Hello and welcome to The Ether. Today is Monday, January 24th 2022. This episode of The Ether is brought to you by WeFund. WeFund is a community crowdfunding cross-chain incubator on Terra and is the first launchpad that implements a milestone funding release system to protect investors. All money raised for projects is deposited in Anchor Protocol and is refundable, and all decisions are based on community voting power. WeFund is community focused and designed to be a user-friendly experience for both project creators and investors. Be sure to follow them on Twitter and join the Telegram for more information, links in the show notes and check them out online at wefund.app. TerraSpaces appreciates their support. Today on The Ether, we have the LUNA News and Trading discussion. It’s a Cephii space, let’s take a listen.
Atlo people. I don’t know if anyone was in on that or has any opinions about that whole thing. Basically, Atlo is another launchpad system, sort of like StarTerra and Pylon and such. I think there is an issue of timing, like some of the speakers had mentioned, where there is a tendency for these type of things to be more popular during more bullish phases of the market, where people are replete with leverage that’s available to them, and then kind of ape into a bunch of stuff. This also comes on the tail of Prism announcing today that they’re going to delay their launch by about a week, mostly because of community feedback relating to people shuffling the deck a little bit regarding their leverage and their available capital. And Prism obviously wants to be successful in terms of, I guess, raising as much activity and capital as possible. So they kind of pushed their launch back a bit. I’m not really sure that I agree with these approaches where you try to time the market. The public is already sort of speculating a bit in terms of price action. I don’t know that it makes a whole lot of sense to try to time the market regarding launches and such. When the markets really hot it’s actually more likely that investors going to get wrecked if they buy high, compared to when the market’s doing poorly when you might get a lesser… Let’s say, Prism or whoever is less successful in their initial raise, it’s still the same problem where you get a really hot market and it crashes after you buy, it’s kind of annoying too.
So I don’t know, we’ll see how that all goes. I’m still not sure how many launchpads we need on a particular ecosystem, I guess Atlo would be number three. They’re bringing to the table I guess some sort of participation metrics, where people that are early investors and participating in voting and this and that can get greater allocations. I think the more complicated you make these things, I don’t know that you necessarily increase participation though. You might get more quality investors, but I think the people that are most likely to manipulate the system are also most likely to game the system during those activities as well. So I don’t know. We’ll see how it plays out. Maybe someone here can comment about whether… What their experiences with these launchpads and whether you like them or whatever.
Let’s see other news… I was just kind of looking at, in general, the Twitter sentiment regarding crypto, and also looking at world news and stock news and kind of seeing what’s happening overall. The narrative seems to be that there’s general liquidity tightening, uncertainty in the markets regarding the Ukraine and other global activities, that these things are going to have a downward pressure on equities markets, and maybe crypto markets. They’re a typical comparison that’s made to, say, Bitcoin and capital markets and the fact that they’re not always uncorrelated. Although the correlation tends to be episodic, for example, in the March 2000 crash of BTC with the stock market, and crypto crashed all at once. Some of that was related to Bitcoin mining and uncertainty regarding that as well. It’s not really clear to me exactly what happened this time around. Sometimes the opposite happens to what you think will happen in terms of whether crypto becomes a flight to safety, BTC, Ethereum, being sort of the big players, whether they have a rally as a result of that kind of flight.
Hard to really say, but we do know that a lot of the leverage in the markets comes from large accounts that hold BTC, Ethereum. So there is a sort of cascade effect of market correlation based on those two large liquidity pools essentially. So you’re not going to get to a situation where your coin just goes up and down completely 100% independent of the rest of the market, unless there’s something very, very decorrelated about your particular investment, like for example, if you’re shorting the market versus longing the market, that could make a decorrelation. But outside of that, I think crypto is going to stay relatively correlated, and it’s going to stay that way for a very long time. I kind of always looked at BTC and the remainder of the crypto space as really just one big coin, to some extent, the correlations of strength, I think, you’re going to have… Some coins are going to decouple from others, which we see all the time. But I don’t think that that’s necessarily going to be the case all the time. It seems like the social metrics, in terms of engagement of various coin communities are usually at their worst when the price is at the bottom, and at the highest when prices are at the top. This plays out in Google Trends it plays out in LunarCrush’s measurements of like Twitter activity. You see it in YouTube channels that are related to crypto where the number of views and the number of likes really substantially drops during bearish conditions.
There’s really just this heavy social correlation with price. I mean, people just get really depressed when price is down. They don’t hold Spaces like this as much, they don’t tweet, retweet, share, etcetera. And it’s interesting, the psychology of the market sort of plays out the same pretty much every time. You can pretty much set a clock to all of that and really start even buying at those levels. You look at some longer term metrics for coins that have a little bit more price history, for example, using things like the 200 day or the 350 day moving average, you can pretty much look at any coin where its price is below the 350 day moving average as a potential buy if someone’s interested. But of course that you don’t know how long the down market would last. So your time horizon is really important as far as buying strategy.
There are at least a dozen coins out there that look like they’re just fundementally worthless, in the top 100 as well. I think those will just continue to fall apart over the years. So those coins do represent a variety of liquidity pools that people are going to exit to move into other coins to rotate. You see some of this happening already with some of the old proof-of-work chains. You did have some pumps during the bull market for things like BitcoinCash, Litecoin, for things like Ethereum Classic, EOS, things of that nature. But really, there’s just almost no excitement behind any of them. No one’s doing anything really viral with any of those things. Social media has really limited to no commentary about most of them. And really, almost nobody’s pitching them. So they’ve really lost any kind of social momentum. And I think it’s just going to be a drag on those, even when I consider them for trading instruments, like what happens if you just use them for volatility arbs or something like that. It doesn’t even make sense really to use them for that purpose, barely, because if they’re going to go down long term, then you’d be stuck holding that bag, even if you’re trading it for price action.
So anyway, if you hold those things, I’m not trying to FUD your bags too much, but they look pointless to me. So I think going forward the next couple of years, the markets maturing from a few coins that just existed because they could, essentially Bitcoin copies and things of that nature, kind of pretty easy to create. Those things still have a fair network effect, though, there’s miners involved, the network’s not going to just die from any of those things. But the growth potential from a price perspective seems super dubious to me, so I tend to steer clear of all of that at this point. Especially on a down market, I think you’re noticing that the like flight to quality has already begun with particularly LUNA and ATOM, preserving most of their gains for the last year. Some of that could be driven also by the incentivized AMM, which is Osmosis, which is sort of helping that situation, anchor is helping the situation. There’s a lot of sort of catalysts in a way that a lot of other chains don’t directly have that do help. But looking at the coming year, I think the flight to quality is going to accelerate. Really anything that you can’t identify a large addressable market for, which doesn’t spread virally is going to be questionable in my view.
One of the ways things grow, not just in transactions on the network, but also they grow from the perspective of just social interaction is things with lots of great projects being built. So Solana had a nice heyday with the activity from the NFT’s on Solana which became, of course, super popular along with Ethereum NFT platforms, they rode that cycle of hype quite a bit. Now with things like Solana having some technical difficulties in terms of network congestion and other problems, they’ve been punished a bit. Avalanche also has been punished quite a bit in terms of drop from all time high. I again, think that has something to do with concerns or indirect concerns that they’ll have similar problems to Solana as far as scalability. We’ve seen like descriptions of where Avalanche gets super busy, and the transactional fees in the network, which are paid in Avalanche, can actually increase during times of major network congestion. So there’s scalability issues all over the place.
Terra, I think has been helped ever since Columbus-5, and anybody who’s here before that knew that when you had really, really busy market days, we would have issues of congestion, especially on primary nodes and some of the heavier validators and such. Follow up to that after Columbus-5, I think we have way less problems during market congestion. We do have the advantage that our fees are paid in UST. UST fees are relatively lower even after Columbus-5, so the taxes have gone down as well. So transactions are still relatively cheap. And we haven’t had a report back from TFL or Terraform Labs regarding Project Dawn, which is the investment by TFL, where essentially LUNA is sold every month, and that money is used to presumably help with development, paying for increased transactional speed by paying for network power. We haven’t heard like a real update on or transparency as far as what’s happening with that money. Technically speaking, it’s TFL’s money, they can do whatever the hell they want with it. But they had mentioned that there was going to be some transparency around how that’s used, how that benefits the Terra community, and such.
And then, of course, there’s this LFG pile of LUNA that’s emerged in the liquid LUNA pool. It’s not being sold, but I don’t think it’s staked either at this point. So it’s not generating any revenue for the LFG project. My presumption is, is that at some point that’s going to be the case, either some will get sold, or some will be staked for maybe the UST yield or something in order to perpetually supply that project with cashflow and revenue. Again, that’s my speculation, I haven’t heard anything. I don’t know if some of the other folks on the chat here have heard any alpha regarding that, feel free to chime in. Excuse me, just had a little coughing to do there. Lucky, did you have any comments? Questions? Theories? Yeah, go ahead.
Lucky Luciano 17:15
Yeah. Can you speak a little bit to… I’ve been noticing you’ve been posting some charts on the strength of BTC and what you’re looking at, can you just share a little bit of what you’re seeing, especially with how the markets been and how LUNA is holding up and what your thoughts are around that?
Yeah. So historically with BTC, the price action as far as back to… Let me think here, it was around the bottom of the market, around January 2015 for Bitcoin was the beginning of a very long trend line, that the second… If you think of it like point A to point B, the second point of that trendline was the capitulation dump of Bitcoin in 2019, to… Or actually late 2018, early 2019, to about $3,000. After that, there’s kind of this trendline on the log chart that was kind of retested again around December 6th 2019. And then eventually, my concern at that time was if we dropped below that, that would make you pretty nervous. That was apparently the exact time in March 2020 where you had the pandemic dump, where mining pools sold off a shit ton of BTC and dumped the price down to around $3,845. I think I bought some at around $4,200 that day, or that week, or whatever, which is pretty sweet. But the same logarithmic trendline that was developed served as resistance on the way up around May 20th, as well as August 14th, and then once we broke past that trendline is when bullish conditions returned in earnest.
Typically, when you form a cup and handle type of pattern on a price chart, which was formed with the break of $20,000 Bitcoin, back in… Let’s see, that was, I believe, in December of last year, not this last year, but the year before. You had then, of course, a major upward move to… Of course our top was around $65k to $67k, that range. Wha’s pretty typical after a breakout from prior all time high, especially on such a long timeframe over several years is that typically the breakout is going to be approximately to the upside, as much as the downside was to the very bottom. So for example, $20,000, down to $3,000 is around, let’s say, $17,000. So you take $17,000, and you add it to $20,000, that gives you an approximate measured move, as it were, to around $37k, where the buyer who is buying at $20,000, which I did, by the way. I sort of bought the breakout, back in December, with a lot of money again, even though I did buy quite a lot under $10k with BTC the prior years. The reason is, because at those kinds of long term breakouts, the market’s made a decision. You’ve returned a prior high, Bitcoins not bullshit, it’s not a Ponzi, or whatever other BS people say. And it’s proven itself, in other words. So at that point, you went up to about $37k-ish. And we are sitting right now at about $36k. The market extended past that to considerably higher, it hit the appropriate 350 day moving average multiple that I talked about, that it should for this cyclical move, and then it’s sort of done it’s little pullback
Right now, BTC actually has fallen below the log trend line, which about… Some of the things I used to post years ago on StockTwits and stuff was that, once you go above the logarithmic trendline again, that at some point, you’re going to retest that line, and we are at that point now. Now, keep in mind, the log trend line is at an angle that has been preserved for a long time. And if you look at its trajectory, say for example, for January of 2023, it’s sitting at about, $85,871. So, assuming that that remains the mean value of BTC, I think it’s reasonable by the end of 2023, especially with a good solid correction, that you could retest that line, and maybe head above it. So my guestimation would be that you’d be at $80k again by end of year, something like that. And, basically, you… It’s hard to call the immediate price action in between and all the other macroeconomic factors. But that trend line has been pretty stable for a long time. And, unfortunately, on my little TradingView chart the trendline, it doesn’t… Let me see if I can get it to extrapolate, one second, so I can tell you where it would be in the future. Hold on, I’ve got to go to a weekly chart here. But if you just follow the log trendline, and if you’re able to maintain that out to, say, 2028 around October, that trendline if it were to sustain is at an obnoxious $8 million BTC.
So the issue there is that, is that even possible with the amount of money in the universe, with the market cap that that would entail, with essentially a substantial domination of a substantial portion of the M1 currency on float on the planet, is that actually feasible or not is a is a different question. So I think this log trendline, if we can continue up it, we’re really talking about 2024 $250,000+ BTC, something like that. But the way BTC works, because it’s functionally deflationary by nature is, it’s sort of a black hole in the economic world, in that it could actually go up a lot more than you think, assuming that it becomes more and more broadly accepted currency. I think it was Brazil or Argentina, I forget which one, recently announced it was going to, I guess, put some of its treasury in BTC or something. So there are more countries and probably some existing sovereign wealth funds that have already been putting some cash into it. So I think the market in general, long, long term, there’s not an obvious reason to believe that they won’t do well. But I think the questions around quality among a variety of projects are coming into question. Scalability on Solana, scalability on Avalanche. Bitcoin’s clearly scalable, although people worry about the suppose it energy requirements as well as the access to silicon and whatnot, if that’s going to be the big thing.
And even for that matter, Terra and such, a lot of great things going for it, but again, it hasn’t had a really heavy, heavy test of scalability yet. And those things are sort of yet to come, but plenty of room to fix most of those things. I mean, it’s computing after all, it’s not the most impossible thing to get to assuming that the valuations if things are going up, then people will come up with the capital to build out systems. I’m not too worried about that. But as far as… Sorry, what I was gonna say is, as far as the current market, as far as bottoms are concerned, for starters, below the 300 day moving average, or below the log trend line is, at least for BTC, a reasonable place for buys to be taking place. So I haven’t really bought much BTC… Bought basically none above around $42k. I think I threw a few pennies above $50k just for the fun of it. But at this point is where my bias have started to escalate for BTC. Around $42k, which was right above the log trendline, I started buying only because I figured it’s possible that it could be frontrun potentially, and price could rise and not necessarily drop below, it’s now testing below that. And it has not actually resulted in a serious cascade liquidations or anything like that, volumes been falling off quite substantially at these levels. So that could imply that sell volume’s dropping.
Some people have been looking for like more of a capitulation candle, like how we had in March 2020, that there’s like this massive dump, like a vertical down, somehow. And that’s going to result in cascading liquidations and a big spike in volume that’s going to detect the bottom. It might, it might not. I think if you have an exponential buying pattern like I do, there’s no way to lose, so it’s like, I don’t care. The lower things go, the more I get, it’s as simple as that. And it’s why you keep your day job. It’s why you have a strategy that involves crypto not being the only thing that you’re in so that you have enough cash to be doing these kinds of things. That’s sort of my take on it. But as far as how far the market can fall and whatnot, can you be absolutely certain about it? Of course not. But I am a buyer under these levels at this point, personally, but go ahead Lucky, sorry.
Lucky Luciano 28:21
Yeah, no, I think that all makes sense. It was a great explanation. I want you to touch upon then the other tweet that I continue to see you post is the burn mechanism on LUNA and how you’re seeing that play out in this long term.
So the the so if if you are an exchange or you are a DEX for example and you’re trying to accumulate UST liquidity for your systems, LUNA represents a pretty interesting way to accomplish that. I haven’t seen a lot of on-chain metrics in terms of who’s doing what, you see these burns but I haven’t analyzed them in any meaningful way to look at what they’re doing with their LUNA. Is this some larger funds that are actually maybe exiting LUNA to UST over an averaging period, are these people that are accumulating UST, are these users that are escaping to UST and so UST is being minted as time goes on, I don’t know the answer to that. I’m not sure which organizations or driving forces there are to the UST being minted. Do seems pretty confident for all the different reasons he probably has in the background for the growth of the UST. It’s a good 10% already, and it hasn’t even been a month in terms of 10 billion to 11 billion this year. And if we continue along that pace, there is going to be, obviously, a scarcity pressure on LUNA. But it’s hard to comment all the mechanisms because I don’t know if these same people that are burning to UST, are these folks that have been… Are they buying LUNA immediately and doing that? Or are they taking profit on LUNA and burning to UST and holding it? What’s going on?
If you’re a big owner of LUNA, and you simply convert to UST and hold it, you’re not going to create any pressure to… If you’re not dumping on exchanges, and there’s not a lot of excess UST, you’re not going to put pressure on the peg and you’re not going to wind up causing changes in LUNA’s price through reverse scarcity, like where LUNA’s minted. So I don’t know what the strategies of the different minters of UST are in terms of what they’re doing. And I think without really knowing that if that’s organic, or what the purpose of all that is, it’s really hard to make claims about what LUNA’s price is going to do or something like that, right. So I’ve kind of reserved judgment on that. But as far as the burns are concerned, obviously, at these lower prices a lot of LUNA’s burning. We’re talking about a million a day for the past few days, that’s quite a bit. And where do you get to those inelastic zones, where you start seeing it have an impact on price, who really knows. The scarcity mechanism has a long term effect on price, staking and the fraction of stake probably has an effect on price. But can you predict day-to-day what those prices are gonna be? Of course not. There are a lot of longs and shorts in the market and other things that sort of drive price up and down. There’s also a lot of rebalancer bots, i.e., algorithms, and all sorts of things that like drive LUNA’s price and correlate it to markets. So it’s hard to really tell but it’s a nett good thing. I think most of us would agree that you’re probably going to see a correlation with price because even if it doesn’t have a direct correlation, let’s say, UST becomes 20 billion market cap, right, and it’s really at that point moving up in the market cap ranks, it creates a tremendous amount of visibility.
So the beauty of LUNA UST is that itself advertises itself, because you have two ticker symbols, essentially, on the market cap. And when people flip down, they’re like, “Oh, what is Terra UST, and hey, what is LUNA? And how does this correlate?” The way I look at it is really the sum of LUNA and the sum of UST combined. So I think, let’s say LUNA’s market cap’s 25 billion plus the $11 for UST. So you’re probably at around $35-$40 billion market cap with the two of them combined, which actually puts us right after BNB in terms of ecosystem. The Binance USD coin is not necessarily tied to the BNB tokens, that’s sort of two separate ecosystems. But really, I would say our primary competitor, as far as chains is concerned, whether it’s in price or whether it’s just in network growth would be BNB, more than the others. There’s zero evidence that Cardano is accomplishing anything of any serious utility right now. There is not any evidence that XRP is doing the same. They’re both basically somewhat pointless at this point. And it’s just simply inevitable that LUNA passes those, all of those. I think BNB is the other one. I think we should be right up there next to BNB in terms of valuation.
Lucky Luciano 34:34
Yeah. BNB is around $60 million market cap.
$60 billion. Yeah. So we’re a doubling away from that, which is very, very feasible with sort of how…
Lucky Luciano 34:44
USDC is at $48. So we’re right there when you add those two, or right around there.
Yeah, sure. So I think there’s also sort of the global nature of Terra in the sense that there’s a lot of users all over the world. I’m not so sure there are a lot of users all over the world for USDC comparatively. There are I’m sure, but not… I would say globally probably Tether’s more popular. On things like Coinbase, for example, USDC is probably reasonably popular. But in the end game, I think when there’s a lot more robotic trading strategies built out for UST on places like Binance, places like Kucoin, etcetera, you will wind up with a lot more traded volume, which is pretty low right now actually on UST. You want to see that increasing over time as a good metric of real utility. So those things are coming, I think it’s just a matter of time. The growth has been really good, though. And the visibility in the marketplaces is great. I do feel like everyone should post more shit when the market’s down though. But that’s a double edged sword because let’s say you’re a YouTube content producer, right, you create a show and then if it doesn’t get sufficient views, then you’ve just sort of wasted your time, right. So there is this huge tendency for people, the audience, to show up when things are on the upswing and not show up on the downswing. So I don’t know that there’s a definitive solution to that except for content producers to just keep trucking on regardless of the price for the day.
Lucky Luciano 36:44
Yeah, I mean, I would say obviously we hold quite a bit of Spaces in our area. And I think one of the thesis we say is, the more onramp we see to UST as the future comes also is super bullish for this area. So we kind of touch upon the pros coming on the roadmap and having people see what’s coming with Terra LUNA ecosphere. I mean, is that a fair thesis as you look forward with especially UST?
Yeah, I mean, I think I’ve always felt like both LUNA and UST should be good choices for people. So people that want price action, store of value, deflationary tokenomics, and the yield, LUNA’s right there for you. And then for people that need that stablecoin exposure and yield, of course, you have UST. I was talking a little bit earlier with someone about the… What was I gonna say? Oh, yeah, we were discussing a little bit about realancer bots a little bit. And one of the conversations went around to some people see more benefit out of those if they have a lot of different volatile coins in there. But on the flip side, the problem is, is that, presumably, you’d always want to have coins that you have price exposure to with a really high upside, and, of course, the least amount of downside. So volatility is great, but you don’t necessarily want to own things that are going to go down long term in value, over a several year period for example, if you’re an investor. You want those things to theoretically go up if possible. Or if you’re going to get more of those things, when they’re going down, like in the setting of DCA or rebalancing, you’d want to have things that’s eventually going to come back up, right. At this point I’m not so sure I want to exponentially purchase Litecoin or something like that, for example. I just don’t know that it makes any sense.
So LUNA’s benefit is that it is a superior tokenomics model compared to the vast majority of things in the, perhaps, top 200 coins in the crypto space. There’s very little in that that I can… I’ve been waiting for someone to come on and tell me that something’s better. And so far no such human being has shown up to provide the better tokenomics. So my presumption is that because I haven’t heard of anything, probably there aren’t very many. So then you get that benefit. So you wind up with a scenario, which is good, which is, alright, you have an apex tokenomics scenario. You have all the benefits of the Cosmos ecosystem, so LUNA is a good play. And the better LUNA is as a play, the more attention it gets, the more people get comfortable with using UST also, right. ‘Cause a lot of people are in crypto not for stablecoins. They’re there for price appreciation, but stablecoin volumes tend to be very high in crypto markets. I think Tether usually has more volume than BTC, for example. So there’s a place for both, and I think both should succeed. And of course, things like Prism and such are bringing utility for LUNA on top of anything you might do with UST. So I think both are really cool. And the more things we can do to have reasons to hold UST as a long term investment, or reasons to hold LUNA those are both going to be value accretive to both systems.
Comparatively, you don’t need a very protracted presentation to explain why XRP tokenomics sucks, basically. There aren’t enough catalysts on Cardano to host a Twitter Spaces on it, honestly. I don’t know, maybe some of you guys been to Cardano Twitter Spaces to chime in on what they talk about. But I think catalyst-wise Cosmos seems to have, in my view so far, the most cohesive network effect, it has the most extensive number of catalysts available for price accrual over time. And I think the market is going to sort that out as time goes on. And that’s including the fact that ATOM didn’t have a lot of utility. And I know Sunny Aggarwal of Osmosis is talking about ways to improve ATOM. I know Do is interested in TFL supporting the Cosmos ecosystem with actual funding and such so that the Tendermint system can actually continue to grow. So at the end of the day, even ATOM, being inflationary, it’s maintained its value better than most of the coins in the top 100, I would say. So it had a nice bull run. It’s top was like $45, maybe. And I think it’s, what, running like $35 now, which is not bad. So that’s a really reasonable price action.
Lucky Luciano 42:20
Why do you think that? What’s your bearing on that?
Well, some of it’s because ATOM already had a deep correction. It was at $45, and it got crushed to $20 for a little while. So some of it is like the weak hands have been expunged already, to some extent. But there’s also, I think some of that could be Osmosis related incentives. So it’s pretty lucrative to hold an ATOM LUNA pairing, for example, at this point. If you had an ATOM LUNA pairing on Osmosis, I mean, you’ve done pretty damn well for yourself over the last year. So some of the catalysts for ATOM so far have been just the inflationary rewards, and plus it being the keystone of the Cosmos ecosystem. And then couple that with the fact that ATOM has been available on lots of exchanges for quite some time, well before LUNA became available. Especially in United States exchanges, ATOM has been really, really available which made it easy for people to buy it. So I think they’re sort of like the twin sisters of the the Cosmos, is kind of LUNA and ATOM. And then of course, ATOM and… I’m sorry, Osmosis and Juno are pretty interesting projects. Sunny with Osmosis and his gang are clearly very sharp people, and I think will bring additional value to… Indirectly bring value to Terra, to Cosmos and everything.
Lucky Luciano 44:00
Yeah, I mean, I have been in the Osmo space. I mean, I see what you’re saying. And that’s kind of my belief on what you’re saying, especially the team behind it. And the value that it’s going to bring to the LUNA spaces is why I appreciate it very much.
Yeah. So I think, over this coming year… And if you guys haven’t seen it already, Terra Bites also did do a discussion with the… I forget the name of the gentleman from Vertex Protocol, who talked about the kinds of money market development that’s going to be done on Vertex for Terra. I’ve never been a forex trader, never played with it, never done it. So I have the least knowledge about that. So I’m sure there’s people in forex that have some sense about it. But the way it was being described, it’s basically similar to Forex, but the advancement of the project looks like it’s pretty imminent to go on testnet in the next month or so, according to what he was saying. I think this was a week ago was the podcast and he said that it was a few weeks away from testnet. So that’s exciting. So I think, again, these are all big catalysts, if you have a bunch of people show up to play games on a forex-style exchange, you’re going to create more reasons for… Initially, it’s just going to be traders that are just screwing around. And you’ll have more reasons for LUNA to burn because you’ll need, potentially, more of the international stablecoins to make that system work. And then later, as you’d get a much better liquidity for the international coins, you could basically build businesses or larger applications on top of that. So clearly at TFL with their interaction with the city of Busan, with like Thailand, and all this, I think as they were sort of dealing with Chai, I think they’ve come to the realization that they just need to develop a much, much broader use case for the Terra stablecoin network, not just for UST. On order to make, one, a lot more trading volume on Terra, not just regarding those coins, but just in general, but also to be able to build international businesses on top of these coins.
Because there’s a huge potential application base there since nobody else is doing this, right. There’s nobody that has the international stables on the planet today. The possible market for that would be nothing short of a complete… There’s no question in my mind that if that could be executed at scale, then there is no reason why LUNA would not be second to Bitcoin, that Ethereum just holds no candle to that kind of power at this point. So Ethereum has its decentralized network and a lot of neat things going for it. But what an international stablecoin network can do is bring in market participants across the globe, in addition to the gaming Metaverse concept, all of that. Because you can create stablecoins of any kind, it doesn’t necessarily have to be a international stablecoin. You could build a lot of interesting things like video game gold, for example, could be a stablecoin of some kind. But basically, these kinds of markets represent the future of money, and I think Terra is really well poised. I don’t think any other system in the world today, in the crypto space has anywhere near the chance of getting to that scale that Terra has, there’s just no comparison in my view in that regard. So I remain bullish from that perspective as well. And of course, I’ve already said this type of thing before but I think the more and more people will realize this this coming year. I think the media will get more sensibility towards it. You have almost no coverage regarding Terra on traditional media at all. Even, what’s it called, Grayscale was just talking about adding LUNA to its potential holdings like they did. I think they were debating between Avalanche and LUNA or something. I don’t know if they’ve done that. But really, there’s not that much traditional finance exposure to LUNA yet. So there’s a lot of upside available. In other words, we’re still early. Let me get Ben on real quick, he was kind of here for a bit. Ben go ahead.
Yeah, no, thanks. Just as an additional catalyst, I don’t know if you’ve heard about ZK-Rollups and zkSync on layer two Ethereum. They’ve been slowly growing up the narrative in the last two to three months and they were only managing three pairs within the L2, zkSync and ZK-Rollups, for example is ZigZag Exchange is one of the two available exchanges under zkSync for ETH. And they have, of course, ETH, BTC, USDT, USDC, and DAI. But today they added three more… I’m sorry, four more tokens. And it was AAVE, it was Yearn Finance, it was LUNA, and it was UST, which blew my mind because I was like, “Wow.” I mean, being the first option since the moment that they were created, volume is crap of course. Right now there’s no volume but it was interesting to understand what the reasoning for that might have been. I don’t know if you knew anything about that. I see literally nobody on the LUNAtic hashtag or anything like that mentioning anything like that. And I just saw the announcement from zkSync and it blew my mind.
Yeah, I don’t know too much about that, nor do I have a good feeling of the driving forces behind it. Now keep in mind these days, the desire to bring in cross-chain liquidity is high, because essentially blockchains are cannibalizing each other’s customer base, so to speak, or user base to some extent or the other. So it doesn’t surprise me that any new chain would want to have UST on it. I know, for example, even Kadena originally made a tweet that they would, and then later added it to their official roadmap. And the alpha I got from the dev team is that for Kaddex is it’s not too far away there either. But as far as, yeah, and Ethereum… Yeah, the entire ZK-Rollup and all of the scaling measures that they’re taking, the typical question is, is that going to save Ethereum? Is that going to make ETH 2.0 amazing? And all these kind of questions. And where UST falls into that mix? Who knows?
Right, I just saw it from the point of view, okay, so if I try to mimic the same ETH to LUNA trade, it would have been $60 at these current prices right now, the volume is very low. In other days, it wouldn’t be $180, and I spent $1 for it.
Oh, okay, you’re saying is the speed and the transaction cost is knocked down.
And basically, it exposes a lot of people that wanted exposure to LUNA, to now have it on ETH, of course, it’s not native LUNA. But the typical ETH guys usually saying, “Hey, you know what, why am I going to migrate out? I’ll stay in Ethereum.” I’m guessing this type of protocol has to have native LUNA liquidity or is it just mimicking or mirroring or… Do you know anything about that?
No, it would typically be provided… Yeah, it would be some sort of native liquidity through a Wormhole or a bridge of some kind usually. Yeah. As opposed to… Well, there’s no mechanism to just, I don’t think, just simply mirror UST in the way that you think of it. But I think it would have to be a bridged UST for anyone to really take it seriously.
Cool, cool, cool.
But I’m not sure of the mechanism and the liquidity provider and all that sort of jazz for that. You telling me is the first I’ve heard about it. [chuckle] Mike, are you there?
Yes. How are you doing?
Long time no chat. How’s everything going?
Good, good. What you guys been up to?
Nothing much in Angel. Just chugging along, getting as much TVL locked for good as possible.
Do you notice that traffic to the site is substantially affected with market prices? I imagine it would be.
Yeah, we’ve been focused on organic growth. And so the things that we’re still doing are reaching our target audiences. Pipeline for charities is still growing, since most of that is word of mouth thus far. So all good on those types of levers to our protocol. We’re actually pretty… We weren’t really affected that much by the drop, since we’re just such a new and young protocol. So with our deterministic value of the token, we’re still trading a little bit below TVL, but I’m sure that the market will correct itself at some point soon.
Sure, sure. Any comments or thoughts otherwise?
Yeah, I mean, other than that, it’s just look at the amount being staked to the validator, look at the size of the Angel Alliance, understand that a bet on Angel is a bet on the Terra community’s altruistic powers. So that’s something, along with the moon, I wouldn’t want to bet against.
Yeah, I think any kind of altruistic activity indirectly creates kind of a goodwill, it creates a marketing power as well for the total ecosystem. Have you guys attempted to reach out to traditional media to get on TV and whatnot, or what’s your marketing theory there?
Yes. So so far we’re just been focusing on the v1 product so that the community can start donating to charities that we’ve onboarded. Once that’s available, we’re definitely going to be pushing out that message. Anyone can donate any crypto to the charities that are onboarded with Angel. But from that, I mean, what we’ve done with Restore Earth, what we’ve done with Project Mitch, there are definitely a ton of heartwarming stories that will be coming out of Angel Protocol for years to come.
Oh, cool. So there’s like… You guys might want to have something on the site where maybe charities that have benefited from it, or something like that could leave behind some testimonials or something, right. [chuckle] So people are like, “Hey, this is a legit protocol, and it’s helping people,” and whatnot.
Definitely, I mean, we’re gonna start reaching out to get as many testimonials as possible. We kind of just want to give everyone a fair shot. So with the v1 launch, every charity will have their separate dedicated page to explaining what Angel does to them. And the impact that it’s already created. And just getting those messages out is definitely top of mind for us. It’s actually been pretty funny since the hackathon that’s been our website. So we’ve been head down, hacking away at the actual platform, and haven’t been giving our homepage as much love as it should have.
That’s all right. But let me get Logan on for a minute. Logan, what’s up?
logan shippy 56:36
Hey, what’s going on, man? So that was Mike just speaking right, from Angel?
logan shippy 56:42
So I actually introduced my buddy Darren, who runs a nonprofit called Protect, which is ocean conservation. And he’s working with Angel, supposedly, now. I’m pretty sure right, Mike? Have you heard of his foundation?
Yeah, we talked to Protect a long time ago, I actually was the contact on that. Yeah, we wrote a charity highlight. We’ve actually sponsored a few of their coral reef cleanups. And yeah, they went ahead and did an NFT project as well.
logan shippy 57:16
Yeah that’s awesome. Yeah, it’s a small world. I know, when I reached out to Darren originally, he was like, “Oh, the guys, some of them are from Maui,” or something where he’s at. And it’s just really cool to kind of see those things come together. And also too, when it comes to PR, and articles being written, I have a software company outside of what I do with crypto, and we’re launching articles and it can be a struggle to find good trusted sources to launch articles on New York Times, and Forbes, and all that stuff. So I have some guys in my pocket that have really good pricing on articles and whatnot, and really easy to get them launched. So if that’s something that you guys are interested in, and just kind of getting that more traditional media outlet stuff outside of the crypto space to kind of get new eyeballs, I can totally be an asset and help you guys in that department. So if you want to just like shoot me a DM after this or something.
We’ll be sliding in the DMs. [chuckle]
logan shippy 58:11
Yeah. Yeah, ’cause I know there’s a lot of bullshitters out there that are like, “Oh, yeah, it’ll cost you five grand to get in Forbes,” it’s like, dude, what’s your cost on it? What’s real… You have a 500% markup, and especially if you’re dealing with charities that could actually make an impact, it’s like, where’s the homie hook up price? So, yeah, I’ve filtered through that and I have good sources. But on crypto related stuff, focus on price, Cephii. So my question is back in March of 2020, when we had that major sell off, COVID madness, etcetera, I’ve seen on Twitter, it’s like, “Oh, we’re at the same RSI levels.” And it’s like I almost have two conflicting things that I’m seeing where it’s like, “Oh, we’re in crypto winter, this bear market.” And then I have the other side that I see where it’s like, “Well, we’re at these levels right before Bitcoin absolutely mooned.”
Well, think about it this way, the way that the RSI sort of works is the fact that crypto sphere was able to make it to like 3 trillion market cap, or BTC was able to make it to $65k, let’s say, that just represents future potential. Because once you make it there one time, there’s no obvious reason why you can’t necessarily get there again, in other words, the proof of liquidity has already been established. This was true when BTC had a FOMO run to $20,000, and I was like, “Okay, well, it’s just a matter of time before it goes $20,000 again,” and when people say, “Well, no, it can’t,” well, I’m like, “Yeah, it can because it’s done it already, that’s how it works.” [chuckle] So if you look at just a simple metric, like what percentage are you down from a top, that’s not a bad way to start using a metric to see am I ready to start buying again. The more mature a market gets, the less likely you’re going to be able to get, say for example, a 99% drawdown on BT, right. It’s just improbable, there’s no obvious reason why that would occur. The lower the price goes, the more buyers you find, and then you bottom out at some level, and you kind of create some kind of rounded bottom.
On the RSI, if you look over the long history of BTC, there hasn’t been that many times when RSI has been as low as it is now. So in other words that is an objective measure of a substantial pullback. Or for that matter, when we’re now below the 350 day moving average. That’s a pretty good objective measure of a pullback. Does that mean, I know where the exact bottom is, or that you would? Not necessarily. For example, in the last few years, BTC had crushingly low RSI several times before it reversed. So you just don’t know how long of a timeframe the markets can stay down. So that’s why time preference matters. So if you’re a 10 year investor, and I think danku always mentions, he’s listening here, that he’s more of a longer term investor, then at that point the fact that price is down, you just decide for yourself do you get some more, do you allow your autocompounding LUNA to just keep getting you more LUNA, do you… How are you going to react to those different bottoms of prices, whether it’s BTC, whether it’s LUNA, whatever, it doesn’t make a difference. If you don’t have a plan of how you’re gonna react to those bottoms, then there’s no point in actually watching them. You might as well just turn your phone off and go do something else, quite frankly. [chuckle]
logan shippy 1:01:56
But what do you think on timeframes just based off of the maturity of the market? Because I’ve watched, for instance Crypto Lark, he had a really interesting chart that he had pulled up with tech stocks, with Apple over the last, I don’t know if it was 30 years or something like that, but in the first decade it was super volatile. And the bear markets would last a year or whatever it was, like longer durations, and then over time you see these faster wick up, and then a correction, a 50% still, but it would happen in a few months rather than two years.
Yeah, of course. That’s what’s happening to LUNA now, for example, the extraordinarily high volatility happens when the market’s less mature. And so that’s why volatility and growth are proportional, indirectly right. So if you were able to ride out Apple’s volatility in the early years, then you get to enjoy the benefits of the million percent gain or whatever it was that mean went up. So that volatility implies… Actually there’s two things you can look at, LUNA is a great example. It has the volatility, so that implies growth. And, two, it has traded volume that exceeds most other coins in the crypto space right now. So the volume gives me a lot higher confidence that there are buyers there. There’s a lot of LUNA changing hands, maybe from weak hands to stronger folks or whoever, or there’s just a lot of people playing… They’ve initiated bots and stuff to buy LUNA. Whatever the case may be, it almost doesn’t matter. As long as average volume is just rising, which it has been actually, it’s actually… We’re doing pretty well if you look at KuCoin volume and where it is. The combination of the two to me is still pretty bullish for LUNA much more so than the broader market. Just pull up a dozen coins and just look at the volume charts on them, like Bitcoin and you see what I’m talking about. It’s very impressive, isn’t it?
logan shippy 1:04:01
I mean, I had a couple friends reach out and they’re like, “Wow, LUNA’s the clear champ in this market right now.”
Yeah, whoever’s doing the buying and selling is clearly buying back. Galaxy Digital dumped they’re… Or Mike Novogratz dumped his coins at the top, these people are gonna be buying back. I don’t think they’re gonna be just watching this, wait till it goes down to $10, and they’re gonna somehow…
logan shippy 1:04:25
What do you consider, for instance, there’s pullbacks, and then there’s bear markets. So when you think of a bear market, what in your mind, what factors need to happen to enter into a “bear market”… The differentiators between pullbacks and a bear market.
For starters, the BTC ETH, or the general crypto bear market from 2017 and onwards, first off, as you’ve all noticed, nobody’s able to call the beginning of a bear market at the top of the market, right. If everyone could pick the top and sell, that’d be interesting. But few people accomplish that daunting task. But most people, if they want to take profit, they’re scaling out on the way up, they’re not guessing the exact top, it’s practically impossible. Even if you use my technique with a 350 day moving average multiples, those multiples are rising as the price goes up, they’re moving quite fast. So you don’t know the exact top. Was it going to be $45k BTC? $65k? Nobody knows for sure. So at the end of the day, if your intent is to exit, then exit, that’s your business as a trader or as an investor, or whatever, you do with your money whatever people want. On the way down, it’s the same story. How long is that going to last, and how long are things and drag on really depends. But in a market proceeding towards global viral growth and saturation, the so-called supercycle concept, supercycles don’t mean that the volatility is gone. In fact, you’re gonna keep volatility, the difference is, is that the length of those bearish cycles tends to shorten, right. And I’m not talking about the shortening cycles theory when it comes to return on investment. I’m talking about just the length and the depth of a bearish cycle. So for example, do you think it’s rational for BTC to go back to $3k? Do you think it’s rational for LUNA to go back to $5?
So that’s irrational, because basically, the number of people who know about LUNA now and the traded volume is substantially higher than it was when it was at $5. Some of the people in this room were there along with us when it was at $5 and have that dump and have been through that. And those of us who bought at $5, we’ve been buying at $50, $60, $70, $80, $90, $100. There is not a point which I have not been buying along the way up as well. So if it goes to $10, I’m just gonna go borrow money at the bank or whatever at that point, just go buy some more. So the price floor does get determined over time. And how long a bearish market lasts really depends on how badly rekt retail tends to get. So in the original BTC bear market, up to $20k down to $3k, a lot of retail investors sort of piled in near the top, in the $14k to around $20k Bitcoin, and they felt like they got burned by the fact that they had to ride the market down and a lot of people panic sold low. So they got rekt so bad, then you had a dead cat bounce, and then you had another dump, and then more people got rekt. So basically, you get a lot of retail rekage, you tend to drag it on a lot longer. If you have very quick corrections and retail buyers are becoming more mature about it, more people now know that, “Hey, by the way, if you just hodl Bitcoin, or whatever it is, you’re probably going to be fine.” And the ability to escape $20k was a hallmark of that, right. So more people now are like, “Well, I don’t want to miss the next BTC,” and if LUNA is the next Bitcoin or whatever, then they’re going to buy those bottoms more aggressively. So maturing markets, essentially, you’re going to get less deep drops, and you’re going to get less high pops in terms of…
logan shippy 1:08:33
Do you know what the total duration was of the past two bear market cycles? Have they shortened cycle to cycle, if you look at 2013, 2014, or whatever, when that bear market cycle happened in 2017?
Well, I would say the first decade has been just relatively mild adoption, though. We’re really… It’s still kind of technically “early”. We haven’t had the big massive move to $10 trillion BTC, like the gold market with ETFs and whatnot. So there’s still a lot of room to go. So I think what you’re gonna see now is more… My guestimation by the way, nobody take this as any kind of certainty, but my assumption is going to be that we’re going to have a sawtooth pattern of rapid corrections, with higher lows year after year. And it’s going to just climb that way over time. And the fact that all of these people are sitting in Twitter Spaces chatting about this now, and this was not the case in 2017 or whatever. We just live in a different world now where the spread of information, the speed of crypto-related knowledge, the possible on-ramps and off-ramps are just so much more. And also, we just have so many more utilities for our UST, for our LUNA and whatnot. This is not the case at all in those days of BTC and Ethereum, right, no one was buying anything with their Bitcoin, really. It was mostly a speculative instrument for a majority of people.
So the utility functions are emerging, they’re becoming much more interesting. And keep in mind, even for BTC and ETH, there are a lot more ways… Or for that matter, any crypto, really, you can find somewhere that someone’s gonna offer you some yield for holding them as well. This was not the case back… I remember when BlockFi and Celsius came out, that was the beginning of some of the more substantial lending and borrowing capabilities, and those elements also create holding pressure for the market and the bottoms. Because if you’re earning yield on your stuff, you’re likely to hold longer.
logan shippy 1:10:42
I can also imagine too, that… And this is the last thing I’ll say, because I definitely value your time, and other guests have questions. But one more piece of input right here is, back in 2017 bull run, how many institutions were involved? How many Michael Saylors? Maybe there were some kind of like low-key…
Or countries, for that matter.
logan shippy 1:11:02
Yeah, right. So then it’s like, alright, well, this cycle a lot of them were probably watching Saylor, and other larger institutions buy at $30 grand, and then they saw it run to $60. And they’re like, “Shit, I wish I would have bought at $35,” or whatever, “I missed the boat.” And now it’s back here, and I bet a lot of these inside conversations are going on, like, “Hey, probably now’s the time.” So it wouldn’t surprise me if what you’re saying with the sawtooth pattern happens, or it wouldn’t surprise me if we get to a certain point around, let’s say, $30 we kind of bottom, $25 we kind of bottom, and all of a sudden you just start seeing these massive buyers come through from institutions.
And keep in mind, institutions, by the way, have a slightly different paradigm of how they’re managing a balance sheet than, say for example, a retail investor. An institution is really interested in showing their investors that they are in the “green”, right. How do you show you’re in the green? In other words, they can invest in a lot of things, not just BTC, not just in crypto. So they are interested in a balance sheet that is in the green, and that they’re fairly liquid? Okay. These are the kind of features that they go for. Because otherwise, why would you go and stick your money in a hedge fund, if it can’t show some gains every year or something. They have to beat the market somehow. So they’re not interested in buying BTC at the “tops”, they’re going to want to buy below, say for example, 250 and 350 day moving averages. There going to be much more likely to buy at the bottoms. And there are definite… By bottoms, I mean, they don’t necessarily have to worry about if it’s a year or two bear market. They just need to know that they’re getting a value buy. And the perfect way to make a value buy every time is exponentially buying downward on price. So because you overwhelm all prior purchases, and you can start really small and not be very red. You get whatever bottom you can and the odds that you’re going to be in the green before too long is pretty good.
And I think that’s going to be how a country is going to manage their treasury. Most countries aren’t going to buy your $65,000 Bitcoin bag after you rode it up from $3k, right. We joke about that, but sovereign wealth funds and whatnot are not idiots. They’re going to basically have a lot of different things they can invest in. And they don’t need to walk in and just buy the top of something, right. They’re not even going to do a traditional DCA, necessarily, they’re going to do a Martingale approach with a logarithmic buying pattern because they know they can do well and have their balance sheet in the green at all times. So you can learn a lot from that, actually, as individual investors as well. If your goal is to basically have a green balance sheet, not necessarily the highest growth, you may choose to use that methodology. Let me hop on Forest and then Mandiv have real quick here. What’s up, guys?
Hey, I think actually Mandiv had his hand up first, or their hand up first.
Okay, go ahead.
Mandivs de’ Medici 1:14:10
Thanks, Forest. Thanks, Cephii. The guy from Vertex, I think he disclosed his name as D. I don’t know his full name. And yeah, I don’t know why he kept confidential and he didn’t share any information except he’s from UK or something. But I was trying to figure out why… This is the biggest market ever if it comes to Terra, as you mentioned, right, multiple countries, multi transactions kind of, currency involved and all that.
Well TFL is kind of is the one building this. It’s not some just random individual. So that individual may or may not be the only spokesperson for that and there are a lot of reasons why people remain anonymous, by the way. Especially when building something that’s built to change the entire nature of money. [chuckle] You don’t necessarily want to be known for that, necessarily. You may be perfectly willing to hide, essentially. So there’s nothing wrong with that, in my view. I think, if really at the end of the day on blockchain, if the protocol works as intended, and it’s transparent and audited and everything else, I don’t think we necessarily have to “worry” about that in the immediate term. I think when a project that massive is taking place, I do think they’re going to be really, really careful with making sure that it works as intended. If
Mandivs de’ Medici 1:15:52
I didn’t think that this guy might brought the project and accepted it, and now it’s gonna roll out. That’s what I thought, but it was, I think, different understanding on my…
Yeah, it’s a pretty substantial effort by TFL. I don’t know if this was Do’s brainchild or somebody else, the smart folks at TFL that kind of do all the coding. But it’s been in the discussion works for well over a year. I know I’ve heard Do talk about it here and there about doing this, right. Mike, you heard more about this?
I can’t say. [chuckle]
You can’t say or you won’t say?
Mandivs de’ Medici 1:16:34
NDA applies? [chuckle[
Nhen when SJ Park is intrigued by a team and helps them out, that’s all the verification you need. Obviously, it’s not a backing by TFL, it’s not a TFL project. But when they are standing next to them and retweeting and shouting, and excited with us all about this protocol, then you got to imagine the team behind the project. That’s all I’ll say.
Yeah. Okay. So it’s not directly TFL members then, is that what you’re saying? I thought it was but I don’t know why I thought that.
No, I mean, SJ’s taken a liking to the team.
Okay, okay. And SJ, he’s not involved with the actual development?
I can’t say, I don’t know.
Sure. Okay. This is a question for SJ, I guess. [chuckle]
Mandivs de’ Medici 1:17:27
You have to wait for four or five years, Cephii, at least. [chuckle]
I think you guys heard it on the podcast, but I think we’ll be surprised with how quickly it ships. And I’ll be pretty surprised by the amount of legacy institutions that will find this very valuable.
Mandivs de’ Medici 1:17:35
Yeah. 100 trillion and 0.1% of that 100 trillion, that’s what I’m focusing on. [chuckle]
Yeah, the magnitude can be, yeah, truly breathtaking in terms of scope so let’s see what happens. But let me get Forest on real quick. What’s up, Forest?
Mandivs de’ Medici 1:18:07
Just one quick thing. I was on a Space with, I don’t know if you know that guy, Lord, Bitlord. You know him right. He made billions in one of these meme coins. He’s from Australia or something.
Yeah. Okay. I know a little bit about it. Yeah, but not much but go ahead.
Mandivs de’ Medici 1:18:26
Right. And he tweeted about decentralize and we need decentralize… And I tagged you on his tweet and said, “Cephii, can you come to this Space?” I don’t know if you looked at it. But those guys there have really no clue about… Except Bitcoin. Maxis, they just focus on Ethereum and Bitcoin, that’s it. No other coins in discussion, nothing else. So I was thinking myself like, “Oh, we are way ahead, way ahead in this game.” When they learn about Terra ecosystem, it’s game over for them.
Yeah, I mean, there’s no question. Certainly a lot of proponents come in when they learn about the nuances of it. It takes a lot of mental effort to first learn about your own blockchain much less go to another one. So it’s a time consuming process to build the confidence, figure out what wallets you’re going to use and, I don’t know, there’s a lot of friction involved with getting from one place to the other, so that is a factor. Luckily, Terra is a lot a lot more frictionless than a lot of other places. I think it will be way more frictionless, especially for Western buyers, if there was easier on-ramps to getting UST to your wallet. That’s kind of still a pain in the ass, quite frankly, for a lot of people. And I think that’d be a great goal for this coming year if a lot of exchanges improve their direct native Terra UST availability, but…
Mandivs de’ Medici 1:19:47
I think I saw a tweet today from one company with a debit card and USD to UST conversion directly through some kind of platform. I forgot name, starts with A…
I think I saw it too. Yeah, I don’t know…
Mandivs de’ Medici 1:20:03
Yeah, I don’t know what they’re doing. I didn’t see much about it. I haven’t looked at their website too, but maybe it will come sooner or later. That has to be.
Forest, go ahead. Let’s get Forest on.
Hey, Cephii. Thanks so much for letting me up here. I really appreciate what you do with these Spaces. It’s really such a pleasure to hear smart people like yourself speak. And Mike also, just a little shout out for what you’re doing at Angel, I really love that. I wanted to ask you, in terms of being in the market now, and whether we could be heading into a bit of a longer bear or this kind of saw pattern that you’re talking about where we’re going to get a lot of highs and lows at a much faster rate than previously seen in the market. What are your thoughts between just holding, straight holding, and staking LUNA or being a liquidity provider? Because I’ve been a liquidity provider for LUNA and UST the past few months, and I had these moments where I’m like, “Damn, it’s at 100. I should have just held my LUNA straight.” And then other moments when I see it drop back down to $60, or $65, or whatever. And I’m like, “Okay, well, I feel so comfortable in my position right now.”
So as an LP provider you’ve probably benefited a little bit by LUNA’s price drop because you got more LUNA. The pool is going to shift more towards LUNA. Tt would not have been as good as had you just sold and bought back your LUNA, obviously, but it sort of mitigates some of that volatility risk for you, I guess. So yeah. Plus, you’re getting the LP rewards, which autocompound, so that helps also with downward or sideways market. So that’s all good. I think they’re just different styles of price exposure. I don’t do necessarily one of all the other. Right now I have about maybe 1/3 of my LUNA sort of autocompounding staked on Stader. Actually all of the rest of my assets outside of some of the small Terra assets, I have all of it in bonded LUNA at the moment. And the reason for that is… So when Lunas price goes up, I just borrow off it and park that UST and then as LUNA as price drops, I started deploying that UST to buy more LUNA. And I like the fact that when LUNA price is highly volatile and dropping, not only do I get a lower price, or I can play on Kujira and get some at lower price, but I like the fact that I can swap LUNA to bonded LUNA at ridiculous arbitrage rates of anywhere from 2%-3%, which are available right now. And sometimes I’ll just say hell with it, just buy a little extra LUNA just because I feel like it because I can convert it to 2%-3% free LUNA. So I love that arb anytime I can get it. Even if I have to go and add extra money and get the free 3%. I just look at it as an element in my DCA process as I’m acquiring more over time.
I look at it from the perspective of, “Well, a lot of people in the world didn’t get that 3% discount. And by paying attention to the arb rates, we become more fortunate in a way.” So it’s an opportunity I never had in lots of other markets, right. You’re sort of an insider here in the sense that you know what to look for, you can go and take advantage of it here and there, your DCA process is gonna be a little bit better as a result of that. The other thing is as LUNA’s price drops, the risk of it dropping further goes down, right, that’s just the nature of math. So the beauty of that is that at the bottoms if I use my UST to get bLUNA, I can get not only the nice arb rate but I can use that to manage my LTV if I want to. So right now, the excess bLUNA I have because the price went up again, is just sitting in my wallet earning yield. I don’t want to do anything with it right now. Because if the price of LUNA drops, I have it available to manage my LTV, right. So I’m not ultra degen where I’m borrowing to the point where I can’t manage LTV. If I took all of my LUNA and parked it in Anchor, my LTV would be $20 LUNA or something like that, would be liquidation level.
So unlike some of the people that are sitting there focusing on, watching that LTV every minute, I’m not really doing that. I leave a lot of leeway for mistakes. I tend to be, at least in Terra, I don’t want to make the mistake of losing any of my assets for any obvious reason unless I really want to gamble on it or something. But I don’t need to gamble that badly to do that. So I think by having bonded LUNA sitting there, it’s earning yield in your wallet, you claim it on Anchor Bond. If you need to use it to manage LTV, great. You give up the airdrops a little bit when you do that, so it’s not autocompounding in that respect. I didn’t go get any stLUNA yet, by the way, which I think autocompounds. But anyway, you have some options at that point to manage your LTV and to manage your assets, and have a cohesive way to buy the bottoms, right. Because the more bLUNA I have, if I get bLUNA at the bottom, I can technically, if the price drops even further, I can decide either to manage my LTV with it or use it to borrow more and get more at the bottom. Because the intuition would leverages it makes most sense to use leverage at the bottom, or the maximum deployment should be at the bottom because you’re trying to buy the “dip”. How low it’s gonna dip, you don’t know. So you just have to have an idea of okay, well, what is a scalable way that I can buy the dip bigger and bigger? And if I can’t do that, then what am I doing wrong, right. That’s all you have to know, right.
Interesting thing in Terra is all the opportunities happen on the dips, the arb is better for the LUNA-bLUNA arbitrage discount, the ability to acquire LUNA that’s not going to go down very much further is best at the bottom, the ability to use that LUNA to then go ahead and use it for LTV management is available. And if I have my UST parked there, I can just use that for LTV management. So if I really drop a lot, I just have my UST that I borrowed at the top, and I can just pay it off if I want to, it’s not a big deal. So there’s some tips and tactics you can play with to make sure you have the max capital at the bottom if you intend to continue to buy. If you’re someone who doesn’t have any more capital, and you’re just like, “Okay, I’m just gonna like autocompound stake this and call it a day,” that’s perfectly fine too. The autocompounder’s are actually buying the bottom too, right, because you’re basically getting paid in UST as part of your yield. And that yield is going towards, essentially, buying LUNA while it’s cheap. So the autocompounder is raking in more LUNA for me without having to do anything, right. That’s a beautiful concept that you don’t have to even touch it and it’s doing pretty well. It’s not going to do as well as you borrowing at the bottom and using a little bit of leverage there. But that’s what I like about Terra. I never used leverage before, in any substantial amount before, but I like the fact that Anchor, when used properly, is a fairly low risk leverage if used appropriately. If you go nuts with it, and you’re getting greedy, well, that’s a different story. If you’re looping too much and whatnot, you can have a risk of liquidation, especially if you don’t have the excess capital. So people should always be careful of that. Some people hear part of the leverage story, but they don’t hear the whole thing. So they they don’t have a strategy behind what they’re doing. And then they get wrecked by getting liquidated and I see people like, “Oh, I’m at 58%,” and things like that. I’m like, “Why are you 58%? What are you doing?” [chuckle]
logan shippy 1:28:28
Can you touch on looping real quick? The difference between a loop and then just a regular collateral?
Well, looping is just you taking your LUNA and putting it back into Anchor to manage your LTV and then borrow more UST off of it, right. So you could theoretically do that if you feel confident enough that you’re at a low enough bottom, in theory, but I don’t tend to get too aggressive with that. The most aggressive I got with that looping was when LUNA went from, I think, $16 when I first bought it down to $5, I went a little bit nutty with the looping. Since then I haven’t done it again. Now that was a very lucrative maneuver for me to do at that point. But I felt like the risk was low because the price of LUNA had fallen substantially.
logan shippy 1:29:19
So what you’re saying is basically, you turn your LUNA into bLUNA…
Reprovide it, and borrow more UST. Yeah, exactly.
logan shippy 1:29:28
And then rebuy more bLUNA and then use that as collateral. And then you can just… Yeah, I’ve done that, but just clarification on the risk.
Yeah, the risk is, well, if you don’t have cash on hand, and now you have maxed that out and your LTV is now 45%, you have nothing left to manage your LTV with, and on the way down you’re going to be… Well, you have one of two scenarios, you’re either gonna be shitting bricks, or B, you have money on the side somewhere else that you can send to your account to pay it off, or three, you’re comfortable with having some of it liquidated, right. Because that’s a possibility. You might feel like, okay, my upside value is good enough, even if I… I’m getting a max LUNA exposure, and I know… danku had the little 100, what’s going on down there? [chuckle] But he got liquidated once. And you may do okay if it’s not a tremendous amount, but if you’re in that boat, though, you really need to understand the liquidation mechanism, how much of your LUNA can get liquidated. All of those mechanics you need to be really, really well-versed on and there’s certainly pros and cons to doing that kind of shit. So just be careful. And I think a vast majority of people should focus on just not going ultra degen. But looping one time, maybe, to get a little bit extra LUNA to reprovide, I think is fine. I think it’s really interesting in that when I buy at the bottom, and I get bonded LUNA and I can get the 3% extra, that helps as well, right. But keep in mind also, you know when that arb, when bLUNA drops in value compared to LUNA, your collateral on Anchor is based on the value of bLUNA, not on LUNA, right. So during the worst times in the market, which is when the markets taking a dive, your bLUNA collateral is actually worth less, and you’re more likely to be liquidated, right. Because it’s not base LUNA you’re talking about, it’s LUNA minus, sometimes, 2%-3%. So just be aware of that. The farther it falls, the quicker it falls, the even more likely exponentially… Not exponentially, but even more likely on a percentage basis that you’re gonna be liquidated. So something definitely to watch out for. Yeah, Forest, go ahead.
Sorry, I’m in a bit of a noisy spot. But I’ll try to make it quick. Yeah. So I was wondering if you have thoughts on transitioning from an LP position to going something like Anchor and…
Well, you could. For example, if you’re in an LP position and you already rode it down, you could basically exit at that point, you have more LUNA, and you could just bond that, take the 3% free money arb and then borrow against it at the bottom, right. So that’s an option. That’s what LUNAomics does. That’s his basic strategy right there, which it has pros and cons. But whether that’s the most efficient way to do this or not, that’s debatable, but I think it depends on market conditions. It could be advantageous to do that, it might not be. I don’t know, it’s hard to say in any given moment, right. So my basic strategy is, the lower something goes, the more probable it is that it’s not going to go that much lower. That’s how I look at the math of these things, right. You will find buyers, eventually, at the bottom somewhere. And getting to that point, managing your LTV without getting liquidated until you find the bottom is the trick. What I find a lot of people do, though, is the bottom shows up and they don’t buy anything. They think it’s just gonna keep on going down. So the problem with that strategy is it’s just pure emotion at that point, the max FUD, the max garbage on Twitter, and all that is going to happen at the bottoms, right. Everyone’s gonna be talking nonsense about crypto, everyone’s gonna call it a Ponzi scheme, and your confidence is going to be shaken and you’re not going to buy the amount you should at the bottom, right.
For example, you might buy a certain amount at $50, but you’re now hesitating to buy at $40, that’s what happens in crypto. The exact time you should be deploying the most capital is the time when people deploy the least, which is weird. But it’s because they bought too much at the top, so they don’t have any money left. So now they’re upset, and their life savings seems like it’s going down the drain, and they think they have to go pay their mortgage or something. So that’s the thing, that’s why people say don’t invest more than you should, than you can afford to “lose”, not to say that you’re gonna lose all of it, but you shouldn’t need that money immediately, otherwise you’re gonna make bad choices. But, Marty, go ahead.
marty schoffstall 1:34:12
So how I would communicate what you’re doing is you have maybe four macro processes of making money with LUNA. And it’s like Stader, there’s some Stader, I assume you’re staking. Here’s a process me using ANC. And then there’s some minor flare, maybe minor’s too strong, but you have your 3% arb flare, and it’s almost like we have to beg danku to do the Cephii… Doing multiple processes to essentially hedge your accumulation of LUNA. So there’s another one, which is kind of off chain at some level but not off IBC, which was taking UST, putting it into Osmosis, building up some performing assets there, and now because there’s enough assets there, bringing back the UST…
Yeah, I think your receptions breaking up, but your points taken, there are great opportunities on Osmosis DEX for your LUNA, for UST. And additionally, other price exposures like Osmosis, ATOM, JUNO. So some pretty cool stuff there. And what I think he’s saying is, if you’re borrowing at the bottom, you don’t actually have to buy LUNA directly either. There’s other options one has. Or the flip side is, if you’re creating cash flow on other sites, you could use that for conversion to, say for example, bonded LUNA and if you want to borrow off of that. Other interesting things are, and I think we’re very close to the opening of bonded ATOM and bonded Solana. I’m more interested in bonded ATOM, personally, on Anchor, and you will be able to use your bonded ATOM for these tasks as well. So for example, I have ATOM staked on Cosmos Station at the moment, and maybe I don’t want to use all my ATOM to borrow off of. Maybe $1,000 of ATOM gets accumulated in my wallet from staking rewards, and I want to take that, and I want to ship it over and bond that, for example, and use that for borrowing off of. So if you’re borrowing off of money that you don’t mind to have liquidated because you earned it already and your risk is low, you might be more aggressive with your strategies or something.
So yeah, there’s different ways to look at that. But you could also say, “Well, if I have free money that I’m making off of my staking yields, I could also just go to KU coin and park it on a 5x long on a dump also.” So if you’ve got money that you could just literally just gamble with at that point, because this is just revenue as far as you’re concerned, and you can do whatever the hell you want with it, you could be a lot more aggressive with that money, right. You could try to… Especially on some nice drops, you could be a little bit more degen with it, I guess. So there’s a lot of different opportunities. Yeah. And I think that’s why it’s important to focus long term on developing cashflow sources, because then you can diversify your strategies and your thinking, and maybe even your risk profile with that money if you’ve earned it. As opposed to you go into your job and earning it, and then getting rekt. Marcus, go ahead.
Hi, Cephii. Hi, guys.
How are you doing, man?
Great. I want to speak about the Terra community, how to grow our community. And I want to drive attention to the Loop website. I don’t know if you guys notice, but they are building the whole Terra community behind them.
They’re building the Terra community?
There are a lot of articles that are written and all those articles are on Google. And they are driving organic traffic. And it’s one of the most visited websites on Terra.
Yeah, you’re right. In fact, the social metrics for Loop’s site on some other tracking platforms would suggest similarly. Yeah, if people are interested in writing articles about anything we talked about here, or whatever, on Loop, yeah, that is a… If you like to write, obviously, like Jay does, and a few other people, that can be very beneficial to provide some content there. The other thing that’s good for content is just Medium articles, too, are pretty good.
Yes, but this is organic traffic from Google. And I think slowly Loop will become the biggest DEX on Terra. That is my opinion.
Cool, I hope they are. That would be great.
Yeah, Abhi, go ahead.
I have a question.
Actually, let me get Steve first. He was waiting here a bit. Let’s get Steve real quick.
Hey, man, how you doing?
Good. Good. What’s up?
So I have three questions. First is that when you get… I did a good arbitrage using the Arbie bot on Telegram, if you’re out there I just wanted the community to know it gives you a notification when there’s an arb opportunity. And for my first time, I purchased a lot of bLUNA. Now, I was wondering, what would you do to turn it back to LUNA, you wait till the Astroport peg comes back to 1:1, or do you go to Anchor and unbond it and then wait 21 days? What is your go-to method?
Yeah, that’s a good thing to cover, because people keep asking this question. So it depends on what you want to do with it. So one thing you can do with it, is once you have gotten the… You’ve gone to, say for example, Astroport, you’ve converted LUNA to bonded LUNA and you got a 2% discount on your bonded LUNA, right. What he’s asking is what to do next? Do you burn the bLUNA back to LUNA for 21-24 days, and that way you can do this again at some point in the future? Or do you wait for Astroport to go back to a 1:1 peg between LUNA and bonded LUNA? It’s kind of funny, when it’s off peg when, LUNA and bonded LUNA are different prices, everyone thinks that it’s never going to go back to 1:1. And the funny thing is, when it’s 1:1, everyone thinks it’s never going to be off-peg again. And it continually, during times of volatility, even after Astroport has emerged, we have seen that these arb opportunities still persist, you just have to be patient for them. The thing about being patient is though, you don’t know if your 21 day unbonding period is going to correlate with the same time that you can basically perform this arbitrage opportunity. So at the very least you want to do better than, let’s say, staking yield, I suppose as your base rate, which comes out at around, say, 9% or so. You could probably beat that with the arbitrage method.
The thing is, if you use the Astroport technique where it goes back to a 1:1, you’re bonded LUNA is much more useful, because your bonded LUNA, A, is earning yield while it’s sitting in your wallet, that’s one reason it’s more useful. And the second reason it’s useful is because it can be used to manage LTV, right, because it’s not locked up and burning. And the third reason it’s useful is because it can be used to borrow if price falls further. So I think I’m going to move… I’m gonna see how it goes, but I’m gonna see how using Astroport’s 1:1 ratio to go back to LUNA might be the way to go from here on out. So we’ll see how that plays out. But I’m not 100% sure timing-wise how long it’s going to take for the peg to be restored on Astroport depending on… The way this works is the more people that take advantage of the LUNA to bonded LUNA arbitrage, the more closer to peg it’s going to become, right. So when everyone’s poor and everyone’s like not ready to buy anything, what happens is is that you’re seeing that the peg is taking longer to correct itself. But I think as price rises, you’ll see that that will correct itself on its own. I would guesstimate it might take a week or so at max, I would think, and it probably is going to be less than 24 day burn period. Does that answer your question, Steve?
Yeah, yeah, that’s great.
That’s my guess at least, by the way. I don’t know that that’s gonna be the case, but let’s see how it goes.
It makes sense. When people are getting liquidated they want to get out of it or when they see the price coming down, so one or two, or maybe three consecutive green candle, I think the peg comes back on Astroport. But on Anchor…
And what it tells me also is that there’s a reason why LUNA’s price has been behaving the way it does, the fact that you get these 40% and 50% corrections has a lot to do with the fact that a lot of people are doing really crazy shit with their LTV. What they’re doing is they are clearly… The reason why it goes off peg is people are selling their bonded LUNA, they’re selling LUNA while it’s low to manage their LTV, because then they can have enough UST to pay off their loan, which is fine, I suppose. But you’re selling low to do this. And that causes LUNA’s price to drop faster than it would potentially otherwise. That’s my thinking here. But if you look at LUNA’s price patterns since the summer, it really reflects this type of behavior in my view, it seems like… Because LUNA’s chart is not the same as all the other charts in crypto, right. It has a kind of interesting sawtooth ascending accumulation pattern and you can’t help but imagine that buying and selling pressure is happening via Anchor, as well as all the extra volume that’s taking place, right. Because a lot of coins don’t have the volume of LUNA. So this is all good activity. I mean, I’m not saying people should do what I say. I’m just saying it’s interesting how predictable the arbitrage rates tend to be when the price crashes and all that. And the depth of the crashes are always deeper than what people think they’re going to be, which is also interesting. So with LUNA, it looks like a 40%-50% correction is… A 40% correction is good. A 50% correction is possible. I think we hit 48% from the top as a reference point. And that’s kind of where we bounced off so far. So let’s see. [chuckle] But, Abhi, now you have a point or a question.
Mandivs de’ Medici 1:45:54
Yes, Cephii. First of all, thank you for hosting this session. Now, my question is around the three announcements that are going to be made, right, one of them is out. We all know that, right. So what do you think that is, two announcements would be, a wild guess?
Oh, well, apparently, the announcements are sort of interlinked, somehow, I think, the way that they made it play out. I don’t know. there’s been talk of some kind of a BTC reserve related to the Terra ecosystem. There has been some talk about… I don’t know if this is true. But I don’t know what all the purposes of the LFG system are. There’s like a team of people and they’re supposed to be doing what exactly, I’m not sure. [chuckle] I’m not 100% sure, is that just a group that’s going to work on doling out grants in development? Or is that related to, somehow, pegged maintenance via managing other assets? I just don’t know fully what all that’s about, honestly. So I don’t even know what the first full system is about much less speculating on the rest of it is, exactly. So I don’t know. Do you have any theories?
Mandivs de’ Medici 1:47:31
No, no, I’m pretty much looking forward to management. Plus, I’m a long term LUNA holder, holding it from 24th. So looking forward to go back to three digits again.
Well, I think it’s awesome for it to go up. I mean, obviously, but no, I don’t know. I don’t know how that’s gonna play out.
Mandivs de’ Medici 1:47:55
And just one more question. So I’ve successfully been able to use Anchor Protocol during the last fall. This time, it was a bit scary. So I just managed to pick some but what according to you could be the best use of Anchor Protocol in terms of borrowing?
Well, I think it’s mostly what I had mentioned. I mean, I would only borrow, number one, to buy an asset that I thought was a good idea. And simply what I’ve been doing is is as the price of LUNA rises, I basically borrow off my LUNA, park that UST in Anchor and then just let it sit there and as price falls, I tend to sort of enter into getting more. And I usually leave 50% of that UST untouched, so I’m not going to try to spend all of it so that if the price falls lower than what I think the LTV… I don’t want to be able to make my LTV unmanageable. And I have the max borrowing capacity at the top so that’s to me a reasonable time to borrow. And then the Anchor Earn for me right now exceeds in yield what the cost to borrow is so that seems to make some sense to me. And then I deploy that UST on the way down basically to buy more. And then as I do that, I’m converting LUNA to bonded LUNA with the arbitrage as well. And then I’m able to get a little bit of extra LUNA for starters, but I can use that bonded LUNA also to manage my LTV as well on the way down. So it’s like a mixture of those things that I think works well for me so far. And there may be more hardcore degen ways to do this, just go all in or something. But it’s whatever allows you to sleep well at night, okay. So yeah, if it’s money you can throw away, and you can play with, that’s one thing, if it’s serious money, you might not be so aggressive. So, very good. Yeah, I think just think it through and just game it out in your head how you’re gonna play this out and different ways to use that. Yeah. Frugal, go ahead.
Frugal Lunatic 1:50:21
Hey, Cephii, how are you doing?
Frugal Lunatic 1:50:24
I had a question regarding Anchor Protocol, but in the sense that do you think it’s sustainable or… Because I see a trend with new protocols that they would promise you a certain amount of yields with Anchor Protocol in the background and I feel that just makes Anchor as a single point of failure, just like… In a decentralized economy I don’t think that’s a very good idea.
Yeah, for starters, I wouldn’t worry too much about it. There’s too much… Anchor is too important for TFL to allow it to languish. So number one, they have a gajillion dollars now in LUNA value, and they’re gonna make it work no matter what, that’s the first thing. The second thing is a lot of things, a lot of startups generally are going to bleed cash. But what you basically need on Anchor is a balance point between borrowers and depositors, obviously. And that is being worked on actively with several things happening, bonded Solana and bonded ATOM are the ones that are most likely to show up very soon, and that’s going to bring in a fair amount of TVL. It probably won’t bring as much TVL as bonded Ethereum, necessarily, because it’s not necessarily as big of a possible borrow pool, but I think it’s going to make a difference. And additionally, ultimately, maybe 19% isn’t going to be sustainable. And maybe you’re never going to be able to find… Theoretically you have an infinite number of people that could… Or not infinite, but all the world’s people that would be interested in 20% yield, but not all the world’s people are going to be interested in borrowing against their assets. So some of the assets like bonded DOT or ATOM, which have 12%-14% yield output are substantially more potent than, say for example, LUNA’s yield output, which is not quite as high. So you might have that element too to kind of bring in more cashflow. So I think yield earning assets is part of it. And then the second part is does Anchor ultimately do other things in the background to generate revenue, like using volatility arbitrage trading platform or something like that to just generate cash flow 24/7. So there may be other possible uses of the… Maybe even the depositors’ cash than just to sit there that UST is deployed in some way to generate revenue similar to a traditional bank. So there’s a lot of things that can be done with Anchor that haven’t been explored yet. So I wouldn’t worry too much about it, honestly. Don’t get too wrapped up in the Anchor FUD, it’ll get sorted out I think.
Frugal Lunatic 1:53:21
I wasn’t too concerned about whether it’s sustainable. If it’s hacked, I don’t know if it’s possible, but if it’s hacked there’s a lot of liability there. But yeah, I guess if it’s the prized possession of TFL then they would probably have the maximum number of audits on it, and so on.
Yeah, they’ve been working on that. And some of the folks that have brought up concerns about the front end and other things are being addressed. So yeah, you’re right, you want to keep Anchor simple and you don’t want to change it too much. You want to make it relatively hack-proof by keeping the smart contracts straightforward. You don’t want to build too much crap inside of it. Any protocols who want to build on top of it, that’s a different story. But you don’t want to bring a lot of protocol risk into the actual thing itself. So far, it’s done pretty well, no mega catastrophes. And I know some white hat hackers had come up with some ideas of making the front end less hackable and such. So hopefully they took those into consideration. And that’s not to say that that’s the type of hack that could drain all of Anchor of its funds or something like that. As far as we know, such a thing does not specifically exist. There’s also the possibility of course that there is a Terra… The entire ecosystem could have a problem that we’re not aware of, but the more time that goes by the less likely that’s to be the case as well. But yeah, there’s always some risks. In a computing network, you’re never in a zero risk scenario. That’s sort of why Bitcoin is Bitcoin. It is meant to be trustless, permissionless, etcetera, etcetera. So when it comes to proof-of-stake networks, there’s always going to be some concern about all sorts of things. So yeah, so invest accordingly, in other words. If it’s the only destination for all your life savings, well, then that’s a risk you’re willing to take, I guess. [chuckle]
Frugal Lunatic 1:55:24
And I did have a follow up question but unrelated. Do you know how on-ramp… A very simple on-ramp application could be made where somebody’s depositing their own fiat currency, and they’re getting their own native stablecoin on Terra? I’ve asked a lot of people but some people say it’s very hard to make. And others don’t have much idea about it.
No, actually incorporating Anchor onto an app is a very short…
Frugal Lunatic 1:55:54
No, no, not incorporating, just unrelated. So let’s say, there’s a website where I deposit Indian rupees, for example, and I get INT, the Indian stablecoin on the Terra network, Just a simple transaction of sending in money to the website, through whatever means, let’s say, a debit card, or like a different way or method of paying and you just get INT in return. Do you know if it’s feasible to make, if it’s easy to make, or something, if you… Do you know people…
Once you’re talking about fiat on and off-ramps, there’s all sorts of regulatory stuff involved. And you’re talking about mixing an ACH in there. Yeah, that’s a pretty extensive process. That’s what Kash and Alice are doing and whatnot, but it’s not a minor process by any stretch. You would need to have a full commitment to build something like that. It’s not simple. Yeah, adding Anchor Protocol to adapt or some of the things that already has Terra on it, that’s different. It’s very different if you’re just trying to create a full on fiat on and off-ramp, and creating sort of an exchange is what you’re asking for, right, that’s what you’re talking about. It takes some effort to create that. And some of that is what Vertex Protocol is attempting to do is to make international stablecoins on Terra more stable, by creating a forex market, and to make it more feasible to make sure that you’re getting your coins at the right prices and pegged to the global stablecoin markets. So because the rest of the international stablecoins on Terra aren’t as robustly pegged as UST is right now. So the Vertex Protocol hopefully will add a lot more liquidity to those systems to make that more feasible. And eventually, you may have easy-to-adapt code to do exactly what you’re talking about to build on-ramps elsewhere. I think it’s not so obvious right now how I would do it. And by the way, I’m not a developer. The people to ask would be Alice Finance, you say, “What did you have to accomplish to do this? I want to do this in my country,” they might be able to tell you some details about how to make it work. If you have a group of programmers or something that wanna be involved. So yeah, think that through, but those are the type of people I would ask.
Frugal Lunatic 1:56:50
Yeah, okay, thank you.
Cool man. Scott, go ahead.
Hey, I love that you have an answer for everything, by the way.
I don’t know that I do. Sometimes I think I just bullshit my way to that one.
Yeah, I didn’t say it was right or wrong. I just said you had an answer. [chuckle] Hey, I did have a question. So…
And part of the reason I have at least somewhat of an answer is I’ve thought about all these same questions to a large extent. So it’s not like… They’re on my mind. [chuckle]
Well, yeah, I like that last question. I was thinking about that. And I know shit compared to you. But I like that last question that he had, because you start looking at the ecosystem, you’re like, “How do I get everybody I know into this?” [chuckle] And you’re like, “Alright, what if I build a little app, and they could just onboard their fiat. I could take the little bit that I know, and basically create three different levels for them to basically create savings accounts. Something where they’re not in DeFi, and it’s a simple…” But yeah, like you said, it’s not simple. So it’s that fiat onboarding and off. Onboarding, that tends to be a big problem.
So no, I was gonna say is, before I lose track of this thing, there’s something else I was going to mention on the BTC price chart, that logarithmic long term trend line that I posted on my BTC tweets. You’ll notice that the price action is specifically going right up to that again. So that’s now the theoretical resistance in a sense. And the reason why that is, is because people will place their longs and shorts at those levels, because everyone’s seeing sort of the same thing. And so you’ll see the price retrace to that and kill some shorts off for a little while. So, depending on whether the price goes above, for BTC in particular, if you see that price substantially takes off above about $38k, in other words, retests the logarithmic trendline, and just does a V-shaped recovery and just starts flying, then you’ll probably see a move to the next volume resistance at about $47,000 or so. That’s another $10k jump. And if it goes past that, it just starts flying after that. So if it doesn’t finish this retest at $38k and just make some really good moves, then you’re gonna have some downside for a number of months almost certainly. So just some thoughts off of the price action that’s happening right now. Maybe Montana, you have any ponts?
Cephii, real quick, yeah, I just had a question. And then, Montana, seems like he and I was on the stage at the same time. But for SPEC, for spectrum, so 171% API on the MINE-UST and when I did it, it was supposed to be about 0.28% per day, about $7 a day on about $2500. However, after two days, it was only $0.68 for that two day perio, over two days. What am I missing? And then I went back and checked it. And shortly after that, about four or five days in, it had changed over the rewards to Astroport. Is that what happened there? Or is that…
Good question. I’m not totally sure. You have to count also how much of your yield is coming in to Spectrum token rewards too, ’cause I think the MINE-UST on Spectrum, you’ve got…
I think was like 98, and whatever the rest was in…
Because you’ve got your autocompounding that’s going back into your MINE-UST, right. Because it’s taking your MINE tokens, and then splitting it 50:50 and buying you more UST and MINE, right. So that’s how part of its being generated, and part of it, I believe, is going to SPEC tokens, I believe. It depends on how you have the thing set up. So yeah, it’s… I have a hard time following how my Spectrum portfolio is doing, honestly. [chuckle] Same problem as you’re having. [chuckle]
Well, because I was trying to actually for the first time really get into like, “Okay, I’m going to use this specifically for a cashflow event so that in 55 days, I have X amount, and then I’m going to…” I actually wanted to have a practical use, not just what I’ve been doing for months is just accumulating as much LUNA as possible, and I don’t really give a shit about anything else, right. And then I tried to do it, and it completely failed. [chuckle]
Yeah. I don’t know, I have some stuff in Spectrum, and I just sort of let it ride. I haven’t really looked at it honestly, to really analyze the yield output and whatnot. I just haven’t paid that much attention on it. So, I threw a little bit of money in there, cross my fingers and sort of hope for the best. [chuckle]
All right. All right, thanks.
Yeah, no problem. Montana, go ahead.
Whatcha you doing?
Just hanging out. Just a quick question for you on… Sort of related a little bit to what Scott was just talking about, but on Anchor, for example, and I think maybe Nexus and others, they talk about migrating their LPs over to Astroport. And it asks me to essentially do that. And when I look on Coinhall It looks like the APY or whatever is better on TerraSwap. And I think that the difference is, I’m not getting the native token, maybe, in Anchor’s case, ANC, unless they migrate now to Astroport. And so I guess number one, do I have to, do you know, migrate to Astroport? And number two, if I don’t, am I then losing the ANC rewards? And I don’t know if anyone has looked at that calculation in terms of since on TerraSwap the APY is still quite a bit higher, if it’s still higher in absence of those rewards, but yeah, I’m just still confused about that. It’s like “Hey, do this,” and do I have to, am I able to keep it where it’s at? So yeah, I don’t know if you know anything about that.
Sorry, I was muted. ANC-UST is actually migrated to Astroport like you said, so any rewards you’d get are in ANC tokens and you get that plus the Astroport dual rewards in theory. So I haven’t monitored the performance of that lately, as Anchor’s token price has been falling quite a lot. I’ve mostly just been taking my Anchor awards that I get from borrowing and I just dump them into governance, because the governance yield is 25%-30%. And I figured what I would do is when the market turns upwards, the market price of Anchor on the exchanges will typically pop and then I’ll just ride that up as opposed to dealing with impermanent loss. So when something’s really down, I tend to just hold it. If it’s sort of mid market, I might LP it. And if it’s a top market, for ANC I might sell it. So it’s just a way to think of that from a framework perspective. But yeah, that’s how you deal with your ANC-UST specifically on Astroport. You’re basically getting dual rewards, which is good. Now, is that better than what you’re making on TerraSwap? I don’t know. I haven’t calculated it carefully, because I haven’t used that lately. So I would just definitely look at some metrics as far as what the yield is on doing either one, maybe PB has an answer, he was kind of raising his hand. Do you have some comments to that effect?
Does anyone know do I have to actually migrate or take it out and put it back in TerraSwap if I want to keep it there? It’s telling me, “Hey, migrate,” I’m just wondering if that’s something I actually have to do, if the LP is gonna stop existing within Anchor the way I have it.
You’ll still get the TerraSwap rewards, technically, you just won’t get the extra… You’ll get the transactional rewards, you just won’t get the free ANC, or whatever, right. So you definitely want to do that. So all you have to do is you take your LP, and you deposit it on… You take the LP token, and you just stick it on Astroport and it should do the job. It’s pretty straightforward. Yeah, ’cause the ANC rewards were also migrated, not just the fact that you get Astroport tokens.
So right now, I set up this LP, ANC-UST, within the Anchor webapp. Is that functionality going away where now it’s only going to be… Gotta go to Astroport to do that, or am I able to basically pull it out and put it back in right on the Anchor webapp?
I think, I could be wrong, but I think the way that it’s designed now is when you use the Anchor Protocol app, you know how there’s like a LP section now, and there’s always been LP section, right? I believe if you deposit there now, it’s over an app, yeah, it just automatically…
So I just pull it out and still put it right back in within the ANC app or webapp, if that’s how I want to do it.
Yeah. And you might check, it might have already migrated their check and see if…
It keeps asking me to.
If you go look at your TerraSwap, go hit “Withdraw” and see if your ANC-UST is sitting there. And then do the same thing on Astroport, and you’ll see where it got moved to or if it got moved automatically. I know a friend of mine, it got moved automatically. I didn’t happen to have a ANC-UST… ‘Cause he wasn’t sure where his LP went. He’s like, “Where the hell did my LP go?” And he went and found that it was sitting on Astroport. So I don’t know how that works, but whatever. Yeah, check it out. It’s gonna be somewhere and just figure out where you’re getting the highest yield off of it.
Okay. Thanks. Yeah.
Yeah. PB, are you there?
Yeah, I’m here. How’s it going, guys?
Go ahead. Go ahead.
Yeah, about staking Anchor staking rewards… I mean, the loan rewards, right. It’s a great idea. And I do it myself. Honestly, the upside with this is huge. Because when the market bounce back, then your Anchor rewards will be worth more, and you will be able to get the upside out of it. So yes, that’s what I do. Also, I try to…
By the way, we’re presuming that there’s gonna be upside
Yes, of course.
What we know is there’s going to be some more Anchor token emissions, by the way, when you have bonded Solana and bonded ATOM and stuff like that. So when other tokens come on, there’s gonna be more possible borrower emissions. So I’m assuming it’s going to go up but it’s not an absolute that we know what price directions for people to understand this. And it dropped a fair amount. One of the guys, I think Bubbles went and bought… I said I was doing this with my ANC, and he went out and bought a bunch of ANC tokens and went down afterwards. I’m like, “Don’t hold me responsible for that shit.” [chuckle] I’m just taking my borrow rewards, just stake them in there. That’s a small amount every day. So that’s relatively small amount, in other words, and basically I’m using that to DCA into Anchor. And I do that on the way down and then exactly like you said, I just stake it. It’s 30% yield now, it’s pretty good. And I just let it ride. And if and when the price comes up, then I might sell it at that point, if I choose to do so. But yeah, go ahead, sorry, you’re saying?
Definitely. And when market, just just before it started falling, I tried Loop markets, too, with some LPs because I got some liquid LUNA just in case and some UST of course from the Anchor loan. And I was trying Loop market, it went well, I must say, I tried the aUST and the LUNA LP, it was about I think 46% APR. And that was cool, I liked it. The only thing I didn’t like about it was the fact that it was not too flexible, because you start earning rewards right away, but in order to keep them, you have to wait two weeks. And it was just not enough for my case for my flexibility. But that’s a good way to do it too. You can just stake also Anchor, I think, with UST and yeah.
I think the Loop system works well if you are the type of person who is simply going to leave that there and just not mess with it too much. And then maybe take LOOP tokens and maybe autocompound more into the LP. You take your LOOP tokens and maybe buy more aUST and more LUNA and park it in there so you’re sort of autocompounding it manually. I don’t think they have that… They don’t have the Loop pool available on Spectrum or on Apollo DAO yet to autocompound it for you. But that would be kind of nice. But it makes sense because you’re earning on the aUST side, and you’re earning the LP rewards, which is kind of cool. But you’re right, there’s some flexibility issues with it.
Yeah, and I tried it at the worst time. I think that’s why it didn’t work for me because I started this just before the market started to crash. And actually, at some point I needed my liquid LUNA to add some more bonded LUNA to my Anchor loan to make it stronger. And I need to the aUST to swap to UST and buy more LUNA with it.
Which is sort of okay, because what happens is is on the way down your it is converting your pool to more of the LUNA. And then you can basically take that and bond it. And a lot of times, again, like we said before you get an arbitrage discount on it anyway so you might make an extra 2%-3%. And then you can then use that use any UST that’s sitting there to manage the remainder of your LTV if you need it.
You’re right. The only thing that didn’t work for me was the fact that it was less than two weeks, so I lost my LOOP rewards. [chuckle] I didn’t just before, maybe two or three days before the market crashed. That was the worst time.
Yeah, that system of earning is meant for a true LP provision. It’s not meant to be in and out of the market. TerraSwap allows you to just kind of… TerraSwap lets you just kind of jump in and out, or Astroport does, but this is not the same thing. Yeah.
I tried Astroport too, and it’s pretty amazing. I like it. Yeah, but I was here to say, I know the market situation is not funny at the moment. It’s start to kind of bounced back, but we don’t know what will happen next. And if you guys just want to have a good laugh, you know I do memes from time to time and I just released one. So if you guys want to just have a little bit of fun, because I know many of us got liquidated during this crash. It was hard to keep the LTVs, right. And yeah, just in case you want to have a laugh, just check the meme and yeah, you know what you think.
Yeah, cool. Montana, you want to hop on?
Oh, you kind of addressed my one question, I guess. Yeah, I’m sure I’ll think of something new though, if you give me a minute.
Let me grab one of the guys that’s been waiting here. Advias, are you back? Had a comment or question or anything? I’m not sure if he’s AFK or what here. [chuckle]
I do have just one quick question.
I know that Terra Bites had this on their podcast but it was long and one little piece of it. Has there been any update with Alice as far as timeline goes or anything there?
I haven’t heard anything new. Yeah, nothing that they haven’t… Yeah, anything new and they’ll probably announce it themselves, I’m sure. But they don’t usually release a lot of pre emptive information of any kind typically.
Yeah, they’re either about to really let something rip, or they’re a ways behind and I don’t know which one it is.
I was in New York City for the first TeFi Alpha. And we were told, it was November 2021, for the first Alice cards. But I know there is a lot of regulations around it, and a lot of discussions going on. So yeah, that’s why I think we can expect maybe something like late Q1, it sounds pretty hard, to be honest. But maybe beginning Q2, we could see something happening, but it’s really not sure. We don’t have any information about this. Correct me if I’m wrong.
Yeah, I haven’t seen anything new. So everybody that has debit cards has been dragging, actually not just them, in multiple crypto applications. So who knows? Maybe with the market slowing down, some of the building can kind of continue, and there’s not as much… Everyone rushing for the door at the same time. We’ll see. Advias, are you there?
Hey, how’s it going?
Good, good, go ahead.
So I see you do sophisticated strategies, and I’ve been following you for a while, but I see everyone else is pretty interested. So I want to share what we’re doing at Advias real quick, quick elevator pitch. So we’re building a protocol that integrates into Anchor through the Wormhole bridge. So we’re not gonna be launching on Anchor, I should… I mean on Terra, but it’s going to directly integrate into Anchor. So what it is, is it’s a lending and borrowing protocol that specializes in creating delta positive debt positions. So a quick example would be, you put in 100,000 UST as collateral, and it will appreciate that 20% APY. And then you can receive another stable asset at a fixed 90% loan to value, so you’d get like $90,000 worth of USDC. But the USDC is only at a 10% APY. So at the end of the year, you’ll create an $11,000 value delta positive result. So that’s the gist of it, so you would owe 99,000 from the debt. And once you pay it back, you release your collateral, which is now worth 120,000. So that’s where the 11,000 would come from. And what you can do with this is fairly unlimited, once you have the debt. I mean, something simple you can do is take out debt, for USDC, swap it to UST take that UST, bridge it back over to Anchor and deposit in Anchor. So if you do this, you would ultimately create an extra 9,000 in profit, because that 90,000 that you swapped and put into Anchor is now 180,000 at the end of the year. So you do the same thing I mentioned before, you pay off the 99,000. But instead, this time you end up with a result of 129,000 of UST, so you just took what… If you use Advias, you can create a 29% APY with that strategy. I mean, there’s also other things you can do, you can go pretty degen with it, and take the debt, swap it to UST and deposit it back in as collateral to then take out more debt and to grow your collateral to just make it bigger, so you get higher appreciation. So that’s basically the gist of it.
Is this similar in some way to what’s happening on Terra with Kinetic Money or is very different from that?
I’m not familiar with what that is.
Kinetic’s kind of like a self-repaying loan concept using your yield, essentially, off of your, say for example, LUNA. And I don’t know all the mechanics of it to rattle it off the tip of my tongue right now. But yeah, I guess you’re doing kind of a lending… But what’s the primary collateral for you guys?
UST is the collateral.
So yeah, you would put in UST as collateral and then you take out another… I think, I’m assuming Kinetic might be an Alchemix type of deal with the delta’s neutral.
It’s more like Alchemix, yeah.
Right. Yeah. So what we’re doing is not exactly that. It’s really not, because that one you’re kind of borrowing your own assets in a way. With us here it’s kind of like Aave, or even Anchor, you’re borrowing from a pool of everyone’s assets.
Got it. Got it. Cool. Yeah. Folks, check that out, I guess. Where do you go to do this? You’re on ETH?
Oh, no. Yeah. So by the way, we’re not launched yet. We’re waiting for Anchor V2 Wormhole integration audit to be complete. And once that happens… It’s supposed to happen in February of this year.
But your protocol’s on what chain native, though?
We’re gonna be on Binance, maybe Ethereum. Likely not, just because we don’t really suppose people are going to use it too much for this type of stuff. So Binance, Solana, Oasis, and whatever the Wormhole uses. Yeah. So just anything, not Terra that the Wormhole uses so this will directly benefit Anchor and UST because we’re basically gonna be funneling assets into Terra.
Got it? Yes. I got it. Cool. Yeah. Thanks for letting us know.
Let me get CE5isREALandYOUshould… I don’t even know your full username is. [chuckle] Go ahead.
Oh, Advias, yeah. If anyone out there, check out the Gitbook in the link. So we don’t launch for a couple of months. But well, we’ll do some, you know, announcements on Twitter. Not to shill the Twitter but…
Thank you, though.
Cool. Yeah, CE5, what’s up?
Hey, I was just wondering if there’s any way to… I’m not sure if you’re familiar with true shorting. But I was wondering if you could stake LUNA and kinda borrow future yield on the staked LUNA and then short farm… Or not sort farm, but… Yeah, I guess, kind of short farm.
Yeah, I mean, your options right now are you could go onto Mirror Protocol or mirror.finance, and you can do somewhat what you’re talking about, you can basically borrow UST off of your LUNA by shorting an asset and selling it. So you would take, for example, I don’t know, S&P 500, which I think Hutch did, he’s one of the guys and he actually is probably pretty successful because the S&P 500 just took a dump. So he probably actually gained benefit from doing that. But yeah, you can do some of that with some of those mirrored assets. The other thing you could do is when Kinetic Money comes out, that’s what Advias and I were talking about here was basically Kinetic Money is going to have the ability to take future yield off of your LUNA and then kind of do things with it. So anyway, for those that are listening, that’s kind of what’s available. Let me grab Nick real quick here. Nick, go ahead.
Hey, Cephii. You were on another Twitter Space, I think it was either yesterday or the day before, and I just had a couple questions. One was how much… ‘Cause your recommendation at the time was hold a little money back and then when things start to go south you kind of exponentially buy as the price goes lower. But what is your general thought in terms of how much money you might hold back for a market consolidation and are you just following the RSI, or what are you paying attention to when you say, “Oh, I should keep some money on the side,” for, or do you always have money on the side? What percentage would that be of your portfolio?
Yeah. I think that’s going to vary a lot obviously, from person to person as far as what kind of exposure you want to the volatility of whatever coin. It depends on whether you’re a buy and hold investor versus a trader and whatnot, right. All that makes a difference. But take for example, right now, if you look at what was LUNA’s some of its highest volume on a horizontal volume profile chart, it sits right at about $42. So if the price of LUNA fell to around $40 bucks, let’s say, I think it would find a lot of buying support there if it goes there. I’m not saying it will, by the way, I’m just saying if it went there, I think you’d see a lot of buying support. The other reason I think that is because the trajectory of the 300 day moving average is about to intersect with right around that same point. And that’s what LUNA bounced off of when we dropped down to $5, or $4 LUNA back in March. So there’s a couple of reasons why I would say… And then there’s a fib at $37, too. So really, there’s a pretty good confluence of stuff going on, right at about $40-ish. So for example, if I was interested in LUNA right now, I might take what capital I have, and think of $67, where it is right now as my starting point. And think of maybe $40 as my bottom perhaps. And then if I… Let’s say, it goes even below that, in theory, if I’m buying a substantial amount at $40, and it’s bonded, I could borrow off of that if it goes a bit lower, right. Let’s say, I was wrong, and it goes to $36, or something, I think there’s a fib at $37, so let’s just say it did that, right, then I could use my leverage, then, to buy that last little bit at the bottom, too, right. So there’s different tactics you could use depending on your available capital and strategy.
But as far as how much to get on the way down, there’s some math to this, but there’s some subjectivity as well, there’s your intuition as far as why would you believe it would go down to say $23, in other words, all the way back to retest March’s prices with all the new developments that have happened on Terra, and all the new people involved, why would you think it’d go there, you’d have to have a pretty compelling reason. So the problem is some people they say, “You know what, I think it’s gonna go back to $20 bucks,” and they don’t scale in, they don’t buy in as the price goes down. What if it never goes to $20, then what? You’re gonna buy it when? Because what’s gonna happen is, it’s gonna work out like this. Let’s say, on the way to $20, and I’m just making this up as a theoretical here, you would drop from $67, where it is now down to $60, down to $50, down to $40, then it jumps to $50 again, you’re like, “Ooh, it’s going up again, maybe I’m missing it.” But then it goes down to $30, right. It’s hard on the way down to predict exactly when to buy, because you don’t know when a reversal has already occurred, right. So you’ll say to yourself, “You know what, I have this mission, I’m going to get it when it’s $20.” But the problem is, as it starts to climb again, you’re going to second guess whether it’s really going to go to $20 or not, right. And so you won’t necessarily buy the bottom ever, because what will happen is, you’ll be second guessing the whole way down of where the hell that is. And then it will pop and then you’re like, “Wait, maybe I should get it now. Because maybe I missed the bottom, and now I’ve already gone up,” but by that point, in crypto, you’ve already gone up 20%. So you’ve not only missed the bottom, you missed the target you’re hoping to hit, but then on top of that you’re paying 20% more than the actual bottom was.
So the way I look at it in my head is I want to expose myself to the bottom of the chart if I can, right. So the only way to mathematically do that with any realistic hope of hitting it would be to buy on the way down. Now do you do that with a dollar cost average, where you just simply by every four hours or every day or something like that? It depends. If you just look at the typical volatility in crypto, the bottom only lasts… Realistically, the very bottom in crypto, before maybe a 10% bounce happens really only lasts a matter of under maybe a day a lot of times, right. You don’t go sideways flat at the bottom, it has a little v-shaped recovery and then some price action. So it’s hard to catch the bottoms unless you either already have the limit orders sitting there, or you’re watching the price and you’re just going to hit it when when it reaches these levels. So you just have to think through how you’re going to reach those bottoms.
And in theory, you’d want the largest buy at the very bottom too, right. So think of it from the perspective of how do I achieve that, precisely, and do I have the time to watch it, right, that’s another question. So the way that… If you have the time to watch it, fine, watch it. If you’re just going to put in limit orders, fine, do that. If you have the… Like what LUNAomics does, which is he just does a UST-LUNA LP, which buys him LUNA on the way down. It’s not the most efficient process, necessarily, but it does sort of achieve the task to some extent. It gives you some LUNA at a discount, and it gives you some immediate LUNA price exposure already, that’s another way to do it. So it just depends. And it also kind of depends on when you want to start buying LUNA. So let’s say for example, you’re like, “Ooh, I don’t know, $67 is too expensive for me. I’m going to wait till it goes down to $55 again, and then I’m going to start,” right. If you’ve never been in this before, do you take a position now and then get more on the way down? Or do you just pray that you goes down and you get it at the price you want it at? So the price is not there to go to the price you want it to go, right. Not on the upside or the downside. So the question is, what is your goal is all that really matters. And how much capital are you willing to deploy, and also how upset are you going to be if LUNA go straight up right now, right. So, for example, is it possible that LUNA can go from where it is now to $135? Sure it’s possible. So then it’s like, “Well, whoops, I didn’t get any of the price exposure,” right.
On the other hand, I’m not saying you have to FOMO in and just buy a bunch right now necessarily, either. Again, it depends on your goal. If you’re willing to wait longer term, then maybe just buy at whatever price and just wait, right, and then stake it and then autocompound it and call it a day. So it depends. That’s why, by the way, I have several different things going on. So I just satisfy my urge to buy these bottoms by having some capital free. And I have some of it autocompounded on Stader, where I don’t touch it, it just keeps earning money that way. Whatever satisfies your appetite to play around, all of that matters, your trading style, your personality, what kind of things you’re gonna be upset about. So for example, if you bought it at $67 now, and it goes to $30, you’re gonna be like, “Oh my God, I missed… All my capital got deployed, I’m upset, because I could have gotten it at a discount,” blah, blah, blah. So if you’re gonna be one of those people that has a lot of regret, then you have to think through how you’re going to play this game. Maybe you should wait, and if you miss it, you miss it, right. Because one argument people make is there’s always opportunities in markets. There’s not a reason to necessarily go all in on something or chase it on the way up, because that’s the presumption that you’re never going to have another dip at some point, right. So it just depends on your strategy. My strategy is like, okay, well, my thesis is, is that LUNA should be trading somewhere closer to between BNB and Ethereum, not where it is now at some point in the next year or so. So my thesis is I want as much as possible at these prices, and I’m not going to ever be right 100% of time so it’s better if I get a little bit here and there. And if I get some of it on Kujira, I get some of it via staking, I get some of it via bLUNA UST rewards. And I’m just sort of playing around and it satisfies my need to play around and I can just…
And then if I use UST, by the way, that I borrow off of with Anchor, and I park it on Earn and let’s say I don’t have much conviction, like at $55 I didn’t feel like going all in, by the way, I did not do that, by the way. It went down to $50, $52 or something like that, right. And I didn’t go all in, I didn’t use up all my UST. If I had absolute conviction that it could never go down lower, my LTV’s gonna be fine, maybe I would just throw it all in there. But I don’t ever have that much conviction on anything. So I decided to leave a substantial portion of that UST unused I think almost 80% of it, actually. So did I make the most efficient choice? No, but it was a choice that emotionally felt fine for me that moment, right. So it’s what you can live with in the end, what you can sleep with in terms of your risk exposure.
When you say… Oh, sorry, Nick, when you say “unused” do you mean Anchor Earn 20%?
Yeah, I just left it in Earn during that time. Yeah, I want to counter the cost of borrow, right. So if I’m paying 2% or 3%, 4% to borrow, I want to at least be making that return. So the net effect is at least neutral for borrowing costs. And then from there, I can just wait and then deploy however much I feel comfortable with, right. So in that instance, I think I use 10% of it… I bought more today, though, at $61 maybe. Someone tweeted that the arb was 3%. One of you guys tweeted that it was a 3% arb LUNA to bLUNA, I’m like, “Ooh, that’s cool.” Yeah, was it you? [chuckle] So the moment I saw that I’m like, “Alright, cool. I’m gonna just get more LUNA now.”
It wasn’t I me, I don’t remember, but yeah, it was 3%.
But I even though I didn’t catch all my money at the very bottom, prices starting to move up, the market’s correcting itself a little bit, I figured why not, I’m getting a 3% discount, I’ll go ahead and use that UST, get some LUNA with it, convert it to bonded LUNA, I have that for LTV purposes if I need it, and whatever, I didn’t get a perfect… So in other words, just like you guys, I didn’t go all in at the perfect bottom, right. I’m just picking and choosing prices. And I don’t get as much at the higher levels as I do at the very lower levels. Don’t get me wrong, I’m being more aggressive at the bottom. But that doesn’t have to be the only place you buy. You can buy on the way up too, in theory. It just depends on how much FOMO you have, I guess. [chuckle]
As a percentage of your… Let’s just say, just sticking into LUNA, as a percentage of what you would hold in UST compared to, relative to everything else you’re holding in LUNA, what percentage of capital do you actually hold out in UST? Just for sideways movement or downward trends. Where exactly do you like to position just having a little money on the side or a lot of money on the side for moments like this?
Yeah, right now I don’t have that much overall remaining in UST. Now I also periodically, by the way… Sometimes I’ll just go on Coinbase or something, and just go buy fresh LUNA outright without borrowing also. So if I don’t have my cash ready, but I’m like, “Okay, I don’t want to borrow a whole lot much more. Because I don’t want to mess with my LTV,” or something I’ll just go and buy fresh LUNA straight off my bank account or whatever too. So it just depends on where my cash flow is at that moment, can I afford it or not, that kind of thing. But UST I don’t have a ton of right now. Yeah, I started deploying it at the bottom and I started converting to bonded LUNA. If anything, what I could do if I want to manage risk too, is the the the wrapped LUNA I bought on Coinbase, for example, I got a good chunk of it in the $50s. So now theoretically, I could sell that if I wanted to, and then convert that to UST and send it to my wallet, right. So then I could use that to manage further buys if I want to. So there’s different tactics you can use to… I don’t know, just make sure you have some cashflow available. Because let’s say you have some cash on hand in your bank account, you’re like, “Ooh, you know what, I’m really interested in buying that dip. But at the same time, that’s cash I can’t just be sticking in LUNA and leaving it there, right. I just don’t have that available right now.” It’s not unreasonable to just do a brief trade, if you get a really good discount at some point, right. And you don’t even have to go crazy, $100 here and there goes a long way if you can double it, right. So for a lot of people a tiny little amount to trade is not an unreasonable thing to just… Because the way you look at this is you’re already spending the time to watch the price action, right. Because if you’re in this Twitter Space, you’re probably one of these people that looks at the chart every day, or
You’re already deploying the mental capital.
Cxactly, you’re already deploying the mental capital, you’re already spending the time. So therefore, even if you make a little money on the side, on a trade here and there, assuming there’s not a tax consequence for you or whatever, then you may be benefiting from some small trading on the side, even if a lot of yours is staked or whatever, right. So that’s the way to look at it too. You don’t have to necessarily hold everything you buy. If you want to get rid of some because that’s just part of your plan, that’s just part of your plan. That’s just how it goes, right. So for example, I had my kid’s tuition to pay. And it was sitting there ready in the account, and I sort of degened on his tuition. Basically, I think I bought $8k worth of LUNA. And the value popped to $12k, And I sold it and sent it back to my bank account. This is just on wrapped LUNA on Coinbase. So I just made that trade. I’m like, whatever. I’m not trying to blow my money on this, but I had a good sense of which way the market was going to go. And I was like, “Yeah, sure.” Now, keep in mind, I have a lot of money, I could easily have paid the tuition. It’s not that. It’s just funny that sometimes you can just trade a little bit and make a buck and don’t have to worry about it too much. And the way I did it was the same way, I logarithmically bought all the way down. And the bottom buy was really big, so therefore when the price starts to rise even 20%, 30%, I was already even. And then it went up a little bit more than that and boom, I was ahead by double or something… Or maybe not doubles. I was up by 50%. $8k became $12k and I exited and that was the end of it and I sent it back to my bank account. So sometimes If you’re already spending the mental capital, even if you don’t intend to hold that position forever, it’s not unreasonable to take advantage of the time you just spent monitoring. That’s how I look at it.
Kind of like having a little loose coin in your pocket, is that what you’re saying?
Yeah, kind of. Don’t get rekt doing it. I mean, again, the whole trading enterprise is part skill, part intuition, part risk management and my general senses and on a Martingale logarithmic buying strategy, with crypto being as high velocity as it is off the bottoms, you can make this work. You can’t do this with the stock market or something, right, because the velocity is not there. So if I go and buy Apple stock today, at whatever it is today, at $150. That’s great. But that doesn’t mean it’s going to pop right back up to $180 by next week, right. That’s not how stocks work. So the extreme velocity of crypto allows you to do things that you can’t do in stocks, in my opinion, especially on strong cryptos with high volume and high velocity like LUNA has, you can be a little bit more aggressive in my view. That’s kind of how I look at it. But let me get reigning on, he’s been waiting a little bit here. Sorry, for the wait, we’re just sort of carrying on and on. [chuckle] Are you there, man?
Hey, I’m here. Thanks, Cephii, for everything that you do for the community, I’ve really learned a lot listening to a lot of these Twitter Spaces that you’ve had. I want to get your opinion on Prism Protocol and kind of thinking about the value of p versus y LUNA. I’m not sure if you listened to the launch Q&A that they held, I don’t know, maybe a week or so ago. I had asked Hyperion about some comments that he made when he was on the Delphi podcast about how the whole idea came about. He had previously worked in fixed income and kind of based this idea of refracting yield bearing assets on bond strips, where you have a bond that matures at a certain date, and they’ll sell off the principal, so you have to wait until the maturity to be able to cash in the stripped-off bond principle portion to redeem for the principal. And then there’s another portion, which actually collects the coupon payments during that time. And the idea is that, if a bond is trading at par, it’s trading on $1,000. So let’s say, 6% bond, it’s paying $5 per month monthly for the next year, the stripped off coupons might trade for something like $55, and the principal portion would trade for something like $945. Together they’d be worth the par value that it’s currently trading at.
So, if you think about that in terms of where the value lies and the yield to maturity, if you took a bond that was 30 years out, obviously that’s also trading at par, the proportion of the value of that bond, much more of it would go to the yield portion of it, because it takes so long for that principal portion to mature. But then thinking about what Prism Protocol is actually launching, which is a perpetual, in a perpetuity, the principle never matures. So, in essence… Whereas, if it was a time based, refracted version of LUNA or whatever asset, you would be able to take the principal portion, wait a year or however long and just turn in the principal portion for the principal, which would be that LUNA.
You’d normally get the entirety of your LUNA back.
Exactly. And so, in the case of a perpetuity, that doesn’t exist. And so like the example that I gave, if you think about one year of how much of the value of that bond goes to the principal, it’s quite a bit, because you’re only waiting a year to get the principal back, 30 years, it’s quite a bit less. But if you never can turn that in, I just don’t see any value in the portion of it that is the principal other than the fact that they’ve allocated governance rights for LUNA to that pLUNA. So in my mind, it sort of just turns it into a governance token for LUNA, all of the value remains with the yLUNA. And especially if you think about it in the context of… Let’s say the value of LUNA increases to $1,000 over the course of the next year, hypothetically, I mean I would still expect the yield on that to be around the same that it would be today. So it would probably be paying around 8%. So over the course of that time, the the yield is actually increasing in dollar terms. So all of the value for that principle accrual should accrue to the ytoken. And I just don’t know what I’m… I just don’t see where the value accrual mechanism is for the for the pLUNA.
Yeah, so from my understanding from our discussions with Hyperion, and Jimmy and others is, well, for starters, you have a variety of kind of interesting market forces at play. One is, keep in mind that when you refract your LUNA to principle LUNA and yield LUNA, at that moment of refraction, you basically have the opportunity to go back to regular LUNA, right. So at that moment, the moment that you refract, your pLUNA and yLUNA in your wallet are literally worth exactly the same as the LUNA you just had, right, that’s one thing to keep in mind. The second thing to keep in mind is if you go on the open market, and you buy some yLUNA and you buy some pLUNA, you can kind of create LUNA with that. So any situation that exists in which, let’s say for example, the yLUNA is worth a certain amount, and the pLUNA portion is worth, let’s say it’s worth too much, so that yLUNA and pLUNA actually equal more than one LUNA, then you’re going to have a reason to sell those individual pieces, because then you can buy more LUNA outright, right. And any time yLUNA and pLUNA combined are lower than LUNA, you’ll have an arbitrage opportunity as well, because then you could basically buy those two things, convert to LUNA and then sell it, right. So you have these interesting… So the pLUNA portion is going to have value automatically one way or the other, whether or not it actually has a specific separate utility. Now, what portion of the valuation… And Jimmy is actually right here, he might be able to hop on if he has a moment to kind of cover what his thinking is. But basically, there is the yield piece of the puzzle, but the the question is, if let’s say for example, the principal LUNA token was cheaper, right, and you’re like, “I want to get just more of that.” What you’re saying is that since you’re losing the yield, and you’re only getting governance capability, why would you not… Why would you want to even do this?
One would reason you might do it is because you want to play the arbitrage game. So you actually might be able to get discounted pLUNA and then you can use that for the arb possibility. So keep in mind, the arb trade is going to be pretty busy too, on top of the fact that people want the yield versus principal. The other thing too, and maybe someone knows more about this than I do, but I believe you might be able to use things like pLUNA on something like Mars Protocol to actually borrow against it. So you can use it as collateral as well. So there may be some other utilities for pLUNA that we don’t fully know about yet. And you may be right, maybe the yLUNA will always be higher, but then of course the yield on LUNA is going to drop, right. It’s not going to be 8% forever. It’s higher right now because of the Ozone burn of the community pool. So there’s this extra yield that we’re getting right now. It will not be this high, say for example, in a few years. So people might decide on what yLUNA is worth based on the future value of the yield. Also, the yield is valued differently over time because the UST portion of the yield is fixed relative to the amount of LUNA you have. And the LUNA yield is rising in value with LUNA because it’s paid in kind. So the yield curve is interesting for LUNA, it’s a little bit different than it is for a lot of other coins that are paid in kind. So that’s gonna have some role in the pricing mechanism. But yeah, we won’t know all the nuances of this, honestly, until the market just prices this stuff, right. And you’ll see what it’s worth one way or the other.
Yeah, I get the whole idea of the arb opportunities and potentially you can use any asset as collateral, I guess, in theory, for whatever. I’m just strictly talking about in terms of when we think about dividing up the value of LUNA between the two tokens and where the value should be accruing. Conceptually, I just don’t… Aside from the governance rights that you can get with pLUNA, and I guess it would be an interesting question what the governance rights are for LUNA. But even…
I guess it also depends on how powerful the governance rights become in terms of utility. If there’s mega whales that actually want the pLUNA token for that governance, they don’t really care about… There’s a lot of accounts that don’t even claim their staking rewards, right, they don’t care. So maybe there is an element of large whales that want the governance portion for warfare or whatever. So I don’t know.
Yeah, and I guess how I was kind of thinking about the future yield of LUNA as well, is that yes, right now the community pool, a large chunk of it was burned so the yields went up. But if I think about what is supposed to be happening over the course of the next year, where we have $90 billion worth of LUNA that’s going to be burned to create more UST and at the same time, the number of LUNA that are outstanding is going to go down, I would think that like those two forces, should keep the yield relatively high. I mean, outside of the fact that that portion of the community pool that was burned.
Yeah, I would tend to agree, as the transactional volume on the network rises with everything from a 4x to whatever, you should see the yield be pretty sustainable per LUNA, just like you said, because the number of staked LUNA is going to be… That’s the reason why you want as much LUNA as you humanly can find. And the reason is, because years from now a majority of that yield is going to go to the people with the most LUNA. So LUNA is actually designed in such a way that the rich very much get richer, by the way, everyone should be well aware of that, so if you’re some kind of socialist or something this is the complete opposite of that. Because it is designed in such a way that the more you have the more of the yield you ultimately claim. And the less possible it is in the future for you to be able to afford the same amount of yield return, right. It’s not like ATOM in this regard, or like Polkadot, it’s different. So yeah, your points are well taken. And I think we’ll have to see how the market prices this mess. I’m still confused about Prism, and I’ve talked about it quite a bit. So we’ll see what… I think we just have to see, ultimately. Until we know what the market forces do, my strategy is I’m not going to go too, too crazy with it. I’m going to do the refracting for the purposes of doing some of the PRISM token farming for sure, right. I’m going to be participating in buying some PRISM token when it comes out. I’m doing those things. But as far as me going nutty with converting all my LUNA to yLUNA or pLUNA or something like that, I’m not doing anything of the sort.
I’ll refract it to start with and then make some decisions as time goes as to, like you said, how the market price of these things. I’m going to be really careful in deciding what I’m going to buy. My thinking is if I can find either of the yLUNA or pLUNA at a really substantial discount to the market rate, so whatever the rate of pLUNA is, it’s gonna vary, right, on a day-to-day basis. So let’s say it’s up 10% today, it’s down 10% tomorrow, it gives you yet another price exposure within LUNA that keeps you in LUNA, which is interesting. So in addition to the traditional price exposure of LUNA, you’re going to get even more price exposure because pLUNA is going to trade up and down at least to some level or the other, right, some sort of volatility is going to be present. And that volatility is what I have my eyes focused on, honestly. I talk about volatility arbs a lot, but that volatility is where your opportunity is gonna lie, right. So if you find pLUNA and you’re like, “Oh look, it’s 10% down today. I’m going to get a little bit of that,” and tomorrow yLUNA’s down like 15%, you’re like, “Ooh, I’m gonna get a little bit of that.” You may actually be able to have a more efficient DCA process, possibly, for LUNA if you’re paying attention here. So that’s how I’m looking at it. Wven if I just want LUNA, right, even if I don’t care about the yLUNA or the pLUNA sub halves, I could still possibly find some discounts in the market.
And I was talking about also the idea of the yLUNA pLUNA rebalancer bot could be pretty amazing because then you could have rebalancer without UST in the middle of it. You could have the arbitrage bot buy you more yLUNA or pLUNA depending on which ones more… The acquisition of more LUNA, while actually still being totally price exposed to LUNA the entire time. So there’s some really interesting things that can be built on top of that. So I think the demand for pLUNA is going to be in the trading value of it, even maybe more so than the governance value of it, in my view, at least for me. I’m not too worried about the governance angle right now, I’m looking at it from the angle of volatility. So I think you may get some access to pretty decent deals on LUNA, especially if you countertrade the rest of the market to some extent or the other, right. You buy the stuff that’s cheaper at any given moment. It could be pretty interesting so we’ll see.
Yeah, Agreed. Agreed. I think there’s gonna be a lot of good opportunities for arbs and whatnot. And it’s gonna be interesting to see how it trades, but I guess I’m just more optimistic for yLUNA, it’s utility versus that of pLUNA. But yeah, thanks for your comments.
Yeah, I mean, either way, even if you sell one half and get a half of the other, you could do some interesting trickery too. You could, say for example, you could refract your yLUNA, and then you could preserve the yield element. And then, say for example, you could trade the pLUNA while not risking your yield. And then you could basically buy and sell it as it goes up and down a little bit, or put it into a rebalancer bot and then take the yield off of that and get yourself more yLUNA too. So if you do love the yLUNA portion of it and you want that yield, there may be ways to optimize your ability to get more of it that might involve a system that is not just simply converting all your pLUNA to yLUNA at one given moment, you could do it a little bit less risky and you could basically make the money on the arb trades off the pLUNA and then buy yLUNA, so you’re not risking any real capital, or you’re risking very little at that point, in my view. So there’s some low risk strategies to build yield positions. I think that could be pretty cool. We’ll see. Let me get CJ on for just a minute. I’ve got to get to a phone call because I got some calls to make. And then I’m supposed to meet up with the Terra Bites guys to do a discussion. So they wanted to have me on to do something, if I have my voice left after all this. [chuckle] So we’ll see how that goes. But CJ, you want to do the last comment or question?
Yeah, thanks Cephii. I hope everyone’s keeping their head above water too, in these choppy markets. I wanted just to comment and a question following the last comment about the value of pLUNA and the way that I think about yLUNA and pLUNA is kind of like thinking about staked LUNA and bLUNA. The staked LUNA is kind of your yLUNA, and the pLUNA is like your bLUNA in that if you can collateralize that gives you massive opportunities for growth while you’re not giving up the yield. So I think there’s huge value in pLUNA. But my question is kind of like is what pLUNA is collateralized against going to be the full value of LUNA, because if that’s the case and pLUNA is trading pretty cheaply, that’s just massive opportunity in terms of being able to buy something that’s less than the value of the token but being able to borrow against the full value of the token. I think that’d be amazing.
Right, that’s what I was saying. That’s another point you bring up too. One negative, theoretically, on the yLUNA is to earn yield on it you’ve got to stake the thing, right. It’s not a autocompounded yield so you actually have to park that. And it’s not going to be as easy to “trade” it because you’d have to unstake it and whatever. So the pLUNA piece of the pie, you could be trading it, in theory, if you wanted to get some price action while getting the yield. So you might actually see some interesting situations happen where, say for example, at the top of the market you might see people exit their pLUNA position that they’re trading and buy more yLUNA. So yLUNA’s price might go up at certain points in the market because they’re moving to take their gains and basically add some staking position to it so that they can make yield long term. And then when the price of pLUNA falls, maybe they buy some more and then do the same thing. So this way you’re not gambling with your yield-earning potential, you’re only gambling with your price movement, right. So it’s a risk… The Prism system creates a new form of risk management strategies, whereas if you needed to preserve your cash flow element, you could do so. Not to mention, remember, yLUNA you’re going to have some other interesting features like the ability to divert the yield to different things like buying stuff on Pylon, or take a loan on Kinetic Money, or something like that. For example, if I had yLUNA and I don’t sacrifice that, I could do a self repaying loan on kinetic, for example, and then I could basically go and buy… Let’s say the price of yLUNA maybe is less at the bottom of the market, and I could buy that more of it, or if I pLUNA is cheaper, I could buy more of that with my borrow. So I can basically use my borrowed money to then get the highest price action possible by buying the cheaper coin at that moment. And then when I ride it up I could, say for example, sell that, convert it to more yLUNA, park it over there on Kinetic, get another self repaying loan and then play the game again. So there’s a lot of exciting risk management/borrowing/buy the dip trading philosophies that can emerge from this that are quite… I don’t know, they’re pretty intriguing to me, I think it’s gonna be a lot of fun. I think there’s gonna be a lot of “safe” ways to make a buck off of this. [chuckle] Yeah, CJ, does that answer to what you’re thinking?
Yeah. And I’m kind of keen to see when you’ve got bLUNA, for example, you can borrow against the full value of LUNA. So if your LUNA is $100, you’re borrowing at the price of $100. And I’m just keen to see with pLUNA, if that’s the same deal in terms of collateralization. Because if pLUNA is less than $100 bucks, but you can borrow against $100 worth of value that’s pretty crazy.
Yeah depending on the utility of the different tokens from the perspective of borrowing, and which systems allow you to borrow the most amount for the least amount of risk, that might have a role in what you decide to… Whether you want more pLUNA or yLUNA too, right. So yeah, definitely some… And I don’t know what Mars’ scheme is going to be, I don’t know if anybody here knows how that’s gonna interact. The other thing I’m not fully versed on is how Levana is going to work, and the use of a pLUNA 2x, right, because if you can do 2x perpetuals on your pLUNA, then not only could you basically have your yield protected by parking it in a staked position, but you could also take, for example, your yLUNA yield and since there’s not a lot of cash coming off of that, you got some coming but it’s not huge, right, but let’s say you can take that yield and you can buy pLUNA 2x with it, for example. So when the market is in a place where you like it, you could take your yield and divert it to some of these tactics. So for example, the exponential buying strategy I mentioned earlier, you could, say for example, when LUNA takes a little bit of a dip, you can buy a little bit more LUNA, or you can buy a little pLUNA, or whatever is cheaper. If the market takes a really big dip, you could say, “Ooh, I want to get the pLUNA 2x,” right. So at the bottom of the… Does that makes sense? So anyway.
Yeah. Definitely. Yeah, that’s cool.
There’s gonna be a lot of fun involved with that, but let me let you guys go and I’m going to break because I’ve got some things I’ve got to do, and now I’m supposed to get on with Evan or one of the guys for Terra Bites in a little bit, and see what… We’re going to try to produce some little YouTube thing I think, and figure out what we’re going to talk about. So alright, guys, have a good day, everybody.
Thanks for checking out another episode of The Ether. That was a Cephii Space, LUNA News and Trading Discussion. Recorded on Monday, January 24 2022. This episode of The Ether is brought to you by WeFund. WeFund is a community crowdfunding cross-chain incubator on Terra and it’s the first launchpad that implements a milestone funding release system to protect investors. All money raised for projects is deposited in Anchor Protocol and is refundable, and all decisions are based on community voting power. WeFund is community focused and designed to be a user-friendly experience for both project creators and investors. Be sure to follow them on Twitter and join the Telegram, links are in the show notes. Find out more at wefund.app. TerraSpaces appreciates their support. For terraspaces.org, I’m Finn. Thanks for listening.