagination. There’s no comparison. Compounding everything that you’re counter-trading against in a rebalancer? Holy crap, I don’t even know how to calculate how much money that. That’s how fast you’d be making it.
So those are the kind of innovations I think are coming as the proper primitives are built. And then you have to have the protocols built to build this. And then you could do natty ass things like, you could have a Solana, Atom, LunaX, all of them autocompounding, and they could all be rebalancing, and you could use aUST position to use the aUST yield to dollar cost average into the actual rebalancer bot or the vault, right. So you could do all sorts of nutty treasuries with this kind of strategy, and they’d be way more lucrative than the shit we’re seeing now. There’s no comparison to what I’m talking about. If you just look at how well rebalancer bots work in general, the APYs tend to run 100%-200% APYs nominally, that’s just standard. That’s without even really fast growing assets, but you have autocompound multiple high volatility assets, especially if we can keep getting these cycle one ultra volatility assets. Geez, we’re talking about some serious money printers. Most people would be retired in two years on one year of income. It’s that kind of ridiculous numbers. But anyway, so it’ll be fun. You’ll see. We’ll get there. [chuckle] But yeah, Joseph, you want to hop on?
Joseph Johnson 1:29:07
Oh, sure. Thanks for holding these, by the way. So I don’t know if I have a complete thought here, but I am curious because typically my strategy on Anchor had been to keep my LTV well below 40%. And then if it went above that, I would usually hold LUNA and bLUNA as an LP, and then if the LTV got too high I would break it, and then put bLUNA onto Anchor to help lower my LTV. But as the APRs on the LUNA-bLUNA pairs have dropped, becoming less and less…
I think it depends on what you prefer in terms of the amount that you have outstanding borrowed. Because the most aggressive way to get the highest possible exponential buys towards the bottom is going to be, use the max borrow power of LUNA, which I don’t personally do, by the way, like I mentioned, I have 1/3 of it doing one thing, another 1/3 of my LUNA doing something else. And then, I’ll be using 1/3 of it at least for these Prism tactics, I’m sure. So yeah, I mean, exactly like you’re doing. I’m sort of using some of my LUNA for other things, to some extent. Now, is that the most aggressive route? It is not. If I did LUNAomic’s strategy and went just ultra aggressive and just convert everything to bonded LUNA and just borrowed the shit out of it, I would have done dramatically better than I’m doing now, for sure. So he’s right about that. But at the same time, it just depends on how aggressively you want to manage that borrow and just different tactic.
Joseph Johnson 1:30:59
And so, kind of my follow up thinking is, is with the new bonded assets coming on line soon, my strategy is primarily changing. Now I’m primarily holding just bLUNA, well, on Anchor, but then a fair amount just in my wallet, earning, I don’t know, what is it, 8% from Lido or I don’t know, that magically shows up in Anchor. But it’s paid out in…
Yeah, you’re making like 8%-9%
Joseph Johnson 1:31:32
Yeah, but it’s paid out in UST, and my thing that I loved about the LP was it was paid out in more LUNA and bLUNA. I guess my question is, is there a way to use a bot that can kind of autocompound that UST while my bLUNA is waiting in my wallet?
That’s sort of what Nexus’ bot is building. Nexus is building exactly that. They just announced that today that they’re gonna… I asked them to… Because it doesn’t make sense to keep emitting Psi token, and it doesn’t make sense… ‘Cause lot of people just sell it for more LUNA anyway, they go and get nLUNA and whatever. So why are we going through this shenanigans when we know everyone wants LUNA right there. So exactly that. They’re building exactly what you want. So you’re going to be able to park your bonded LUNA there in a vault that’s going to buy you LUNA, or buy bonded SOL, or buy bonded ATOM in the future. So that’s not a bad play. That should be decent. That’s a fairly conservative strategy I would say. It’s basically yield direction to buy things that you like, right?
Joseph Johnson 1:32:43
That’s exactly what I wanted.
Yeah. You could then do something simple, like DCA into the different coins. What I want them to actually do, though, is I want them to go one step further. And not just where you have a vault where it just… You put your bonded LUNA or something in there, and it buys you more LUNA, but some strategy that’s more ETF like, where he would actually buy whichever of the coins is down the most or something like that. So relative to each other, which one is… And then maybe calculation that’s relative the amount of interest yield it has. So because ATOM has higher interest yield. On a deep dump of ATOM, I want plenty of ATOM because then I can use the interest yield on that to do the exact same thing that we’re talking about. It’s just sort of, you take that bonded ATOM, and then you just take the yield off of that, and you compound it more. So there’s just different ways to look at it from the standpoint of a mixture of, again, price action, diversification, coupled with yields redirection to create these automated ETFs or whatever. So that should be pretty fun. We’ll see. Yeah, we’ll see what they come up with.
Yeah, cause I definitely don’t… Yeah, I got sick of having to sell the Psi and then buy LUNA again. So that sounds great.
Yeah, the Nexus team and I, like a weekend or two ago, I did kind of a good solid brain dump on them about all the different ideas here that we’re talking about for a few hours with them. And their team sounds quite competent as far as programming and coding and such. So what they’re actually investigating also is rebalancer bots. And they’re first trying to evaluate what the… They’re looking at how much slippage is present on the current AMMs, like TerraSwap and Astroport, to see if we’re going to have enough slippage-free liquidity available… I’m sorry, there’s enough liquidity to prevent serious slippage if you do a vault with large quantities of money with large order sets. Because we don’t have something like Serum which is like a more traditional… We don’t have a traditional market maker system yet. These AMMs have pros and cons, as you guys have noticed, in terms of slippage and whatnot, that, A… Like Coinbase, or Binance is not going to have as much slippage. But those kind of money markets need to arrive, ultimately, potentially to do some of the more fancy things. So we’ll see what happens. But that’s where Vertex protocol and some of these other ideas play a role. So a lot of good innovations coming that should help some of these things. So long story short, Nexus is testing out some different ideas of what I talked about, just to look for on-chain technical feasibility before like promising anything specific yet. So we’ll see how that goes. But there are some really good vault ideas for easy investing that we talked about too.
And then also ways to improve maybe the Psi tokenomics and increase value capture for it, all that shit, right. All the things that you’d want to see them accomplish, both for the Nexus token holder, and for you, the user of the platform. So we’ll see what they come up with. So like I said, I’m not technically proficient enough to know what is technically 100% possible, I just do know what I want in terms of the financial product. And then, if someone can build it for me, Hurray, that kind of thing. We’ll see what happens.
Joseph Johnson 1:36:31
Yeah, cool. Let me see here. Let me grab triple real quick. Yeah, what’s going on?
Hey, Cephii. My question is about accumulating LUNA as the price is going up. So what in your opinion… I’ve heard you speak about the strategy of increasing the DCA on the way down and pivoting to other assets that might be, or likely will be in the Anchor Borrow vaults, like ATOM and SOL and that kind of thing. But what in your opinion is the ultimate or kind of… Not ultimate but just a really good strategy or several strategies for accumulating LUNA as it’s rising in price?
Yeah. Let’s assume any asset, forget about LUNA specifically. Let’s just say I discovered some new coin and I’m like, “Ooh, I want to do something right now.” The first thing I do is decide, okay, do I want to enter this thing slowly with a dynamic DCA because it’s already had a run up and maybe I want to try to optimize for cheaper prices, or you know, what I think, Oh, holy shit, this is the next best thing since sliced bread and it’s going to do amazing things over the next few years. I’m just going to get a big core position, hold it, and then if it goes down any further I’m going to either top off my position or, again, start a new dynamic DCA. On the way up, what I’ve been doing is, to me the way I look at crypto is every peak, whether it’s Bitcoin $20,000, or it’s LUNA $103 or whatever it was, every peak is a confirmation of buyers out there and each subsequent peak, if it behaves in a way that is consistent with longer term growth, represents future potential, so therefore every peak I will start buying as we fall from that peak is how I kind of look at it.
So am I buying right now while LUNA is going up? No, because I just bought it like $62… Well, actually about all the way down. Could you also buy all the way up you could but then you’re just doing a traditional DCA at that point. You might as well just buy every day then, right. Instead of trying to time it and everything then a traditional DCA would work. I mean if you guys remember… So remember how Finney, if you guys remember him, he passed away of ALS and he was one of the original people to make Bitcoin work, and when the reporters used to ask him and stuff like, “Hey Hal, you’re pretty smart, how would you get into this Bitcoin thing?” And he’s like, “Well I would just DCA it.” In other words if the Cal Tech Genius is telling you to DCA it. that’s probably good enough for me. The dude that practically founded Bitcoin…
In terms of deciding and amount to DCA, I love the way you kind of explained the doubling or the exponentially increasing DCA on the way down. Would you just basically figure out what that smallest amount is, and as LUNA is going up that’s what you DCA with every single day? Or do you have some other like…
Yeah, with something like LUNA by the way, I made some fairly like grotesque errors in terms of when I bought, right. I was like, oh, it was at $23, and it dropped to $16. I’m like, “That’s a good buy.” So I bought a little chunk, I bought a pretty good sized chunk there. And then I ended up buying a whole lot more at $12, and $4, and $5, and then on the way up, I learned more about the ecosystem I bought even more. So I don’t know that there’s a right exact way to do that if you’re buying on the way up. I think it really depends on whether your intent is to sell on the way up also, to then exit to cash so you can buy more with each of these subsequent drops. So I think if I had a limited amount of capital, I would probably deploy it. Honestly, I would say one of the most straightforward ways to win would be to just go into a rebalancer bot. So if you’re concerned about, “Well, you know what, I don’t know, if I’m buying at the right price,” you do a 50:50 rebalancer on KuCoin or whatever, and you’re basically 50% of the position already, 50% is available in cash to buy the dip, it’s going to do it automatically for you. And typically a dual coin rebalancer is going to be hodling anyway over a two year period. So in that respect, I think if I had limited funds the rebalancer bot, even if I had to pay the short term capital gains and all that, that’s probably the way I would go if I’m concerned about this.
Now if my presumption was is that, like mine is, that LUNA could be an easy $1,200 by end of this year or sometime past summer, then if that’s my intuition, then maybe let’s just go all in right now and call it a day, right. Because you’re earning the yield along the way which amounts to 9% yield now anyway. So if you wait a year, at least 10% of the volatility you’ve covered through yield. If you’re going to be upset if a dip happens and you miss the perfect dip, well the only choice you have is to preserve some capital to buy the dip, right. So really depends on your strategy at that point. But again, it also depends on how much capital you intend… If you’re throwing your life savings into something, it’s very different than if you’re throwing small positions around, right. I think there’s a lot of ways to decide how much that’s going to be and that kind of thing.
Yeah. So real quick one more question, if you don’t mind, about when the best time is to convert LUNA to bLUNA. Am I right in understanding based on… I think what you said before is the most optimal time to convert LUNA to bLUNA is at the very bottom of a dip. If you can catch that…
Well are you talking about LUNA you already have? Or you’re talking about…
Yeah, yeah, LUNA you already have.
Yeah, if you already have it then during times of high volatility is when the bLUNA arbitrage is at its best, because you have people being liquidated and people are suddenly converting bLUNA to LUNA in order to sell their LUNA. And what’s happening there is that they’re creating the depeg at that moment, and that’s when you get the arbitrage to convert, right. But that presumes you have LUNA waiting there for you. So a lot of times I do. Not only am I buying the dip, but when I’m buying the dip, I know almost with certainty that I’ll have a LUNA-bLUNA arb somewhere in that volatility and I can get an extra 1% for free. So when I bought at $63, or whatever it was, and I have some even on a fresh exchange where bought some, I know that I can then arb that at some point down the line here and get another extra 1% free which is nice. That amounts to a lot of money, by the way. Who in the in the universe would you free 1% here and there in your life?
So am I right in basically saying that as LUNA is going up and I’m buying LUNA as it’s going… Because I’m buying in both sense, both cases, I bought the shit out of the dip and I’m now going to do the rebalancer, basically, to buy as we go up so…
Oh, by the way, the thing is something else to keep in mind with LUNA, always remember that every LUNA you buy is at least like 20% more LUNA you can buy on a dip using the Borrow, right. So one of my tactics all year or last year has been if I happen to time the price of LUNA wrong, who gives a shit, because then the price will drop, that’ll be the exact time when the bonded LUNA arbitrage occurs, I will convert to bLUNA, borrow off that bLUNA at the bottom, essentially, because that’s when those liquidations tend to happen, and then I’ll just get more LUNA using the borrow power. So even though I didn’t time my LUNA buy perfectly, the fact that you can borrow against it meaning what it does is it allows you to DCA in in the bottoms at the optimal time where you care, both when you can get the arb, and when you can get the cheap buy on the Borrow, right. Because if you’re going to borrow money the absolute best time to be able to get the buy is at the very bottom, right. And you’re much more likely to have hit it by that point, or close, at least.
So basically what I’m hearing you say is, one strategy that could work really well that I probably will try is DCA in via a rebalancer bot as LUNA’s climbing, and just hold that LUNA. Hold it in your wallet, maybe stake it on Stader something like that, where it’s very available, but don’t convert to bLUNA until things start to drop. When things start to drop, you can go into the UST-LUNA pool to kind of get more LUNA through LUNAomics’ way, or you can just hold that LUNA, progressively DCA in more like how you do with that exponential DCA strategy, and then as things start to turn around, potentially, you can start to convert to bLUNA.
Yeah, or whenever. It depends on… Whenever you find a decent arb, do it. Or put it on Miaw Trader and put a limit order in and convert it. It depends, if your intent is to borrow off it, then this is the way to do it. If your intent is to sell LUNA on the way up, then obviously if you arb it you have to burn it again first and all that. So that takes time. So just some things to think about. But you can also find bLUNA… Sometimes the bLUNA arb is better on Astroport, sometimes it’s better on TerraSwap, sometimes it’s better on Loop Finance. Sometimes you can get the LunaX arb actually. So sometimes if LunaX is 2% cheaper you can get that. And then you can burn it in Stader instead of on Anchor. You can’t borrow off your LunaX as of this moment. Although you can do that delta neutral Mirror strategy. Once you can borrow off your LunaX, then it becomes less of a concern which one you get, whether bLUNA or LunaX. And then when you can borrow off of your yLUNA, that’s a whole nother ball of wax, right. So we have some cool shit coming where that becomes a possibility. So then you don’t really care which one you get. You want to arb for the cheapest one possible and then borrow off of whichever one you have the greatest collateral power from, whether it’s pLUNA or whatever. And you’ll have all sorts of tactics at that point, but basically any LUNA you have is an easy 20%-30% extra LUNA.
And in fact you can go max out your LTV at bottoms because once price of an asset… Well, in crypto once you have fallen 40%, and if you go to a 45% max borrow off that new bLUNA that you just got, then your odds of actually getting liquidated become much lower at that point, right. So you can actually get more bLUNA, but off the LUNA that you just converted at the bottom, and not be concerned so much about a LTV problem or whatever. And you can reprovide that bLUNA too, by the way, to sort of lower your LTV even further. So just a lot of…
Yeah, lots of cool stuff.
So the take home message is, think about your borrow power potentially as… When you’re buying new LUNA think about your new LUNA as the borrowing power being a way to take advantage of the next dip, if in case you… The dip that keeps on dipping or whatever. And that’s another…
So real quick, have you heard of anything about Pylon offering any sort of PRISM tokens, or any sort of presale vesting thing that they did with some other protocols? Or is that not happenning?
Prism, I believe, was going to do something there. I don’t know if they’re going to now or they’ve nixed that idea. Because it used to be listed on Pylon. But yeah, so I’m not sure. I think they went with that… Ultimately that Mango Markets concept of selling PRISM tokens and such. Then they’re going to have some refracting, community farming type shit going on, which would probably be worked out pretty well too. So yeah, you’re going to want to have some LUNA in the open in order to participate in this. So I have a lot of LUNA coming out of burns personally, bonded LUNA that I’m burning back to regular LUNA that I arbed, and I’m waiting for that to all be released. But I think my biggest pile comes out January 16th or something like that. And then I should be right on time for whatever the hell… The whole Prism shenanigans to begin. But at the same time, the first part of the Mango Markets for Prism, you’ll need mostly UST actually. So my hope is by that point, LUNA’s price goes up, I can use the money I have sitting in Anchor Borrow, and then buy a bunch of PRISM tokens at that point, and kind of go from there. So we’ll see.
So the perfect timing would be if between now and Prism, the next few weeks, we have a mega move in LUNA, that would be the perfect timing because then my borrow power is maxed out or it’ll be very high. And then probably the new floor price would be for LUNA above $100. That’s just usually how this works. And then I don’t need to worry anymore about LTV from where I’m at now. And then I can just buy a shit ton of PRISM token and call it a day. Just go to the Mango Market and just go apeshit or something. We’ll see.
Sounds good to me.
I’m just basically planning that whole thing out a little bit in my head, but it just depends on the price of things at the time.
Yeah. Well, thanks as always, Cephii. Thanks for answering my questions.
Yeah, no problem. Yeah, have fun. Hutch, what’s going on, man? Hutch, are you there?
Hey, did you guys cover LunaX yet? The Mirror Protocol? Did you guys go over that?
No, we were mostly just talking about borrow strategy. But yeah, the LunaX delta neutral strategy, you’re going to be able to use your LUNA basically as collateral the same way you use aUST as collateral to do the delta neutral strategy on there. People like that kind of idea.
Pr any strategy, that’s what I was saying. I wasn’t so much thinking… I was thinking of delta, just take away the neutral, just whatever, it just kind of opens up. I mean, my understanding, and I wanted to ask this because correct me if I’m wrong, I think we only get triple duty on short assets. So if I post LunaX as collateral, and borrow an asset, I can borrow any asset, but if I go long, I’m borrowing the asset itself, and I have to pay the asset back. So there’s kind of no point in that. But if I post a LunaX as collateral, borrow an asset, instantly go to TerraSwap and sell it. Now I have triple duty in that I can use that UST for whatever I want. Or I could swap it for more LunaX and loop it or whatever. But I get that triple duty effect. And so it’s just another dimension of a loan. It’s just a perpetual loan at 1.5% for perpetuity, it just cost you 1.5% to close out the position, but you need to pick one that you think you can buy back cheaper. Am I thinking of it correctly? Like long it won’t work, but short it works?
Yeah, I mean, it should be okay. It depends on… Yeah, it totally depends on what you do with it. Yeah, but there’s should be some… But these are more slow growth strategies, right. The reason why I’m not messing with the Mirror farms, personally, at this moment, is because I think the nature of where LUNA specifically is, I think the vast majority of people are going to probably just want straight up LUNA exposure in the grand scheme of things. I think all of the other pool… I think a lot of the other longer term phenomenon, where you can… The slower growth strategies probably are going to be much more super important to us a couple years from now, when…
Yeah, near the top.
Well, no not just near the top, but when a serious portion of the rapid… We’ve squeezed a lot of the honey out of this ultra… Maybe at cycle four peak, and LUNA’s sitting there in the $2,000-$5,000 range, somewhere… In that range. And at that point, you’ve squeeze the juice out of the orange or whatever. And now you’re looking for all sorts of ways to like improve your yield output.
Totally get that. Totally get that, but try this on for size. So my S&P video is kind of a slow growth, because it’s via UST. But the video that gave me the idea for that was Dr. Cleans. And in his first video, it’s all done via phone and he’s kind of going really quick and I had to watch it three times. And he did it with silver, so it was a turnoff to me because I wouldn’t short silver with your money. [chuckle] I just get afraid to just get rekt. But the way he’s doing it is he’s not using UST at all. He’s using LUNA as collateral, borrowing silver, selling the silver… Not selling, excuse me, going to TerraSwap, put the silver and swapping it for more LUNA and then looping that six times. And so he shows that he basically gets, basically 150% exposure to LUNA, to his original LUNA stack. And there’s no Anchor loan involved.
Interesting. So if you’re at 150% exposure then you don’t even really have any serious liquidation risk at that point. Because even if you got liquidated, you’d be ahead, right?
If silver moons and LUNA drops simultaneously, you’d get screwed. And so that’s why I kind of like the S&P because I think there’s a little bit of correlation there. I think LUNA is going to moon, as a pairs trade even if you were both long, LUNA is going to outperform the S&P. But if the S&P gets rekt… And obviously yesterday with the little head fake, we’re gonna be bullish for a little while longer. But at some point, we’re gonna have to pay the piper. And when it does, I’m concerned that the S&P is gonna take everything down with it. So I have that on with aUST, and that is kind of a slow growth. It’s really just kind of an aUST farm for me, where I might get a windfall if the S&P goes down. But I’m thinking now with LunaX, and starting yesterday and then today when Do posted his thing with the, whatever, the little Venn diagram thing, I was like, “Oh, shit.” Whenever Do posts these things, we just go crazy. So I all of a sudden, just… I was like, “Okay, I was waiting for a dip. But I don’t think it’s going to come, I better just get in here.” And so I was thinking of swapping my LUNA to LunaX, and then doing the looping strategy, even for more LUNA but it’s not live here on on Mirror, but that’s why I wanted to run it by you guys. And so I’m wondering if I go long… I’d love to be long gold, there’s mIAU. I would do that, I would post LunaX as collateral. And I would use that to borrow gold and I would just be long.
Got it, yeah. Oh, your mic’s cutting out, by the way. But yeah, I think I see what you’re getting at. But yeah, I’m gonna watch that video specific to the LUNA looping strategy. I wanna review that and see what he’s doing. Because that might be another way to use the LUNA you have, and then get more LUNA, particularly might be another bottom buying strategy. Or once you’ve had good corrections, that might be another way to expose yourself to relatively minimal borrow risks, but then get some loops of extra LUNA and such. But winter, did you have something along these lines?
Not specifically, I just wanted to touch on the DCA, on the dynamic DCA and whatnot. And I while I realize your strategies are quite sophisticated, and probably perform tremendously, the studies I’ve seen of DCA and even dynamic DCA showed that over periods of time where the asset rises in value you underperform, because you’re never going to get as much value out of it as if… If you have the money, you ought to put it in that asset right now. Because take a look at Bitcoin, if you bought $5,000 in 2009 it’s way different than spreading that over 12 months, 24 months, whatever.
I think it depends also on your… It certainly depends on the asset. So for Bitcoin’s example, you have something that is a… Just constant extraordinary adoption grade growth… You basically have access to growth, a viral growth of something that grew with the speed and the size of the internet, or whatever. And you’re getting direct value from that, not like buying Facebook stock or something. So the opportunities where that’s the case are not very high in most asset classes, because in many cases, you’re buying shit with a lot of… Like IPOs, where the VCs, or whatnot, own 90% of the thing in the stock market. So I think it really depends on what one is talking about. But yeah, in the crypto space in particular, I think you tend to be right in that something like LUNA, that’s what I was mentioning earlier, if someone’s not sure, but at the same time they’re kind of inexperienced, and they’re not sure what they’re gonna do if it dips and like, “Oh my God, you rekt me because I put my… You’re bullish on LUNA and I put my life savings in, and it dipped 40%, and now I’m upset.” The main thing is yeah, as long as you have the confidence to understand that that volatility is good, and it’s gonna basically… The price will go up eventually, then you’re right, you probably make out better generally by just buying all at once and be done with it.
Yeah, the studies of every asset that I’ve seen listed, I mean, and there’s studies of Bitcoin, the US Treasury bills, gold, a mixed portfolio of 60% stocks, 40% stocks, 100% stocks, all US stocks, consistently, DCA underperforms over periods of time.
And the reason I mentioned those tactics is because unless you are savvy enough to understand the volatility, then a lot of people fuck up and buy the… They sell the bottoms. Because clearly people are selling the bottoms otherwise we wouldn’t have someone to buy from at that level, right? So there are bottom sellers out there and clearly they’re getting themselves rekt by doing the wrong thing. And that the DCA and dynamic DCA advice is the more capital conservative strategy, I would say, versus what winter’s saying which is just go all in and just screw it, just let it autocompound. So when when LUNA was about $63, I called my cousin up and I’m like, “Okay, looks like it’s time to buy LUNA again, my portfolio is in the dumpster.” And he’s like, “How much should I spend? I’ve got all this money in Anchor that I parked there waiting.” And I’m like, I don’t know, “I’d probably just dump it all in there.” That’s exactly what he did. So he didn’t have to do any kind of special strategy, he was able to pick it up, because I just told him when to buy it. He just dumped his bank account in and that was the end of it. So he had well ahead now already, on a buy that was a week old. He’s probably outperformed most hedge funds in one week, right. So the reality is yeah, if you get the timing right, you can work out really well. But it’s really hard to… You could also have bought Bitcoin at $18,000 and then rode it down and sat there for several years as well. So I think it really depends on people’s…
There’s a lot that can go wrong in a sense that the timing is gonna affect different people different ways. So as long as people have a long time horizon, what winter is saying is probably true a lot of the time. If you’re worried about the short term horizon, like you got to pay your mortgage or something, well, don’t go put it into something that you have to sell it. So the other thing too is part of the reason why I covered dynamic DCA and dollar cost average is because when you’re borrowing money, like for example, on Anchor, you don’t necessarily want to get rekt to the point where you just have a loan that keeps rising in value in theory. And to be fair, Anchors borrow’s pretty cheap. But let’s say you were rekt with a borrow and you’re not making any cash flow, then you’re losing even further opportunity cost. In those circumstances, having automated financial products on-chain that allow people to take their borrow power, still be sufficiently liquid to fix an LTV, that’s where the dynamic DCA/DCA discussion sort of came from. It was really about borrow strategy where you don’t get rekt on liquidations as opposed to maybe the most lucrative strategy you could ever have in the universe, which would be to buy a perfect bottom. In fact, the most successful thing would be, you not only picked the perfect bottom, but you put a 10x long on BitMEX, and you just owned it. But you see the problem with doing that is that it becomes more and more risky with your borrow power in a sense. And especially for amateurs that don’t know what they’re doing, that’s a great way to ruin your portfolio.
And the reality is all of these techniques I’ve been mentioning are pretty good in accumulating wealth over a long period of time. If you’re willing to be at least reasonably patient within a few years, you don’t have to try to win the lottery immediately, you can do really, really well with most of what I’ve talked about today in a lot of different asset classes without losing a lot of sleep, is what I’m getting at. So the dynamic DCA is the ultimate… Let’s say for example, you throw $100 at something and the thing just goes up. That’s the reason to have portfolio diversification in my opinion too, though. You want things that will go down so that you don’t have to necessarily chase the one thing that’s going up. If you have other things that are going to go up but they’re down simultaneously, price exposure really helps you to buy the dip in something as opposed to chasing the one thing you think is the next Messiah or whatever, whether it’s LUNA or whatever. So that’s another way not to get rekt is find something falling not going up. But ML you had a comment?
Yeah, with with all these bLUNA peaks above 1, are you still burning bLUNA? I mean, I would think in that 21, 24 day period, you could set a limit sell on Miaw and get rid of that… Convert that bLUNA over to LUNA a lot faster, maybe even at a profit. ‘Cause, I mean, on TerraSwap, it’s been hanging out. It’s been peeking above 1 every day, multiple times.
Yeah, I did not do that. I probably should be doing that though. Where you take the 1% arb and then even if you took a little bit of a hit on it, you just keep doing it over and over again. But the thing is, I’m not too worried about that right now. And the reason is because once Prism comes out, and Jimmy builds me the right arb bot, the reality is that I could just make money 24/7 on arbitrage trades on those things on just the price volatility arbitrage, right. Because now, what’s beautiful about Prism is you’re going to have an even more price volatile LUNA than LUNA itself in the form of the pLUNA and yLUNA arbs. And you’re going to be able to do all sorts of wacky bots with that and then basically just make the arbs between those different coins and not even have to worry about the bLUNA-LUNA, right. Because at the end of the day, you didn’t care how much yLUNA or pLUNA you had, you’re just fine buying the dip on either one, you could just do a yLUNA-pLUNA rebalancer, or a yLUNA-pLUNA… What do you call it, a LP or something like that, and the constant price movement back and forth, and all the buying and selling back and forth, will not only get you a lot of LP fees, but you’ll also get, let’s say for example, on Astroport, you’ll get the the secondary the fees for that, you’ll get the PRISM tokens or whatever for the LP provider dual rewards.
So pretty soon, some of these other previous strategies will be eclipsed substantially by things with a lot more volatility and a lot more liquidity. The problem with the bLUNA-LUNA arb is, with enough people participating in it, what you’ll notice is it gets narrower and more narrow. And the more people that are using Miaw Trader, the more narrow it becomes to where it becomes like everyone’s frontrunning each other and that’s all there is. But when you have an asset class that is essentially volatile 24/7 no matter what, then you can just basically build an arb bot and just keep having the thing buy and sell non-stop, which is very exciting. So for example, what would be an interesting build would be have a yLUNA rebalancer against a LunaX, both of those… If you could get staking rewards for LunaX, I don’t think you can get LunaX… I mean, sorry, yLUNA in your wallet. But you could be getting staking rewards on the one side, and then getting the arbitrage between all of the yLUNA price variation that’s gonna vary differently from the price of LUNA itself, right. So you could create just nutty bots that just keep buying and selling back and forth, and make a shit ton of money with that. So I think Jimmy is gonna work on something. He might release it to the general public. Because those type of bots actually, it doesn’t matter how many people use them. They’re still lucrative. So it’s not like if you give away the secret, you’re screwed or something. So that could be very interesting.
Yeah, and I mean, now with Astroport. And now there’s multiple DEXes, multiple pools of liquidity on the same pair, I mean, there’s opportunity all over the place. It’s just the bLUNA-LUNA is almost 0.2%, 0.3% difference right now, just between the two DEXes.
Right, exactly. So there’s those arbs too, in theory. Although the problem with trying to play the arbs between two DEXes tends to be… There’s just too much slippage between AMMs, if you’re talking about any serious amounts of money. You want… Volatility arbs actually don’t really play too much on the like… Yeah, it basically has the same philosophical principles as grid bots. The beauty of having multiple forms of pLUNA that you can arb against each other is, all of us want more LUNA. We don’t want to be in a rebalancer with a bunch of other tokens, a lot of the time. So this way, you have multiple ways of having price exposure to things that are moving in different directions. See here’s the thing, the intuition goes something like this. If yLUNA is going up, pLUNA probably has to go down. Why? Because ultimately, the approximate price between the two should be approximately the price of LUNA, right? Because in order to go back to LUNA to derefract, you have to have one pLUNA, one yLUNA. But imagine if there was a time where pLUNA is more expensive and yLUNA is more expensive than regular LUNA. That’s a perfect time to refract it and then sell both your pLUNA and yLUNA, but simultaneously, and then just like buy regular LUNA again, right? So now you’ve made an arb of that price problem. So what you’re going to see is all these crazy arbs, and then all those arbs are going to create volatility between the yLUNA-pLUNA pair, so it’s just a cyclical stupid volatility machine and you just try to make money off it just 24/7.
Basically what you’re saying is it’s about to get crazy.
Yeah, it’s about to get really sweet I think. My theory is, is that… Yeah, and then you have yATOM and pATOM, and this kind of shit coming out. And then you can really do some wild stuff, right. Once you have the proper either protocols or bots that can just play on this volatility, it’s going to be pretty sweet. I think those are going to be much more sustainable arbs and sustainable opportunities compared to what we’re used to right now. So Prism to me is… That’s some just some internet magic shit, right, that’s pretty awesome. That’s how I look at it.
Let me know where the fund is to fund the arb bot and I’ll throw in.
Yeah, we’ll figure it out. I think Jimmy’s gonna create something pretty simple. So I want to hear what he has to say. Yeah. Hutch, did you say something else?
No, I just wondering where you guys lost me. I was blabbing about LunaX.
Somewhere in the middle of that, yeah, I don’t remember.
Thanks for checking out another episode of The Ether. That was part one of a two part Cephii Space, Anchor Borrow Strategies for LUNA Acquisition. Today’s episode of The Ether is brought to you by Orbital Command, a community validator on Terra dedicated to educating, expanding, and promoting the LUNAtic community. Find out more at orbitalcommand.io. TerraSpaces appreciates their support. For terraspaces.org, I’m Finn. Thanks for listening.