Hello and welcome to The Ether. Today is Wednesday, December 29th 2021. This is the LUNAomics Big Picture Strategy Q&A. And if you don’t know what the LUNAomics Big Picture Strategy is, you better get over to the LUNAomics Twitter and check the pins. Let’s take a listen.
Does anybody wanna ask anything before we start the class? We have nine minutes to kind of just cruise. LUNA is down. Is LUNA down? Where’s LUNA?
Hovering around $86, $87 last I checked in the morning.
$85, $86, yeah.
Yeah, I’m pretty excited about something to share about that. Cuz everything is working… The strategy that we discussed in the last Space, it actually is working in a way that I didn’t anticipate it working. I mean, I kind of knew how the liquidity pool would work but it’s actually working way better than I thought. And it works great when the market goes down. So I’m going to share about that at the end. But even though LUNA is down from $100 to $85, I’ve actually picked up 500 LUNA without even doing anything so, I mean, I’m holding a lot more in the pool, the LUNA-UST pool, but I’m going to explain how that works. So this strategy, I think it’s perfect in every way for what we’re moving into next year. If the underlying assumption is that we’re going to 10x next year, I can’t think of a better strategy than this. So I’m pretty…
You did it within the Terra ecosystem, right? Not fund from external source, bring it to Terra and then convert into LUNA?
Yeah, everything is in LUNA ecosystem, yeah.
Okay. Got it. Because I was trying to get maximum $10k worth of LUNA, but I had a lot of trouble because it’s always on Polygon USDC. And I had a lot of trouble getting it converted to UST and then buy out on KuCoin and then send it back to Terra and stuff like that.
Yeah, I’m pretty one dimensional. I haven’t… I stick with stuff that work. And I haven’t found anything that works as nicely as everything that works in Terra. So I was doing a lot of stuff with DeFi in Ethereum. Well, not a lot of stuff. But that’s where I was spending a lot of my time until I came to Terra and it’s been a one way street for me.
Well, yeah, once you’re in you’re not going out. That’s like me.
I mean, why pay $75 per transaction and wait half an hour, when you can just jump to…
I have some rewards coming in every month from seed round for Qi, that’s like they are sending money to save the gas on Polygon in terms of USDC not on Ethereum blockchain. They were supposed to do that earlier, but to save the gass they are just sending on Polygon every time. So every month I get like 10,000 and then I have to figure out a way to bring into Terra. So the easiest way I figured is like 1inch convert to MATIC, send MATIC to KuCoin, sell MATIC right away at the spot pricing. And there you go.
Chad THOReau 4:18
I would check out Rango Exchange. It’s like a bridge aggregator, it might have a… It’s probably a similar path to what you’re doing. But it might come up with something a little simpler.
I was looking for Wormhole to convert USDC on Polygon to UST in Terra, but I don’t see that option yet. Otherwise, that would be literally cool one way. Nothing to do. Yeah.
How my audio? ‘Cause when I went and listened to the Space, the last Space, I was using my Apple Airpods and it wasn’t coming out really clearly.
It is clear, it is clear. Audible.
Chad THOReau 4:55
Yeah, sounds good to me.
Yeah, hopefully everybody had a chance to just review that one tweet of the general strategy. Even though that has changed, because this year, instead of investing in cashflow, I actually did that last the last space on looking at that old strategy of using borrowed money into cashflow LPs, and then directing those cashflow LPs into buying LUNA, and I compared it straight to buying LUNA itself. And it was just like, hands down way better to buy LUNA. So I’ll talk about the general strategy just to get everyone up to speed and then jump into the using… More LUNA.
So how long it took, LUNAomics, for you to reach this goal? Two years, one year, three years?
Yeah. So that’s all in the pinned tweets as well. But it was $6,000 that I started with, starting capital probably like, I don’t know, three, four years ago. But it took, I guess 20 years all together to get to like $140,000, which was my beginning balance in 2021. And then from $140,000, I just ramped it up to like 5 million, and pretty much using this strategy. But I was using… I was going back and forth between using borrowed money to get into LPs, to generate cashflow, to buy more LUNA, or to invest in KDA, or all these other things, and then just stacking more LUNA. I would go back and forth. I never took the time to evaluate what the results of my actions until the end of the year. So at the end of the year, I went back and I looked at what I was doing, what worked, what didn’t work, because I really want to make what I’m doing very efficient, laser focus, direct my capital to something that works. And so it’s always a balance between risk and reward. But the less focused that you are, you can be more diversified and kind of have… Spread your risk around. But then you don’t have the same potential of rewards that you could have if you just focused on one strategy. So I do admit that having one strategy and just putting a lot of capital behind it has more risk. And that’s going to be the next Space.
The next Space, I want to talk about risk management, because that’s one of my main concerns is that people invest wisely, and they mitigate their risk. And at the same time, though, you don’t want to be risk-averse, where you don’t expose yourself to risk, because it’s only through risk that you can get rewards. So we’ll talk about that in the next Space. But this Space, we’ll talk about the general strategy. And I guess we’ll start early, since it’s just one minute. But the reason why I’m doing this format is Twitter is a really bad platform to post content that you can search and you can get back to. So what I was doing when I first got into Twitter, and I was finding… Doing things that were successful. I mean, I post stuff that’s worthless garbage, but there are some tweets that I put a lot of thought into, and they’re very, very valuable tweets. I mean, just with my friends, I’ll show them a strategy. And just in the past year, I probably worked with 12 of my really good friends and all of them have gotten over six figures. My daughter, she’s a freshman in college, but I use a lot of these strategies with her account. And she directs her account, I don’t have her seed phrase, I taught her how to generate her wallet and she has her seed phrase. I have a seed phrase that I keep in case she loses hers, but I never go into her account. It’s a self directed account for her. She’s been doing that since she was a sophomore in high school. And she’s never had a job outside of… She’s never worked full time in her life. But she saved her money since she was like, I think, fifth grade. And so by the time she was a sophomore she had like $2,000 and we put it all into Bitcoin.
And then she thought… We got into Bitcoin when it was like $4,000 went all the way up to $20,000 and then crashed down to $3,000. And I remember her crying because she lost so much money. But I’ve been trading for the past two decades. So I think that being able to emotionally handle the volatility of it is kind of like a muscle that needs to be developed. And for her to develop that at a young age, I think is priceless. So I just had her invest in Bitcoin, and then it crashed. And she was like, all mad at me. And I told her that I would insure her account. So if she just held it to the time when she was a senior, if it didn’t get backed up to where it was before, that I would just pay her the money. So that made her feel better. And then Bitcoin did go back up to $20,000 and then launched back over that. And we just, because I’m always in the space and looking for the best things, moved from Bitcoin to Ethereum. I loved Binance, I got into Binance early. And then moved the capital from Binance to LUNA slowly, as I use the ecosystem more and really liked it, and started using this strategy with my own account, and then taught my kids how to do it with their accounts. So my daughter’s a freshman in college, and she has over a million dollars in her Terra wallet in her account, and it was throwing off about, I don’t know, $300 a day with a strategy that is that general strategy. And my son, he’s like a junior. And his account is over $70,000 and he’s making more money through the passive income of his account, than he doesn’t his job selling drinks and stuff.
So I know this stuff works. And, my close friends, they have experienced really good success with it. And of course, it’s only because LUNA has performed so well. But you can take what LUNA has done and you can put some turbo boosters behind it. So yeah, so then I started posting on Twitter. And I would put a lot of thought into these different posts, just so that people on Twitter could understand how they could utilize their LUNA in different ways. But on the timeline, it just drops, and then all of that hard work and thought into these tweets just disappear. And so that’s why I made the index tweets. I made a Google Doc that puts all those tweets on that one sheet. And so somebody can just jump on there and kind of go through… I sift out all the junk stuff and I just put in there, kind of like the gold, just the stuff that have value, and so that someone doesn’t have to go through my whole feed to find those stuff, you can just click on the index and save a lot of time, and go through that. So on there, there’s tons of… The reason why I put that indexed tweet there is because I would notice that I would be repeating the same things over and over again, answering the same questions, like why do you have two wallets? And what about risk management? And all kinds of stuff like, what is the blockchain explorer that you use? And if I had $1 for every repeated question, I’d be a multi, multi, multimillionaire. So I just put those things on an indexed tweet. And every single time somebody asked the question, I just say, “Look at my pinned tweet.”
And then when I did the Space, a couple days ago, I realized a lot of people haven’t read those, because they’re asking questions that are all answered in those pinned tweets. So then I thought it would probably make sense if we just… Now that there’s a lot of followers, I think there’s over 12,000 followers, now. There’s always gonna be people that have that exact same questions of the people that came in a week before. So I didn’t want to do Spaces where I’m constantly repeating myself, because that takes even longer. So if I put together this format, where we go through the pin tweet systematically, then every single time we’re talking, everybody will be on the same page, kind of have the same language, understand the same concepts, and then we can be a community that instead of having a lot of questions, we can have a lot of answers and people can cross-pollinate ideas, and we have like this foundation of concepts that we understand and we can tweak and make better. So what I want to do in the next… I don’t know, it’ll probably take at least a month to two months maybe, go through all of these tweets. Everybody reads them before the Space and then I’ll kind of summarize the tweet, and then open it up for questions or input on how things could be better, or if it didn’t make sense, to clarify those things. So kind of the…
I mean one thing that was really cool, I don’t know who it was, but somebody had sent me a spreadsheet. And he… The last Space, he caught it. The question was, when do you move your liquid LUNA into your bLUNA vault on Anchor? And I said, “I just look at my loan value, and I look at the value that’s in the wallet of my liquid LUNA. And when LUNA goes up in price, then the amount of liquid LUNA, the value of it is going to be more than the amount that I owe. And so whatever the difference is, I’ll take that convert it to bLUNA, add it as collateral, lower my LTV, and then I can push up my loan to value a little bit more and then buy more LUNA. And then put that in my liquid LUNA and my wallet.” And so this guy went back to my spreadsheet, and he was like, “That wasn’t calculated in that spreadsheet for 2022.” So he actually went in and tweaked the sheet for that exact calculation. Because when I did, it was kind of just like a broad stroke. This is how much you can expect if you borrow 25%, 35%, 45%, and put it into LUNA. But I didn’t take into account the… Of it. So he actually did it and it’s awesome. So I’m probably going to retweet that so people can look at that, and have a more accurate expectation of what you can do if you move your liquid LUNA into your bLUNA vault, and you do it with the underlying assumption that LUNA will 10x in this next year. So that’s kind of the… Hopefully the vision that we can do together, go through the pinned tweets, everybody understand it. And then when somebody new comes in, they can just go to the pinned tweets, read it. And there’ll be a link to the TerraSpace where they can click on that and listen to all the questions and answers. And then they’ll have a pretty good idea of what that tweet entails. And then once they’re all caught up, then they can jump into the Spaces and contribute. So that’s kind of the idea. Any input on that before we jump in?
I think I say this on everybody’s behalf… For everybody here, on behalf of them. Thank you, thank you for doing this for us. We really appreciate that you’re giving us this value just for free, really, and just being able to share your experience and everything you’ve gone through in your strategy. Thank you for that.
Yeah, I really enjoy it. And I think it’s just a good way of contributing. I mean, so many people contribute to this ecosystem. And I’m experiencing like an amazing amount of success with what Do has provided for everyone. So this is just something small that I can do. So yeah, thanks. And it’s enjoyable for me to do it.
So LUNAomics I think if you want to show it on the whiteboard or something with a spreadsheet, I think twitch.tv can do a video shares and also audio, video together. So think about it, if you want to do too, sometime.
Cool. Okay, so let me just summarize the tweet. It’s not a very long thread, and then we can just kind of jump into it. So the way that the strategy that it kind of ended up in is that, I divide my investment strategy into three different buckets. The first bucket is the apex asset bucket, which is LUNA. And then the second one is cashflow assets, which are LPs or anything that generates cash. And then the third is speculative assets. And so the strategy, I first invest my earned income or my W-2 income into apex assets. And so it is LUNA. The reason for that is, is the way that I used to get my capital to invest in the traditional market was I saved up all my money to buy a home. And so my home was kind of like my apex asset. I knew it was going to appreciate in price. I knew that I could borrow off of it. I knew that it would give me… As the house would increase in value, I would be able to borrow more off of my house. And so that became this asset that I would never ever sell. My friend who is a very successful businessman, I asked him one day while we were hunting, I said, “Hey, what’s the secret to wealth?” And he said, he learned the secret to wealth from a Chinese man that he worked for when he was a kid. And he worked in this furniture store. And he said that this business owner told him the secret to wealth is that you never, never, never sell.
And so, my friend, he just kept that in his head. And he started noticing that a lot of people who had great wealth, were people that never sold. They would accumulate real estate, and then use the cashflow from the real estate to purchase more real estate and leverage that, and then purchase more, and then generate more cashflow to do the same thing. And so over time, every single one of these homes would appreciate in price. So they’d have more to be able to leverage, and more cashflow to be able to leverage, and that’s how wealth was created. So that’s what my friend… That’s what he did. And when he told me that I began to notice that as well. That passive income and real wealth came from the accumulation of assets, not flipping. Because a lot of people in crypto, they have this mindset… There’s different stages and I’ve tweeted about that, it’s in my indexed tweet, but there’s different stages of crypto. When someone first comes in, they’re a flipper. They’re just looking for something that will 10x. Like I just saw this girl’s tweet that she got into LUNA at 50 cents. And she said, “I made 200x return, I’m selling everything and moving on.” And that’s somebody that’s thinking first… Intermediate. Because as long as you think like a flipper, you’re always going to have to work. And you’re always going to have to look for the next thing. And the next thing could flop or the next thing could be good, but you’re always working. And you don’t want to work for money, you want to make money work for you.
So the principle of investing in an apex asset is that you’re looking for something that has the properties of a house. And so I’ll just go back to the different levels of thinking in crypto. So the first is, you’re just looking for something that’s going to 10x. And the question is, what coins do I buy? And there’s so many people that that’s all they do is they just look for the next coin. What’s the next 10x, the next 20x coin? And I would say 90% of everybody in crypto has that mindset. Then there’s the the next level is, now that I know what to buy, when do I buy it? And then so now you have all these TA, technical analysis guys that are drawing lines all over the place. And I’ve traded for 21 years, I understand that stuff. But Fibonacci levels, trend lines, moving averages are kind of all you really need to know to make good decisions of where something’s gonna go. So the first level is what am I going to buy? The second thing is when do I buy? And you use TA for that. The third is, how does this thing capture value? What’s the tokenomics of this coin? And much less people think through those lenses. And then the final thing is, what’s the utility? What does this coin do? And so, if you go through the lenses of that, when you when you get to the bottom and you evaluate what does the coin do? What’s its utility? How does it capture value? Oh, you buy it and when do you buy it kind of depends on your timeframe. And then what do you buy?
I haven’t found anything that comes close to LUNA. I mean LUNA is just this black hole of value capture. It’s the only layer one that’s deflationary, which goes down in value. And so like Bitcoin is kind of consistent in its supply. And then all these other tokens are inflationary. They’re dumping more coins on the market every year. Whereas you have this, LUNA that with its initial supply of a billion, and now it’s just burning the supplies because of the demand of UST. So just this year alone, we’ve burned through more than 10% of the total supply of LUNA. And that’s with half the year only having two protocols. And then the last quarter, just this exponential growth of protocols. And we’ve already burned through 10% of the supply. Because the use case for UST is so massive, it’s growing at an exponential rate. So there’s all these different things that make LUNA the apex asset. So one of the things that I look at with LUNA being an apex asset is, it’s like that house that’s going to increase in value that I’m never, never going to sell because as it increases in value, it just becomes that much more useful. I can borrow more off of it, and I can do whatever I want with it. So why would I sell it at $100? Or why would I sell it at $1000? When I can borrow that much more off of it, and it becomes that much more useful. So that girl that bought it at $50 and she’s selling it now because she made a 200x return, she doesn’t understand that it’s not just about the profit of the coin. Not only is she going to have to pay the 30% capital gain on the sale of that coin, but she is not going to be able to utilize the 10x return or the 10x gain that is probably going to happen next year. I’m so convinced that it’s going to go up 10x next year that that’s pretty much the strategy that I’m using. So LUNA has developed not just something that’s deflationary, not just that has tons of different utilities like bLUNA nLUNA, pLUNA, all these other LUNAs that are coming out. But there is this moat around the stablecoin UST that I don’t think there’s any other stablecoin that that can mimic it not anymore.
The network effect that LUNA has created is a network of a network. So Metcalfe’s Law. Metcalfe’s Law talks about the value of a network is the users squared. And so a cellular company is a great example of a network. It’s one cellular phone is worth nothing, two people using the Sprint network is kind of good. And then as more users are added, the value of that network increases, and then it’s harder to take over that network or overtake that network. But what Apple did when Apple came on the scene is they understood the power of not just the network, but a network of a network. So they started integrating like, the Apple iPhone, with apps and with their computers and everything else, their music store. And they started creating these networks of networks, that now it’s virtually impossible for anybody to penetrate that moat. And so LUNA has created not just utility, with UST where you can spend, earn and save. But they have created a network of networks because you have people that use UST, but then now you have Anchor, and now Mirror, and now you have all these different protocols that have their own networks. And so to overtake UST now, it’s not just people that use UST for spending, like Chai in South Korea, and soon Alice in the United States, and Kash in Europe, but you have these protocols, and it’s just sucking in developers exponentially. So now there’s all these developers that are developing protocols.
One thing that is different about Terra that that no other blockchain has, is it has this North Star, that every single developer, their whole goal is just to develop a use case for UST. And I would assume that everybody that’s developing, they’re all holding LUNA. And so every single developer has the same goal. And that’s why I think you see, a lot of cross resources, people helping each other in the LUNA community, because if I hope this other protocol becomes successful to create a demand for UST, that’s a win for me, if I’m holding LUNA. Ethereum and these other smart contracts, they don’t have the same North Star that unifies all of their developers and all of their protocols. They’re all kind of competing for the same thing. So I think what Terra has developed is almost this impenetrable… And nothing isn’t impenetrable. But it’s going to be really hard to compete against LUNA and UST in any kind of way where there… Someone else is going to come up with something that has more use case to spend, borrow, and save.
So because of that, I look at LUNA and I see the trajectory, what’s happened from the beginning of the year till now. It’s almost like it took the whole year for us to even get noticed. And so, I don’t know if I talked about it in the last Space, but there’s two trains of thought on marketing. And one is, you spend like 30% of your energy and your talent on marketing to get your product out there. And then the other 70% on the product, product development. But the other train of thought is, spend 100% of your energy and your marketing on the product, and then when the product is really good, then the market will talk about it without you having to market. So long term, the teams that just develop on product and spend their dollars in their energy in product, they’re going to outpace everybody that divides up their energy and time and money into marketing, because they’re not going to be able to come up with a good a product. So that’s what Tesla has done. They’ve just spent all their energy, not on marketing, but just on the product. And now they’re taking over the auto industry. I kind of see that same thing playing out for Terra, because they’re putting all of their energy and their time and their money into products that are useful, products that are easy to use products that are cheap products that reward the end user so well, that it just doesn’t make sense to use anything else. And so when you look at what they’ve done this past year, they’ve just been working on product. They’ve gone from like 50-something in market cap, to now they’re in the top 10. And nobody can ignore them anymore. And they don’t need to pay for marketing at all. It’s just everybody’s gonna start talking about Terra and LUNA because they’re just in front of everyone’s face.
So the same way that the s&p 500 stocks suck capital into those companies because money attracts money, because Terra is already in the top 10, all the institutional investors that are coming into cryptocurrency, they’re going to be looking at the top 10 coins, top 20 coins, and then just diving into why are these coins valuable? Why are they in the top 20? And once they start evaluating, what are the utility of the coins, value capture of the coins, everything above, they’re going to come to the same conclusion, I believe that we all have come to, that LUNA is second to none, one of the best things to hold going into the future. And so when you have these institutional investors coming in to buy LUNA, and at the same time, all of these protocols are creating an exponential use for UST and LUNA has to be burned, I think this next year is just pointing to an explosive growth of LUNA. And when you compare the growth curve of… Cephii points that out, it’s his pinned tweet. You compare the adoption curve of Bitcoin or Ethereum, and you match it up with LUNA, LUNA has outpaced both Bitcoin and Ethereum in mainstream adoption. And it’s because of all the things that I’ve stated previously, there’s just nothing that compares to it.
So with that, that is the apex asset, that’s LUNA. And because of that, I’m never gonna sell it. Even if it gets to $1000, even if it gets to $10,000, I’ll be able to borrow that much more off of it, and do whatever I want. Because my long term goal is not to flip stuff, it’s to accumulate wealth. And the only way that you do that is you never, never, never sell. So that’s the first thing is you have to have that apex asset. From the apex asset, a apex asset allows you to borrow from it. So LUNA is something that you can borrow off of. So if you have like $100,000, of LUNA, you can borrow for $45,000 loan, that will put you up 45% loan to value, and then you can deploy that in any way that you want. So that’s where the cashflow investments come from. So that’s what I was doing part of last year until all the LPs got decimated. That’s like a whole nother story, and I think a lot of people in here probably got decimated with that. And there’s tons that I learned during that time.
But right now is actually a really good time to invest in LPs because, when something came out they had these crazy yields, everybody flocked to it, pushed the price up to places that it shouldn’t be, and just… By the yield. And then when somebody else came up with something, then everybody would flock to those and leave the previous one all decimated. But now it kind of seems like we’re at this place where all of the coins are, where they should be. And I think that that cashflow strategy is a real valid strategy, less risky to get involved in the LPs right now. Just be… The frenzy where the whole community… It’s a one thing is not there. So that’s one of the reasons why… Yeah, so I haven’t even done anything with Astroport, even though the whole community is going that way. I started looking at what are the best things to invest in, or the best way to invest. I started seeing that if I do believe that LUNA is going to 10x next year, that I should just put all my effort and energy and focus on how to buy more LUNA with the increasing price of LUNA. It’s the only way you can stack LUNA, when it gets up to $200, $300, $400. If use your W-2 money to stack more LUNA at that point, you’re only going to be able to leverage LUNA to buy more LUNA, if you want to do it in any significant way. So I put that spreadsheet out there so people could see it. And then I executed it.
So I have 25% LUNA, and then I bought some extra UST, so got up to like 40% loan to value, and then threw it in TerraSwap. And when everybody exited the TerraSwap liquidity pool to go to Astroport, now I’m making like 100% APR in the TerraSwap pool. And I’m just stacking even more LUNA than I anticipated to stack. So it kind of pays to not go where everyone’s going. And it’s one of the reasons why I’m not going to try to learn everything that comes out next year. I think it’s going to be almost impossible to learn everything that comes out just because so much is going to be developed. And I rather not fraction… I rather not have my attention fractionalized between all of these different protocols and trying to learn all this stuff, which I love to do. But at the end of the day, it’s about… I want to be very efficient with my capital. So I think the best thing is just to stack LUNA with more LUNA have at least 2x-3x LUNA at the end of the year, when it’s like $1,000. And then once I have that to deploy that into the different derivatives and utilize the different derivatives after all the frenzy is over. So that’s the basic strategy. Your apex asset, borrow off of it into cashflow, but I’ve changed that this year, instead of cashflow LPs, I’m just going to do LUNA. And then once you have the cashflow coming through, you can take that cashflow and then put it into more speculative assets like KDA, or RNDR, or QRDO, or whatever is the craze. But this year, I’m just kind of focusing on that. So any questions on that? So I think that’s pretty much the strategy that I talked about.
Yeah, and then the additional rules are like, whatever you have with borrowed money, you should have it accessible in case of a crash. So you don’t want to put it in Stader, or you don’t want to put it in Pylon Gateway projects, where you’re not going to have access to that money because if it does crash, you need to be able to pay down that loan in three minutes. So even taking it over to KuCoin and investing it into KuCoin is kind of risky in my opinion. It depends on how big your account is, because if you don’t do KYC with KuCoin, you can’t pull it back… You can only pull back like one Bitcoin per day. So if you have a larger account and then your loan to value goes to 55% and you need to pay that down but everything is in these coins on KuCoin and you can only move one bitcoin per day worth of coins, then you’re in trouble. So make sure that everything that you have with borrowed money is very accessible. Try not to let the debt get larger than your LP amount, or your cashflow investments. And then know that your cashflow you generate from the borrowed money is for spending, and you can do whatever you want with the cashflow, but the borrowed money is for investing and has to be readily available to pay back. So yeah, so if there’s any input or questions on that we can jump into the questions and answers now.
Chad THOReau 39:53
I have a quick one. So I know the strategy used to be to use the loan and to go into all the various LPs. And now you’re saying it’s more to directly stack LUNA. So you’re touching on this a bit on the Space the other day. So does that mean you’re going fully into the LUNA-UST pool and using that to stack your LUNA? Or are you still going into other pools and then using those rewards to stack LUNA? Or how exactly are you… Like, what’s the mechanism of just purely stacking LUNA?
Yeah, so it’d be the first thing that you said. So when I did the calculations, and I don’t know who it was that sent me that spreadsheet, but I’ll put it out there. The scenario that he put forward is if you borrow… So say you have just 20% loan to value, and you only use 20% loan to value, and you use that to buy LUNA. So you use 100%… This is what I do, use 100% of my capital to buy LUNA, provide it as bLUNA to Anchor. If you just borrow 20% loan value off of it, and you buy LUNA with it, and you keep it liquid, you can’t put it on anything, any kind of protocol that’s gonna lock it up, you have to have it liquid. And your assumption is that LUNA is going to 10x this year, right? So say you borrowed $100,000, and then LUNA goes up 50%, so it goes from $100,000 in value, to now $150,000 in value, you can take $50,000, because it’s more than the loan, it’s like… The loan that you took out, you put that to… I mean… Convert that to bLUNA, and then provide it back to the wallet as collateral, and your loan to value will decrease. And then you can go back up to 20%, and buy more LUNA. And then you have that liquid LUNA in your wallet, and you continually stack it that way. So that’s the… Of it right? If you only take out 20%… So that guy’s scenario is 20%. And with 20% loan to value, you can stack 50% more LUNA. So if you have 20,000 LUNA at the beginning of the year, if you just take out 20% loan to value and purchase LUNA with it, which is very conservative, at the end of the year, and you just do that, you just keep… Every single time LUNA goes up, you push it back up to 20% LTV, purchase more LUNA, when it goes up more you bond it, provide it, and keep doing that all year long. At the end of the year, you’re going to have 50% more. So if you started with 20,000 LUNA, you’re going to have 30,000 LUNA, but you’re not just gonna have 30,000 LUNA, you’re gonna have 30,000 LUNA valued at $1,000. So it’s, it’s a huge return when you just focus on stacking more LUNA.
But then if you only do 20%, which is still really profitable, you’re leaving tons of money on the table because, between 20%-45%, you’re just not doing anything with that. So what I do is… My metrics are that I take 25% of my loan to value, use it on LUNA. But then I don’t want to waste that 25%-45% and just let it sit there. So I’ll take out in just UST. And so my initial thing was I was going to take out that loan and then put it in Earn. So at least it’s earning 20%. And if LUNA ever started going down and my LTV started increasing and got to 50%, It’s super easy just to move your Earn to pay down your loan and bring you back to a safe place. So I look at Anchor Earn as a really safe place to put your UST, your borrowed UST and earn that 20% and make it real easy to pay down your loan. So I use 25% to buy LUNA and then I borrow up to 40% UST, and I was going to put it in Earn, but then I was like, if I put in Earn, then I have all this LUNA that sitting in my wallet that’s not doing anything. And I’m not going to put it in Stader or anything else because I don’t want it locked up. But I don’t know what to do with it. And so the only thing that I could do with it, really, is to pair it with UST and provide it. So I borrowed up to 40% loan to value with UST, paired it with the LUNA in my wallet, and then just dumped it in TerraSwap. And at that time it was earning 35%. And now it’s earning 100%. So now I’m… On that… Percent LTV that I use on… That’s actually now gaining 100% APR in the pool. And so is the matching UST. So one of the things that… Does that answer your question?
Chad THOReau 45:40
Yeah, yeah, it does. I guess the scary part of that, for me is, I know me and you were both liquidated back in May a bit. And it is using the loan to buy more LUNA, which I get that it all kind of works out when things are going up, because then you can just take that, what you’re referring to as the liquid LUNA, and move it over into collateral and stack that way. I still feel a bit scared about what happens when it dips, and then you think that’s the bottom and then it dips again and dips again, and [chuckle] it can kind of continue on like that. But no, I like the strategy a lot. It makes sense that when you’re taking the… What you were saying about going with Earn, you might as well pair that for the LP. It’s still like levering up. So that still kind of scares me. I’m trying to get my head around if I feel comfortable with the strategy, but I see how it plays out when things are going up.
Yeah, no, no, no. Okay, so if you take out 20%, loan to value, LUNA can drop 50%, which is does so often, right. It can dip 50%, and you’re still only going to be at 40% LTV.
Unknown Speaker 46:51
Right. Yeah, yeah. Yeah, doing it with only 20%, it’d have to get really messy for you to end up with less collateral than you’re starting. I guess that would really be the only risk other than the fact you’d be kind of amplifying the losses on the way down by levering up.
Yeah, so. So you’d have to drop 50% to get to like 40% LTV. But then you still have your LUNA that’s worth 50%, right. So even if you’re at 40% LTV, if you sold all of that LUNA, you could still get down to a safer place, or even a portion of that LUNA to get down to a safer place. So it really is not… It’s not that dangerous if you’re doing it that small. So when I got liquidated in May, I actually looped it three times, right. So I did 40% loan to value, bought LUNA, provided the whole thing bLUNA, and then levered back up to 45%, bought more LUNA, and turned it to bLUNA, provided it and then kept doing that. I did that three times. So when LUNA went down, that just like… And even then I survived. And I survived the… We both survived the 78% drop, looping it, I did three times. So I’m looking at it, if I don’t even loop it, if I leave it liquid and provide it, and we do drop 78%, I’m actually three times more safe than I wasn’t May. And with the added… As LUNA gets higher in price, the volatility will decrease. I mean, we’ve seen that with Ethereum and with Bitcoin that the higher in price something goes… You’re never gonna see Bitcoin drop to zero, right? You’re never gonna see Ethereum drop to zero, I don’t think. So, the higher something goes, the volatility kind of decreases. And you can see that in the Dow Jones Industrial, the S&P 500, and then compare that to natural gas. Natural gas is like a few dollars and the volatility is insane. So, as LUNA grow in its price, it’s gonna get less volatile. I feel that 78% pullback is probably the worst that we’ll see. I don’t think that we’ll get to 78% retrace in the future. There’s just way too many things that are adding to the liquidity of LUNA that will get it that low ever again. So I mean, I could be wrong, that’s my opinion. But I don’t think that we’re going to get down there again.
So one thing that kind of helps to… A lot of people talk about impermanent loss. In my pinned tweets in the Frequent Asked Questions, if you go to the bottom, there’s a impermanent loss calculator. And you can actually put in the number of, say, you’re in the LUNA-UST pool, and LUNA is trading at $85, and UST is trading at one, you can put those into the field. And then you can say, “Okay, let’s project the worst case scenario that we dropped to, like $35.” And you can put the number 35, and 1 in the second field, and it will show you what your UST side is going to drop to. And you can kind of plan. So I’ve calculated that you can get down to pretty… Even a 40%-50% drop, and you’ll be very safe, to me very safe, to other people, maybe not. But I look at it as safe. One thing that I didn’t expect, and this is the thing that Hutch was saying. So what you’re doing is accumulating on the way up as your LTV lowers so you’re using that extra margin to buy more LUNA. And then you’re just mitigating risk on the way down. And, and I was like, “Yeah, pretty much what I do.” But the way that LPs work, and this is the thing that I didn’t really think through until we had this pullback, because we went from $100 to $85. And I went into my LP and the time of $100 LUNA till now, $85, I’ve actually picked up 500 LUNA. And the reason for that is the way that the LPs work is that when something is dropping, and you can look at a liquidity pool as a regular pool. And so 50% of that pool is LUNA, and 50% is UST, as the LUNA price drops, people are going to be selling their LUNA and they’re going to be taking UST, right. Uf they’re using that swap, if they’re using the swap, they’re going to be taking their… And they’re going to be providing the LUNA to the pool, and they’re going to be withdrawing UST. What that does is it changes the makeup of the pool so that now there’s more LUNA and less UST.
So when you’re a liquidity provider, and you initially put in 50:50, it doesn’t stay that way. It changes according to the supply and demand. So when the market pulls back, the amount of LUNA increases in the pool, an the amount of UST decreases. So what happens in the case of this pullback from $100 to $85, I actually gained 8% more LUNA. I didn’t get 8% more value, my account didn’t grow by 8%. But because LUNA dropped in value, and people were putting their LUNA in the pool and taking UST out, I increased my LUNA by 8%, which is awesome, because that’s kind of what you want to do you want to accumulate on the way down. And I didn’t realize that I was doing that by providing liquidity. But when you provide LUNA-UST to the liquidity pool, that’s exactly what happens when the market goes down. So now I’m at 46% loan to value. And I’m totally fine with that. I want it to go to 50% because it’s at 50% that I manage my risk. So if I’m up 8% in my LUNA bag, 46% LTV, what’s going to happen when the market turns around is I’m going to lose that 8%, right. It’s going to go back up and it’s going to get equal again to where it was. And then the higher that LUNA goes, I’m going to lose LUNA because people are going to be taking LUNA, they’re going to be buying LUNA and putting UST in the pool, now it’s going to be more UST and less LUNA.
So the way that it works is liquidity pool almost like the way Cephii talks about it, which is I’m going to have less LUNA at higher prices and more UST, which is totally fine because I’m still getting 100% APR. I’m still getting 100% APR on that liquidity pool. And I’m also… So even though I’m losing a little bit of LUNA, I’m still making it back up in APR. So I almost want it to hit $50 because when LUNA drops and my loan to value hits 50, I’m going to withdraw my liquidity. And when I withdraw my liquidity, now I lock in that additional LUNA. So right… That like an additional 8% LUNA, I’m anticipating that if we do drop enough that I hit 50% loan to value and I withdraw my liquidity, I’m going to pick up another couple percent, maybe 10%-12%. So I’m going to increase my LUNA bag by 10 to 12%, just by providing the liquidity and then withdrawing it at a 50% loan to value. And so what I do then is, I just hold my LUNA, use my UST to pay back my loan to get into a safer place. And when I use the UST part of the LP to pay down my loan to get to a safe place, I’m just waiting for LUNA to go back up. And when LUNA goes back up in price, everything that I accumulated, that 10% extra LUNA that I accumulated is also going to increase in value, but my LTV is going to drop. And so when my LTV drops, I can take, now, my loan when I’m at a safer place. So I’ll just wait until my loan to value gets to like 30% and then withdraw UST, pair it with my additional LUNA, throw it in the LUNA-UST pool, and just do the same thing again. So in every way I look at this, and this is the perfect strategy if you want to stack LUNA with LUNA, because you’re actually accumulating it on the way down without doing anything, have specific targets of when you’re going to withdraw, for me, it’s 50%, for someone else, it could be 45% or 40%. But in every way it kind of works out.
Chad THOReau 56:47
Yeah, great answer. It makes a lot of sense. I think my favorite part is have the impermanent losses working for you if things are going down. You’re basically hedging that by actually accumulating LUNA as the pool is rebalancing. I’ve let quite a few speakers on and I also saw Hutch was raising his hand for a bit if maybe you want to move into some questions.
Yeah, sounds good.
I’ll be really quick. I had the same question as you, Chad, I’m glad you asked it. I got more than what I bargained for with that answer. My mind is blown. And I thought… I’d read all the pined tweets, so I thought I understood LUNAomics up and down, but my mind is blown with that, whatever beneficial impermanent loss, whatever you want to call it. So thank you, LUNAomics. I also have three recruits on this call. And I just want to plead with them. If you haven’t read those pinned tweets, I love shitposting as much as the next guy on Twitter every night, but I’ve already read them all. You guys should just go and read every one. I like to say it’s like the Dead Sea Scrolls of degen strategies. So this is an absolute… Yeah?
I was just saying thank you. That’s a compliment coming from you.
Dude, what you’re doing is amazing here. And so to everybody else, we all have our recruits. And it’s one thing to hear it from us… It’s kind of like the prophet has no honor in his hometown, but it’s another thing to bring them on these calls. So the fact that he’s doing these for free is amazing. And he’s gonna be doing a series, get your recruits to read the pinned tweets, they probably won’t, but get them to show up, and then they’ll hear this stuff, and then they probably will. That’s all I got. Thanks, man.
Cool. Thanks, Hutch.
I have a quick question. You touched on the impermanent loss, but what about if we talk the extreme opposite and LUNA really pumps and does really well? Do you not worry about the impermanent loss working against you in that case?
No, because impermanent loss really is called impermanent loss for a reason. Things go back and forth and the pool rebalances, so even if we do go from $100 to $300, at some point there’s going to be a pullback. And if you’re looking at having liquid LUNA in your wallet for the long term, and for me, it is kind of long term, there’s always going to be liquid LUNA in my wallet if my strategy is to stack LUNA with more LUNA. And the only LUNA that’s going to leave are those that’s above the value of my loan. That I’ll turn into bLUNA and then provide it so that I can decrease my loan to value to borrow more. So when LUNA does pull back, the pool will rebalance and then I’ll get the LUNA back. So it’s not permanent, it’s impermanent.
Chad THOReau 59:50
Also, that’s with what you’re… You’re borrowing, right? So it’s like worst case, it’s just your borrow anyways, you’re not actually it losing overall value against your borrow, right?
Chad THOReau 1:00:03
You’re just missing out on LUNA upside as if you were holding it.
Oh, yeah, that’s a good point.
Yeah, great point.
So I was wondering… Thank you very much for hosting this, by the way, this is really cool. I was wondering, and maybe you probably already answered this, but I just want to make sure I understand it correctly. So let’s say I have 25% LTV with the liquid LUNA, and then I match it with UST with another additional whatever percent LTV, and I put that into the liquidity pool. Now, the markets are volatile, and they go up and down all the time. And I was wondering, at what point would I be better just holding, if I would have to repay back? But I guess this is really answered in the calculator, right?
Yeah, yeah. And it really depends on what your tolerance is. Some people would never want to get to 45%. Some people would not feel comfortable even at 35%. So I think the best indicator of what your risk tolerance is, is can you sleep at night. And if you can’t sleep at night, then you’re too big, you’re leveraged a little bit too much. As soon as you can sleep, then you’re good. If you know what you’re doing. So next Space is going to be all about risk management, because that’s the thing that so many people tweet about. They’re like, “You’re going to get wrecked when we fall like 78%. And, so I’m never gonna do it.” There’s somebody that just posted on Twitter saying that they actually went and they put all of their money, they sold all their LUNA, I think, and they put all their money and Kujira. And I mean, good luck with that. I understand Kujira is kind of a fad right now, everybody’s wanting to liquidate other people because they got liquidated and it’s kind of fun to get something at a discount. I wasn’t planning on saying anything about this, but I’ll just talk about for a little bit.
So I have a little bit of LUNA in there and… Or UST in there, but it’s really sitting and it’s not doing anything. And what your banking on when you put any kind of money in Kujira is you’re banking on… If you’re only doing 1%-3%, then yeah, you’re going to get filled, and you’re going to get a 3% discount. But what are the chances that if you just keep it in LUNA, it’s going to go up more than 3%, right? So you’re waiting to get a 3% discount on LUNA, when the chances that it’s going to go up 3% is way more than down 3%. And I just get that those odds by looking at the trajectory from the last year. LUNA went up, way more than it went down, right. So whenever you’re in Kujira, you are making a bet that it’s going to go down. And if you have extra money to do that, then it makes sense because you have money that you don’t know what to do with. And I think we’ll all get to that point some time. With the capital that I have, when I put it in a pool, it actually is a part of the pool that is significant, right? Not significant, like the whole pool, but I mean, I can move the value of it. And I’m only like 5 million, there’s people that are hundreds of millions. And when you’re hundreds of millions, you’re not going to put all your money into pools and move the price around and all that, you have to do something with it. So people that have that kind of capital, I can see why they would park it in Kujira because they want to get discounted LUNA, but for people that are… Capital, when you put your money in Kujira, you’re actually banking that LUNA is going to pull back in a huge way.
And if you put your money… I just went on Kujira and there’s like 10 million, there’s 10 million bids on every single… From 4% all the way to 20%, there’s $10 million bids. $10 million in every single bid, I don’t believe… Somebody tweeted something yesterday that said that they think that this is a whale knowing something and that we’re going to see this huge drop. That could be but you’re making the assumption that just because somebody is a whale that they know everything. And I think there’s a lot of whales that are not very smart as everybody gives them credit for. What makes more sense is that Terraform Labs or whoever is burning LUNA and minting UST and putting it in Kujira to add liquidity to the market so that people, when they get liquidated they don’t get liquidated at a bad price. So I actually look at those $10 million bids on every single tier as a good thing, because on the other side of it, if it does drop in price, I don’t want it to fly through every single bid, and then hit the 30%, where I’m getting liquidated at 30%. There’s way more safety in what’s been provided on Kujira for people that are holding LUNA, so that when they get liquidated, they’ll get liquidated at 10%. I’m super good at getting liquidated at 10%. That’s awesome. For the risk that I’m taking, for the amount of LUNA that I can stack, if I get liquidated at 10%, thank you God. That’s a gift. So I’m glad that there’s liquidity that’s being added to Kujira right now.
On the flip side, when you’re putting money in Kujira, and you’re hoping to get a 15% discount, the chances that LUNA is going to drop enough for you to get 15% is kind of small. And so if you had like $100,000, and you put all $100,000 in Kujira, it’s not even earning the 20% yield of Anchor Earn. And it’s just sitting there and hoping that it’s going to go down enough that your 15% bid is going to get filled. But just in the last month, we saw LUNA go from $50 to $100. So if you put money in Kujira and lost that run that could have been in LUNA and earned 100% because they’re waiting for a 15% discount. So the strategies that we use… And that’s why I think strategy is so important. The strategies that we use and the things that I post about, it’s looking at all the things that are provided, and how does it fit the assumption that I have. If my assumption is that LUNA is going to 10x next year, it doesn’t make any sense for me to park any capital in Kujira. Because Kujira is a bearish strategy. And if I wanted to really make it worth it, I’d have to put it in the 15%, 20%. And the amount of times that LUNA dropped enough to where people were getting liquidated at 15%, 20%, was only like two times last year. So you’re locking up capital, because your assumption is wrong. So with strategy, it’s super important to identify the assumption. If your assumption is bearish, like that guy said, “I’m selling all my LUNA and I’m putting everything in Kujira.” And then people that read it, they’re getting scared, and they’re like, “Oh, my gosh, there’s gonna be a crash.” I just look at that and think, that’s kind of not a good strategy for what’s going on in the ecosystem right now. Yeah, I don’t know. I went off on that.
I got a question. I wanted to say thanks for everything. And thank you guys, I’m glad to be part of this whole thing here. LUNAomics, how do you keep track of… I saw the dashboard for the APR, but how do you keep track of your… The coins you have on the pool for TerraSwap? Is there a certain way you’re able to look at what the numbers are? Or do you just go to TerraSwap?
Yeah, you can go to Ape Board Finance. And it shows you how much LUNA you have.
Yeah, Ape Board Finance.
Okay. And then I have one more other question. Are you familiar with Abracadabra and their UST bento box, or degen box?
I have heard a lot about it. I have not done anything with it.
Okay, so I was just gonna say, if I was in a very speculative asset that’s correlated with that, because that degen box has 1 billion UST that has been loaned out, and it’s going to continue increasing. It says 1000 million, but obviously that’s a billion, but I was gonna say, let’s say you’re earning like $1,600 a day from your W-2, or like a very risk on asset, your best advice was to slowly buy the apex asset and then provid it into maybe the 100% pool or something like that, to be able to solidify your gains and be in an asset that’s not going to go poof?
I’m sorry. My brain is kind of like… [chuckle] Could you try to say that again?
I’ll clarify it. The best way to enter money from another asset that’s more risky into LUNA, in your opinion, would be to buy LUNA, collateralize it, borrow against it, and then in that aspect, go into some high APR type of… More like the Terra pool, kind of like that, right?
What do you mean by going from a more risky asset to LUNA?
So like Wonderland… The Abracadabra and TIME, Wonderland is earning me like $1,700 a day but it could disappear. And so I’m trying to get back into LUNA in the best way. And so like you said, buying the asset, and then collateralizing it, and then earning APR on that would be the best way to get away from another asset that’s not so apex?
I mean, if you’re making like $1,700 a day on the Abracadabra degen box, that’s great cashflow that you can use to stack LUNA. How much how much capital is needed to generate that kind of income?
Not much. It’s like $70k
$70k. Wow, that’s awesome. Every single day?
Yeah, that’s why it’s kind of like… It’s hard to sleep. I’m trying to get back into something that doesn’t… That may not disappear. So the best way to do that, like you said, was collateralize apex asset, and then borrow. And then you said, you can look at the dashboard for the 100% APR pair, right?
Yeah, yeah. But I mean, if you have the assumption that LUNA is going to 10x, then it just makes sense to take that borrowed money and instead of putting it into something that generates cashflow, to just put it into LUNA, because LUNA is going to 10x. The assumption is LUNA is going to 10x.
I don’t know too much about the degen box. I’ve seen a lot about it. I know…
I’ve been following you since I was broke. And then now I’m not broke anymore, so I appreciate you.
That’s awesome, thanks.
Yeah, you should check out the degen box. Apparently there’s no money available, but the demand for people wanting to earn 100%-200% on the UST stablecoin, and there’s no money there available to be borrowed other than the billion already borrowed, is like the most bullish thing for LUNA ever.
Chad THOReau 1:11:32
Just to add a little to that, so Wonderland TIME, it’s an Olympus DAO, OHM fork, so that’s why we’re talking crazy APY, like 50,000%, whatever. And, and so what you’re saying is, that’s obviously high risk, the asset itself can go down a lot. So what I did, which I feel… What I originally did, I feel like it’s kind of a LUNAomics sort of strategy was, I had LUNA already before OHM all of that, and I used some of my Anchor Borrow to buy OHM originally. And the way I kind of rationalize that in my head was, “Okay, I’m usually using the loan for a cashflow asset anyways, so I might as well throw that into something like OHM or TIME.”
Yeah, for sure. I was really appreciative of learning of the TerraSwap pool and the LP and being able to increase my LUNA bag in that way. So I really appreciate that.
So LUNAomics, I just tagged you on one of the medium article someone posted, I think Jason Wong, he posted that article Abracadabra with Terra, it’s MIM-UST combo… You can get 100% APY on it.
Cool, thank you.
Chad THOReau 1:12:47
Umami has been raising his hand for quite a while. And also, if anyone has already spoken and feels like they’re finished, if you don’t mind just to remove yourself as a speaker. If not, after some time, I might kick some people off just to make space for others.
Hello, yeah, I had a question mainly about what you do with the borrowed UST because I was listening to another recent Twitter Space that you had, and you talked about the ANC-UST pool. So how do you pick, or assess different pools that you want to put your money into, say, maybe possibly, instead of using TerraSwap going into a LUNA-UST pool on Astroport instead. What are the different considerations there?
So I always map to my end goal. And my end goal is for this year… Because I think that we’re in a very special season. I don’t think that LUNA is just going to… I mean, you can look at Bitcoin and Ethereum, and they’ve had moments of just astronomical exponential gains, right. I think that that’s what LUNA is moving into this year, and next year, so because I think we’re in that season, I’m going to be stacking more LUNA. I’m laser focused on that. So anything that doesn’t map to that, I’m not going to divert my attention, or my money, or my time to trying to figure something else out that doesn’t help me do that. So the ANC-UST, where I came to that conclusion was, I looked at different ways to generate cash that I was doing last year, like ANC-UST pool, and right now you can get 100% yield on it. But ANC is not going to… I don’t think ANC is going to go from $4 to $40 next year. So I’m really just getting cashflow if I put money in that. But 100% yield is a huge amount, right, so then the question is, if I take that 100% yield, and I use that to buy LUNA, I need to compare that with, what if I just use the borrowed money to buy LUNA just outright. And that whole spreadsheet that I did in the last tweet shows that, hands down, using borrowed money to buy LUNA it’s a profitable thing to do. But then you don’t want to leverage up so much that if LUNA goes down that you get wrecked.
So I think, using 20%-25% is like a pretty safe amount to use your borrowed money to buy that. And then to match it with UST because anytime you take US stable, it’s not volatile, so it’s not going to go up and down with the market. So at anytime you can access that UST to pay down your loan if the market starts going down. Then you have your liquid LUNA if you absolutely need to liquidate it to pay down your loan. So you kind of talked about, how do you pick the pool. so if I was going to… If I was going to pick a pool, and my goal is not to stack, I… One thing to understand that I think a lot of people might not understand is, is the significance of the difference between APR and APY. And I kind of talked about that in my last Space, but you have like Apollo DAO, Spectrum, that are these autocompounders, that take your yield and then put it back, and do it so that you don’t have to do it, and I think they do it every block. And you see these massive differences between 100% APR, and 250%-300% APY. When you look at the 300% APY, you’re actually making two assumptions. The first assumption that you’re making is that that 100% yield is going to last all year long. And for the most case, it’s not going to last the whole year long. Because as a protocol matures, and more people provide liquidity, the yield is going to go down. So you’re never going to actualize the higher APY. The other thing that people don’t take into consideration is that, if you look at the difference between say, 8% and 12%, and you map it on a chart along an X and Y axis, the majority of the difference happens at the end of the curve, when you hit the 11th and 12th month. So the yield has to last all the way… It not only has to stay at 100%, but it has to stay at 100% to the last month. And if it doesn’t stay to the last month, say, it just stays to the ninth month, you’re not even going to actualize any of that… The difference between the yield. So for me… And every single one of these autocompounders cost a certain amount of money, take a certain fee out of it to autocompound it for you. So when I calculated it, the difference between the APR and APY compounded daily to compounding weekly, it isn’t even a big difference. Unless you’re over 200% APR.
Anything under 200% APR, it doesn’t even make a difference. So you can compound it every single week, say on Saturday, just compound it yourself, and you would come very close to what an autocompounder does. Unless that autocompounder is above 200% APR. So for that reason I’m not super fond of autocompounders, I just do it myself at the end of every week, because I’m not in anything that’s generating 200+% APR. So if you are in something that’s generating more than 200% APR, then it is beneficial to compound it every day.
You can do one with a four digit APY, by the way, but that’s a degen thing.
Yeah, Joseph, I see Joseph raising his hand.
Hey, yeah, I’m just gonna chime in here. Can you talk a little bit more about I guess your risk management strategy after this? ‘Cause, I think this is something that’s great and all but that’s kind of under the assumption that LUNA is going to 10x. And of course, I’m as bullish as you are that LUNA is gonna go 10x and whatever to $1,000, right. But it’s not going to be… To my opinion, it’s not gonna be a straight line up, right. There’s gonna be a lot of volatility along the way. I think it might be good if you talk about more of the risk management strategies, because to my understanding, it’s like if your collateral on Anchor is not as high, and if you get liquidated, it’s essentially, you’re done, right? You’re, you’re out of the game. So it’s a good strategy if LUNA is going up, but if you’re not well risk-managed, and you’re more than likely done. You’re out of money to work with, right?
Yeah, yeah. So I mean, I believe that as well, I think the number one rule is don’t get liquidated. And so I’m going to do a Space… The next Space is just going to be about risk management. We’re going to spend, an hour and a half, two hours just talking about risk management. And I think that’s such an important question that I don’t want to jump into that now, just because I don’t have the time to really get into it. There is a pinned tweet on risk management, and that’s what I’ve done for a living, pretty much. As an options trader, I would sell premium. And all I did was manage risk. Because as the strike price move… As the at the money moves back and forth between the call and the put, I have massive risk on both sides. And so as an options trader, a premium seller, I would have to constantly be managing that risk. So that’s kind of the background that I come from, and when I look at the attitudes toward risk, that’s really important. Risk and reward are proportional, right? The higher risk, the higher reward. That’s across the board. So a lot of people, when they see a high reward, they automatically look, “Well, what’s the risk?” And if the risk is high, then some people are risk averse where they say, “I don’t want to take on that kind of risk, so I’m just not going to do it.” But when you are risk averse, you’re actually reward averse too. Because if you don’t subject yourself to the risk, you’re never going to get those huge rewards. So my mentality is, I’m not risk averse, but I want to develop a skill set, so that I can mitigate risk. That allows me to expose myself to the reward, but kind of protect myself from the risk. And so it’s always coming up with game plans, right?
So, when you take defensive driving, the whole thing about defensive driving is you’re thinking about what could go wrong, and pre-determining what your method is going to be to get out of that situation. So it’s always thinking ahead of what could go wrong, and then planning around that. So that’s pretty much what risk management is. It’s like, “Okay, we can drop 78%. If we do drop 78% from here, what do I need to do to stay in a safe place?” And there’s lots of ways to do that. And we’ll get into that during the risk management, because the whole thing about risk management is you don’t… A good illustration I like to use is I live in Hawaii. And we have a beach called Big Beach and Sandy Beach that’s on different islands. There’s Maui and Oahu and… But Sandy Beache is like a shore break that a lot of tourists like to go to. And then there’s this place on Maui called Jaws that’s 30 feet waves that professional surfers love to go to. And Jaws is a way more risky place, but hardly anybody dies there. Because the people that are out there are very skillful. They’ve developed their skill to play around in those ways. Whereas the waves that Sandy Beach on Oahu are probably like eight feet, and there’s more people that die in the shore break because they have no skill, they’re all these tourists that come over and play around in the waves and break their necks and die. And even though it’s way less risky, there’s way more people getting hurt. I kind of look at the market at the same way…
I’m not too worried about… I think you understand the risk that you’re taking and you know how to manage risk correctly. But I’m just a bit… I guess I would be more careful into getting newcomers and participants to take part in this strategy. Because maybe they might not be as understanding of the risks. ‘Cause I’ve seen what happened in May. A lot of people were doing this strategy with kind of the same mentality in mind, but obviously, we have a lot more understanding now, right. But if you get liquidated, like you say… I mean, obviously invest however much you can lose, right? But to some people, that’s their whole life savings. So I think we need to be like more careful about how we preach these strategies.
Yeah, no, yeah. 100% agree. Yeah. And that’s why I want to cover the strategy. And I want to take a whole Space and talk about it. Because it is probably the most important thing to understand.
Yeah, well, no, I do really appreciate that. You taking your time and educating everyone in here about the Terra ecosystem, and all the, I guess, yields they can earn from it. Yeah, so, really looking forward to the next Twitter Space.
Awesome. Thanks, Joseph.
Chad THOReau 1:25:44
Yeah, I think it’s fair to bring light to that. One thing to add, just real quick is, you do just… Well, for newcomers and stuff, you get liquidated down to a safe LTV, not necessarily your entire collateral. And then the other piece of that, which has really helped me coming from you, LUNAomics, is the strategy of just using the UST part of the pool to pay down the loan for a safe LTV. What I was doing months back was just like sell whatever weak LP and then use that to pay down the loan. Now I’m just taking the UST portions of those and not necessarily taking a loss on the paired token, which feels a lot less dramatic when I need to pay down the loan. I’m like, “Oh, I’m just kind of sitting out on the LP for a little bit,” instead of necessarily taking a huge loss on Psi. [chuckle]
Yeah, I got killed by Psi.
Chad THOReau 1:26:40
Yes, same. Let’s go with Remy. Remy has been raising his hand for a while.
Remi Yield 1:26:44
Thank you a lot. Thank you for the Space. I have a simple question. So when you borrow money from your LUNA collateral, my question is, do you buy it whatever is the price or you borrow, you buy whatever is the price, or you borrow, you wait a pullback. Or you just don’t care about the price, you borrow and you pay whatever is the price? This is my question.
For me, I just pay whatever the price is. Just because my timeframe is long for LUNA. I just want it I’m pretty impatient. And I think, I could kind of sit around and wait for pullbacks and all that kind of stuff. But if you just look at the chart of what LUNA did last year, and really… What I used to do as a trader is I would take charts and I would backdate it, and I would go candle by candle, day by day, and I would look at price action and I would say, “Okay, what would I do here?” And then I would move the chart the next day to see if my intuition was good or not. And I would spend hours and hours and hours doing that just to help myself intuitively feel where price is going if you do that with the chart of LUNA of last year, and you just go candle by candle and you said, “Okay, I’m gonna wait for a pullback.” The amount of… You got to enter into LUNA are very few, and if you did get in… Say you’re waiting a 20%-30% pullback, you would have gotten in at the beginning of the pullback of May, and gotten just killed. There wasn’t a lot of entry points that were obvious entry points. So, yeah, I mean, to me, LUNA is like a rocket. It’s going straight up. And I’m not gonna wait for it to stall in the air to jump on it. I’m just… I want it and I’m gonna buy it and hold it forever.
Remi Yield 1:29:13
Thank you, you answered my question.
Vincent Scholl 1:29:15
I have a question. Yeah, so I saw Cephii make a post and it was saying that, if KDA reaches X price he’s gonna pay back 20% to the LUNA that he borrowed, I think it was. And I guess I’m like the world of traditional financing because I’m new to this aspect of it, so pardon my noob-ness. Like if I give you $1 today, and ultimately you have to pay that back and there’s usually like a time expiration, right. So when it comes time to pay back that loan, if you’re using it to buy… If you’re collateralizing your LUNA and… Is it like, the only time I have to pay it back is when I’m at risk of liquidation? Or it’s like, is there… Do I have to be like, “By March 30th whatever, I have to pay this back.” Sorry if that’s a dumb question.
No, no, that’s a great question. I love it. That’s a question that’s asked often and like, “When are you gonna pay back this loan? When are you gonna pay back the loan?” Because in traditional finance, you need to pay back the loan at some point, right? I’m not sure if you’re familiar with life insurance policies, and how you can borrow off of your life insurance, and never have to pay it back, it’s just subtracted from your principal, or equity. This is kind of like that. And I was just talking to my friend, interestingly enough, I was talking to him this morning, because he retired. And I helped him this year, because he had his whole retirement, he gave it to a friend that was a financial planner. And he put everything in REITs, and got wrecked. I think he went from like, $500,000 down to like, $60,000, he lost a lot of money. And so at the beginning of the year, I helped him put that $65,000 into LUNA, kind of showed him how to turn it into bLUNA, borrow off of it, buy more LUNA, put it into different liquidity pools. And now we’re at the end of the year, and he said that the high level of his portfolio, when we were like $100 bucks was over $600,000. So he got everything back and more. And so he was like, “When should I start spending this?” And I was like, “Man, you’re like up $600,000. You’re up $500,000. How much do you spend per month?” And he said, “Oh, I spend like maybe,” cause he already paid for his house, he paid for everything, he doesn’t have any loans out, he said, “I probably spend like $3,000 a month.” So I said, “Okay, so say we’re at $500,000 now in your account. And say you just borrowed $5,000 a month. And all you did was borrow $5,000 a month, every single month. At the end of next year, you would have borrowed $50,000, which is 10% loan to value on what you currently have, right?”
So he currently has $500,000 to $600,000, now $500,000, because we dropped a little bit. But if your underlying assumption is that we’re going to 10x and LUNA is going to go from $100 to $1000, right. He could still borrow $5,000, every single month, and at the end of next year, he would have a $50,000 loan, but his account would have grown from $500,000 to $5 million, right. So at that point, his loan to value has shrunk from a 1% loan to value to like 0.1% loan to value. And that’s something he never will have to pay back. He could actually increase his borrow and maybe do $10,000 a month and still be in a safe place. If LUNA does go up. But he’s in such a safe place now that for him to spend $5,000 per month is very safe, because he’s only going to spend $50,000. And the great thing about that is it’s tax-free income. He’s using borrowed money to spend and because he’s borrowing money, there’s no income tax on that. So for him in a retirement position, and he was like, “Man, I never even thought about that.” And I was like, “Yeah, you’re in a good place.” And he’s like, “Man, that’s so awesome.” And so he’s like, pretty stoked about it. But yeah, to answer your question, if LUNA keeps going up, your loan to value keeps going down. And if it continues in that trajectory, you never need to pay your loan back.
Vincent Scholl 1:33:56
Because it’s off the total value of it, and not the total number of LUNA tokens that you hold, right? It’s the total… It’s the loan to… Okay. Okay. And then so… I mean, I’m kicking myself because I didn’t get into this earlier this year, and I just been watching it and then now, understanding this tokenomics of it and stuff, I’m sure several other people here feel that way too, that are in my similar position. So for someone, if they were looking to start today, and obviously I’m going to educate myself far… Much more on these pools and stuff, but like… So if you’re keeping the LTV at around 20% I mean, price volatility really shouldn’t matter all that much, right? I mean, let’s say, I’m not going to do this, if I bought X amount of LUNA today at market price, and I put it at 20%. Then just like you said before, you could still weather a 50% drop, and I agree with you where I do think it’s going to go up, but hell anything could happen, so that’s basically the… Price volatility being a factor isn’t really a factor as long as your LTV is that.
Vincent Scholl 1:33:56
Yeah, if your loan value is really low, right.
Vincent Scholl 1:35:10
Right, right. Okay, okay. Thank you so much, man. This has been helpful, I really appreciate this.
Yeah, no problem. What I do with people that I’m onboarding and getting in is, I tell them just take out 10% loan to value and just watch it. Compare the loan to value with the price action of LUNA so that you kind of get comfortable with how it fluctuates with price. And as you get… With it, then push 20% to 30%, whatever your comfort level is, but I have everbody kind of start at 10%.
Vincent Scholl 1:35:43
Okay, fair enough. Fair enough. When you say when you are helping people onboard and stuff, that’s just on the expectation of a public forum, right? You don’t do any private stuff, do you?
I do, actually, I have a class. I teach in person, but nobody knows anything. Everybody that’s right here on this Space, and that has access to my Twitter, they actually have way more than anybody that know in real life. You have access to my actual numbers, you just don’t know who I am. But people that know who I am, they have no access to my numbers, so I try to keep this two separate. Yeah.
Vincent Scholl 1:36:22
Fair enough. Thanks for the time, man. Thank you.
Yeah, hi, I have a question. Can I speak now?
Yeah. So I wanted to ask, instead of this strategy, what do you think of leverage farming? Like, I don’t know, there isn’t a platform right now, but the Mars finance is supposed to come on. And I’m thinking like, if it goes how it’s… The leverage farming and other… Like on Avax or Solana, then I’m thinking you could use the leverage farming to let’s say, farm LUNA-UST on like 50% of your LUNA or so. How do you think that compares to what are you doing right now, which is borrowing from Anchor and using that as leverage and then putting it in the LUNA-UST farm?
I don’t know. I just have wait until the protocol comes out. I don’t know too much about… I don’t speculate on what… I’m not a developer. So I can read whitepapers and whatever, but I don’t know what Mars is gonna do. And I’m gonna wait till it comes out for…
I don’t know if you’re familiar with Alpha Finance, it’s on Avax and Ethereum. Basically it works on top of a farming platform. So let’s say you got like, AVAX and you want to open AVAX-UST pool, so you just say that, okay, put my AVAX in AVAX UST pool, and they lend you the corresponding amount of UST. And, whatever, they’ll charge you maybe 20% interest, whatever. And like, basically, you just don’t have to… And you can stay in the pool until you get liquidated. So according to Mars Protocol, they’re saying that their system will work kind of like that. So let’s say you want to open up LUNA-UST on Astro or TerraSwap, they’d lend you the correspond… It’s in a smart contract, you can borrow 100%. So let’s say you’ve got $1 million worth of LUNA, you can borrow $1 million UST and farm with it.
Yeah, I think that’s interesting. I just have to take a look at it and whenever you use leverage, there’s always risks. So I can’t really speak to that without looking at the specifics of it. But yeah, definitely will look at it when it comes out. Is there anyone else? Any other questions?
I have a question. First of all, thanks for the Space. I’m relatively new to the Terra ecosystem. And yes, found your page and I like what you’re doing so thanks again. The question I had, I think it was asked earlier, but I’m not sure I quite understood the answer. It was just around… With regards to the LP and you’re doing it on TerraSwap. I’ve noticed there’s a lot of hype around Astroport. And I’m just wondering if that makes a difference in terms of where you choose to LP.
Yeah, I think… So Astroport, I know that for the beginning part when they’re doing community farming and whatever that, when you provide liquidity, you’re getting rewarded in Astroport tokens at an early investor. So because my goal this year is to stack LUNA, I have no interest in accumulating Astroport, even if it’s a great protocol, and it’s going to do amazing things, and I could get a 10x return on their token, I’m not interested. So not only that, but with TerraSwap, you get rewarded on the fees go into the pool, and you get paid equally with LUNA and UST if that’s the pool that you’re in. If you’re in LUNA-bLUNA, then you get paid equally with LUNA and bLUNA. With Astroport, you’re going to get paid the fees generated, but also with Astroport. And I think, and I’m pretty sure I saw this somewhere that the amount that you get paid out is actually less in the native tokens on Astroport. Because you’re getting compensated with a little bit more Astroport tokens. So I’m kind of not interested in that. I don’t care if I get Astroport tokens. I just want more LUNA.
Right. So we don’t expect that the volume on TerraSwap will kind of move over to Astroport to make it more lucrative essentially? You think TerraSwap is better to accumulate LUNA even past the community event on Astroport?
I mean right now, definitely, because so many people… There’s probably $1 billion of liquidity that moves from TerraSwap to Astroport, which boosted the yield on all the pools on TerraSwap. So I like it. I like everybody moving over to Astroport. So I can get higher yields for the pools that I’m in on TerraSwap. And I would be fine if it was like this for the rest of the year. I should be stoked.
Fair enough. Thank you. Thank you.
Hi, I have a question. Thank you, sir, for this space. I’ve been listening on what you have adviced on about 20% to get a loan, get LUNA and probably utilize the whatever percent, maybe up to 25% on the Earn. Okay, so right now, you’ve been sharing all this strategy. But I don’t know whether this question is asked, it’s like, you had mentioned that you get liquidated by May by looping three times, where that time’s purely on LUNA. So I am kind of in that situation right now. [chuckle] So I was just thinking, how to get back to…
How to unwind it?
Yeah, because right now, if I look at my loan to value right now, especially right now, it’s dropping. So I’m probably all in LUNA, for example. Loan to value, probably, I’m close to 37%, or 38%, something like that. So let’s say for example, now if it were to drop to 50, I would definitely get rekt, you see. So I’ve been thinking, I believe there’ll be people in my situation. So first of all, just thinking how am I supposed to do it? I mean, shall I equal to… Yeah, yeah, maybe just appreciate your thought on that.
If you want to unwind your position, you’re actually in a really good place to unwind it because you’re at a very safe level. You’re at like 30 something percent. So yeah, you’re right, if we did drop from this place… From like, $85, to say, $75 or $65, you’d be in a world of hurt. Especially if you’ve looped three times. I don’t think… The probabilities that we’re going to drop a lot from here, I think, are pretty low. But that’s just what I think and a lot of times I’m wrong. If you want to unwind… That you have to do it, is you have to withdraw your LUNA convert it to be bLUNA, I mean, convert… Withdraw your bLUNA, convert it to LUNA, and when you withdraw your bLUNA, your loan to value is going to increase, right. So if you’re at 37%, you can just go down to the bottom and in the place that you provided your bLUNA, you just withdraw your bLUNA, and you slide the bar to where you’re comfortable. So say, you’re at 37%, you can slide the bar all the way to 45%, and you’ll be able to withdraw your bLUNA. Then you’re going to have to convert your bLUNA to LUNA and you’re going to have to eat… You’re going to have to do an instant burn, and you’re going to have to eat about a 2% loss, 2.5% loss, depending what the spread is. I just want to that during a meltdown, that spread widens, and it’s not 2%-3% during a crash, it widens to about 30%. That spread gets pretty wide. And so you never want to be in that position during a crash. And so I just don’t get in that position anymore. I try not to loop at all. So once you burn it, and you convert your bLUNA to LUNA and you eat that 3%, 2%-3% fee, then you take LUNA and then you convert it to UST and you pay back the loan. And then it will take you from 45% down to like 30%. And then you just got to rinse and repeat and unwind that position to where you don’t have any borrowed LUNA provided as LUNA. So that’s the way you unwind it. It’s very, very hard to unwind that position when the market is dropping. Super hard.
Because right now, I saw in the Twitter tweets these few days it’s been mentioned that some wave is going to unlock… Unstack it and they’re gonna unload it. So probably the price actions is going to drop. So it’s a little bit of concern. So just to get right to what you mentioned, you withdraw the bLUNA, maybe up to 45%, then after that the bLUNA itself to Anchor Burn to instant burn itself, or probably go to TerraSwap to change back to LUNA, sell to UST and just repay back the loan. And just repeat until I’m comfortable enough. Did I get the right?
Yeah, you got it right. And you can either instant burn on the Anchor platform or TerraSwap. It’s the exact same thing. I think the Anchor Protocol uses TerraSwap. So if you do it on the Anchor protocol, you’re using TerraSwap.
So let’s say if I were to do that, I can get to the safe position. But let’s say for example, if I will do that to maybe up to 20%, for example, I will not hold any liquid LUNA, for example, right? I mean, because I’m just getting to the safe level right now, where I do not have any LUNA, then in order to practice what your strategy that you actually mentioned, for example, we just have to go further down. And after that, just to have enough LUNA matches… Liquid LUNA to matche the LTV 20%. So that is where the things that you’ll actually be advising if I want to stick to 20%.
Yeah, I mean, you can do whatever you want to do. If your assumption is that we’re going to pull back, say 50% from here, then you want to get your LTV to like 20%, right. And then you’ll be at 40% If we pull back to $50. But what I like to do when it’s just an assumption on how far something will pull back, is I take it from the all time highs, and then… Past all time highs, and how far back things have pulled that from all time highs. And then you also take into account how much higher the price is, because as the price gets higher the volatility… So we’ve had two major pullbacks from all time highs, one was $24 down to $4, so that was like a 78% pullback. And then we had another one from $50 down to $30 or something. I don’t know, it’s another one that was like around 50%, 50 something percent. So I anticipate, between 50%, 60% pullbacks from the all time high. So right now from the all time high, which was like $100 something, I think we’re down to $85 since the time that we started on this. That’s a 15% pullback. So I wouldn’t calculate another 50% from here. Or maybe if you want to calculate a 65% pullback, it would be 50% from here. But I always calculate the max pullback from the all time high.
Okay. Okay. So in other words, if I feel that there’s a pullback about 60%, then I just based on the all time high to 60% and take that as a gate keeper. Okay, I think I understand. So I think, I’ll just go to unwind a little bit, because cannot see red line.
I think you’re okay. I mean, at 30 something percent and yeah, I don’t think you’re in much danger if you’re only at 30 something percent.
Because my liquidation price right now I’m looking at about $53, yes, correct.
Yeah, I mean, if you can’t sleep, unwind it, but chances are that we’re going to get to 50 something, and I could be totally wrong. I mean, we could enter World War III tomorrow and China could start bombing us or whatever. And anything can happen, but if things keep going the way that they’re going, I don’t think it’ll drop down to 50 something.
Okay, okay. Okay. I mean, not financial advice, I understand. But what is the lowest you look at it? I mean, right now that it’ll probably pullback… If somebody were to go to dump the 4 million LUNA right now or whatever? I don’t know, I mean, not financial advice. I just want to look at what is the price you’re looking at right now, if you’re the lowest…
I actually don’t have any lower price targets. I focus on what my loan to value is. So I know that I’m going manage my loan at 50%. When I get to 50% LTV, I’m going to manage my loan, I’m going to withdraw my liquidity, I’m going to use my UST to pay things down. And I’m going to sit things out until we start going back up again. If we keep going down, then I’m going to liquidate some of my LUNA to pay things down. And I just keep doing that until… And I keep doing that to stay in a safe LTV. So I don’t have any downward price targets of where we could head. I just have targets of where I’m going to manage my loan.
Okay, I understand. So in other words, it’s the safest if I catch you on the previous tweets, you’re looking at about… You mentioned about you paid up to 30% LTV, am I right to say that? Oh, I may be wrong.
I like to live. Yeah, within the 35%-40% LTV. I’m pretty comfortable there.
Okay. Okay. I get you, I get you. Thanks. I appreciate your advice. That’s all I wanted to ask. Thank you.
Yeah, no problem.
Happy Owl 1:51:33
Hey, LUNAomics, what do you think about mixing collateral? Also use some ETH as collateral?
I’ve never done it just because I’ve always been 100% in LUNA, because I want… I’m looking at LUNA as it’s going to 10x. So if I look at where to put my capital, if I… Say I had ETH, it wouldn’t be maximizing what I think is going to happen next year. And that’s a risk, right? So if somebody wants to hold ETH and put that up as collateral, that’s awesome. One thing that I know that is a disadvantage to that is that you don’t really have a clear target of where you’re gonna get… Yeah, you don’t have a clear liquidation price for either one, because I don’t think it’s very clear what they liquidate first. And then there’s nothing that the user has to give permission for liquidating. There’s nothing that says I want to liquidate my ETH first, and then liquidate my LUNA next. So I’m assuming they do 50:50. But then you don’t have price targets for… Clear price targets, so you gotta guesstimate. Yeah.
Happy Owl 1:52:52
The nice thing is, I guess it hedges a little bit against that oracle issue with LUNA. You mix it up a bit. Here’s something completely different. I mean, you’re very open on Twitter, you shared basically your Terra wallet addresses and..
I didn’t mean to. [chuckle]
Happy Owl 1:53:14
Well, yeah, it’s pretty easy to find. But how do you… And then you share pictures of cars, your mother’s pictures. So how do you see that? I mean, it’s great that you’re so transparent, but you’re not worried about those things?
No, I am. So I don’t have my name and social security number and seed phrase out there. And I do have weapons in my house. So that’s a… I’m a pretty good shot.
Happy Owl 1:53:46
Awesome. I really appreciate. Thanks, man.
Just a quick question, sort of related to that on the security thing. I think at the beginning of this session, you mentioned that you had in that index tweet burner wallets or how you use your wallets. That’s something I’m trying to get a better handle on. I didn’t see that in there. Am i… Where is that?
I don’t think I put that in the Frequently Asked Questions, just the questions that everybody asks. But yeah, I have multiple wallets just in case somehow one of them gets hacked or something. I actually…
Do you just spread it around, or do you have any specific strategy?
No, I just have a couple of wallets. I like to have more than just one wallet. I mean, I hear stories of people’s wallets getting drained from different hacks and whatnot. So the thing is that when you have multiple wallets and everything starts crashing, it’s hard to get into every single wallet and manage everything at the same time. So give and take, you have to have the quick… Be able to move things around quickly and at the same time have some sort of security, so yeah.
Cool and thank you. And do you just have multiple TerraStation wallets? Or do you actually have different… Like XDEFI etcetera, I don’t know if you have any opinion on that.
Yeah I have wallets everywhere. [chuckle] But the Terra Wallet, I like the Terra Wallet the best. It’s the cleanest and I don’t know, I like it.
Okay. Do you go as far as… Last question on this. Do you go as far as… Do you have separate computers where you interact with separate wallets?
Okay. Thank you.
Hey, thanks for hosting this space. I have a specific question on the LUNA-UST pool. You were talking about the rebalancing mechanism and how when you sell your LUNA-UST and the market is going down, because the LUNA in the pool is going up as people are selling, then you actually get more LUNA when you sell that LP. Could you talk a little bit more about that? And is that your main pool because that allows you to get more LUNA as the market is going down?
What you said is exactly right. When the price goes down, you’re going to get more LUNA. But it’s not going to stay like that if you don’t withdraw your liquidity. So in some weird, sick way, I want LUNA to drop more to hit my 50% loan to value so that I can withdraw it, and lock in all the LUNA that I accumulated. But if it doesn’t hit my 50% loan to value, then I’m just gonna keep holding it and let it go up. And then rinse and repeat. And the reason why I use the LUNA-UST pool is because… Because I want to stack LUNA this year, I’m not going to do anything to jeopardize my LUNA. And so I’m not going to pair LUNA with any other token besides UST or a derivative of LUNA. Just because when you’re a liquidity provider, and you provide two tokens, you’re providing a market between two tokens, right? So say, LUNA and Psi, you provide LUNA and Psi together in a pool, as the person who is providing the market for that, how do you think the market is going to respond to being able to swap those two coins one for another? The market is always going to want the stronger coin, right? So the market in an up market, how many people would want Psi more than LUNA? Like not a lot, right? In a down market, how many people would want Psi more than LUNA? Not me. So if I’m providing liquidity, and I’m providing Psi and LUNA into a pool, when the market goes up, more people in the market are going to want LUNA. If the market goes down, more people are going to want LUNA. So I’m constantly going to be losing my LUNA if I provide it with a token that’s weaker than LUNA which is every single token outside of UST, because UST is a stablecoin. When the market is going down, people are actually going to want UST more. So because my goal is to stack LUNA this year, I’m not going to pair my LUNA with any other token that’s weaker, just because the demand for LUNA is going to be greater than any other token. So that’s the reason why I’m in LUNA-UST. I’m also in LUNA-LunaX. And I’m also in LUNA-bLUNA. But the highest yield is the LUNA-UST.
Yeah, that makes a lot of sense. I just have one follow up question. You were talking about looping. So why does looping create greater risk? ‘Cause you mentioned you looped three times and in a down market, that means you have three times greater risk. Can you talk a little bit about that?
Yeah, so the previous guy that just asked a question on… ‘Cause he needed to unwind. He’s at 37% loan to value. For him to unwind that position, he’s going to need to withdraw his bLUNA. When he withdraws his bLUNA, his loan to value is going to increase because of that. And it’s going to increase… Because he’s pretty safe, he’s at 37%, he can easily withdraw his bLUNA and then when he withdraws it, he can go all the way to 45%, 50%, and he’ll be okay. But say, you’re crashing, right. And you’ve looped it three times and you need to unwind that position, and you’re already at a 50% LTV. You only have 10% LTV to play around with. If you’re gonna unwind that position and you’re gonna withdraw LUNA so that you can sell it to provide it so you can pay down your loan, you’re gonna have to push your LTV all the way to 60%, or very close to getting liquidated, and you’re going to have to do that really fast. You’re going to have to first eat a 30% loss on the bLUNA to LUNA swap during a crash, then you sell your LUNA for UST. And you’re going to have to take that UST and repay your loan… Your loan to value down. So now, you go from, say you’re at 50%, it will get you down to like 40%. And then you got to do that, again, eat another 30% loss, and keep doing that until you’re in a safe place. So looping is very, very dangerous if you do it on a crash. If you’re doing it going up, then it’s not… But it’s always dangerous, because you can always crash.
Got it. Thank you.
I have a question. Just putting my home scenario, I’m a shrimp, plankton, however you want to call it. I really do appreciate the information that you’re providing and want to be able to grow my stack, for sure. But for example, right now, I’m going to start DCA-ing into LUNA aggressively. I’m getting about 20% more hours starting January. So that 20% plus some additional is going directly into LUNA. Now this takes into consideration that it might appreciate and I’m going to be getting more expensive LUNA or anything like that. Do you have or have you used in the past any other, maybe more risk, but also more reward situation that you have in mind that could maybe be more beneficial? Because 100% of like $1, it’s just $1, right? So it’s a slow process when you have a small capital, once it starts compounding it gets interesting. But this specific… I’m starting to read it, I’ve had to space it out between a couple of days so that I can get all the information in. But this is going to be a process of, in the way I see it, compounding my W-2 and all that, it’s going to take a couple of years, four to five years to even breakeven to what I’d be putting in. But is there anything that you know of to get more LUNA that’s a little bit more maybe risk adverse without the looping?
Yeah, so I’ll be talking about that in the next Space, or maybe not the next Space, the next phase is risk management. But it’s really important what you do outside of crypto. It’s very pertinent to what you do inside of crypto. So the foundation of any type of wealth generation or wealth accumulation is, the first foundation is just budget. Make make more than you spend, or spend less than you make. That’s easy to see when you look at your credit score. So if you have a good credit score, you have that down really well. If you have a bad credit score, you got to work on that. So you either learn to make more and spend less or both right. So once you have more money than you have a month, then then you go into the next step, which is investing. And you put it into anything that’s a positive feedback loop where you put $1 in, you get $2 out. So the investing part is step two. The step three part is learning risk management, which is what we’re going to be talking about in the next Space. Once you understand those three things, and you practice those three things well outside of crypto and inside of crypto, then you get to the next thing which is scaling. And you can scale with credit. So to answer your question, that’s the way that I built wealth and accelerated the wealth building because I had those three building blocks down well, I used every form of credit that I could get. So I did 0% credit cards, I did home equity lines of credit, I did professional lines of credit, I did liens on my car, because I was confident that I could at least make 20% stable yield on these cards and different loans that I was taking out. I don’t recommend anybody to do that if you don’t have those first three steps. But when you can take a $40,000 home equity line of credit with 3% interest and you can put it in something that’s yielding 20% with very little risk, you’re making 15% on $40,000.
So there’s all kinds of ways to arb traditional finance and decentralized finance. I think that that’s the biggest opportunity that we have in our lifetime. The previous generation’s biggest opportunity was the arb between labor rates from China and Philippines to the US. And now that wealth is drifting toward those nations and it’s kind of equalized, that arb is slowly disappearing. And the arb that exists right now is between very, very cheap inflationary money in all of these World Banks, and decentralized finance that is yielding 100% returns. So if you can get cheap money for 3%, and put it into something that’s yielding 20%-100%, it’s just a no brainer. So access to credit is super… That’s kind of the gasoline on the… That you can get to where you want to go faster. But if you don’t have those building blocks to begin with, like you spend more than you make, that is going to follow you into DeFi. And there’s much… That you’re gonna lose your shirt… In or any kind of leverage. Because it really indicates a level of greed, and greed and fear run markets. And if you can’t control greed on the way up, then fear is going to totally wreck you on the way down. You’ll buy at the extreme tops, and sell at the bottom, and I’ve done it before. I speak from experience. And so yeah, I think a lot of people come to crypto… And I’m not saying you are but there’s a lot of people that come to crypto looking for the magic… For their lives and think that if they buy the right coin, that it fixes all their problems. But in reality, decentralized finance is much different than just picking a coin and hoping that it moons. It’s understanding how to use all of these tools that are given to us, and then arb-ing the interest rate. And long term, that is a much more stable and efficient plan for wealth generation, and even legacy wealth, then trying to pick a coin that’s going to go up 20x.
Right. I can tell you right off the bat, what you described is basically me a couple of months ago. Learning about crypto and learning about DeFi, basically made me look into my personal finances and say, “Hey, you’ve had the opportunity of doing something and you just wasted a lot of time and a lot of money that right now could be very different.” And thankfully, it’s helped me to get a little bit more on the right mindset. Right now, I do understand that of course compounding and time and all that, but at the end of the day, I was already wasting the money a year ago. And as I told my wife, “You know what, by the end of this year or mid 2022, we either learned how to save some money even though we lost it. So that if crypto wasn’t for me, it chewed me out and spit me out.” This is what I told her in May. But if crypto choose me out, at the end of the day, at least I learned how to not spend all the money in stupid things we don’t need, at least we know how to save money now, or will learn. And my mindset is, “Okay, if I lose it, I understand.” I was already gonna lose it because of my habits. But right now, what I want is basically any tool to my advantage to compound that possible success. I don’t want to get rich in a month, I understand that, or a year, or five years, I understand that. But 100% of $1 is still $1. So what you said right now about maybe using traditional credit as leverage, I did use that in June. Fortunately, I bought a little bit of LUNA, it’s not a lot of money. But I’ve got a little bit of LUNA in June. And that’s that’s been marvelous. And that has brought me down the rabbit hole. So I just wanted to see if there wasn’t maybe a different… A little bit more degen, a little bit more risk on, that can be used for a couple of months, and then go to something more stable, more much more controlled. Honestly, thank you for all the information that you’re providing. I’ll be looking into it. Thank you.
On the topic of risk management, can you talk a little about the regulatory front here in the US being a US resident? The SEC chairman has said that stablecoins are one of the things that he looks to regulate in 2022. And do you think that will or could have an impact on your strategy and the price of LUNA and the stability of UST?
Yeah, that’s a good question. I look at that as a risk. I know there’s a lot of people that don’t. That’s something that I don’t… There’s no way that they can regulate UST out of existence because it’s decentralized. There’s no way that they can go to get rid of UST at this point. I mean, it’s global, it’s decentralized. It’s on global exchanges where that’s out of the jurisdiction of the US, so…
Agree, but I look at like XRP. XRP has not been regulated out of existence. But the ongoing litigation has certainly had a negative impact on it. So that’s kind of the lens through which I’m looking at this.
Right, right. So Well, I mean, you can look at what’s happening with XRP because of the regulatory influence, and definitely there’s a part of that. But I mean, XRP has basically no function. There’s no problem that XRP solves. They’re helping the banks… They want to replace the Swift banking system, and ACH and whatever, through blockchain. But that’s like somebody’s trying to provide a solution to make Blockbuster a better institution. Blockchain is going to take over banks. And so something that is providing a service to a business or an industry that is going to be disrupted, really doesn’t have a future anyway. But I see your point. And UST is showing itself to be very, very needed for all of these decentralized protocols. And more and more people are looking at centralized coins as something that you’re not able to… Them because the government can just shut it down. So I don’t think that UST… I know UST cannot be regulated by the US government. It’s like Bitcoin. It’s decentralized. But what they can do is regulate users, right? They can say you cannot use UST. So there’s different things that I’m doing to protect myself. I’m looking into different ways to protect myself from regulation of the government, and I’m not going to talk about it on…
Fair enough. Thank you.
Yeah, no problem. Can we take one more question? We’re at two hours. And
You’re My Boy, $LUNA! 2:11:46
Yeah, I just had a quick follow up for you on your LTV management approach you described, where when you hit 50%, you withdraw your LUNA-UST LP, provide some UST to get your LTV down. Do you buy it down to just like 45%? So in other words, are you living generally between 45% and 50% kind of at all times? Or when you get to 50%, do you buy it down…
No, that’s pretty high. I like between 35% to 40%. So if it gets to 50%, I’m going to pay down… I’m going to use the UST to pay down or whatever I can to get to a more safe place. And I’m just going to sit. I just sit and wait to see what it does. If it goes down lower, I’m going to use more UST to pay it down. If I run out of UST, then I’m going to liquidate LUNA to pay it down. But yeah, I just manage it. I just don’t want it over 50%. And for some people, they just might not want it over 45%, or 40%, or 35%. So everybody’s comfort level is different, and just manage it around your comfort level, yeah.
You’re My Boy, $LUNA! 2:13:00
So you’re bringing it down from 50% to 35%. And then when price-go-up mode starts to reactivate, then you’ll pull out some additional borrow, or you’ll reenter the LUNA-UST LP?
You’re My Boy, $LUNA! 2:13:19
Gotcha. Thank you.
Yep. Maybe we can take one last question? Okay. Awesome. Thanks, guys. That was cool. The next one we’re going to do is the tweet that pinned up there. Thanks. Thanks, Chad or whoever pinned that tweet up there. Or is that the right one? There’s a risk management strategy that’s in the pinned tweets. So go ahead and read through that. And then the next Space that we do is going to cover the details and the nitty gritty of that tweet. So have a happy new year. Thanks. Thank you guys for for being here, and we’ll see you in the next space.
Chad THOReau 2:14:01
Thanks for doing this. See you guys.
Thanks for checking out another episode of The Ether. That was the LUNAomics Big Picture Strategy Q&A. Definitely check out the LUNAomics Twitter page, and look at the pins, you’ll find the Big Picture Strategy there. And when you have Qs, listen to this space for the As. For terraspaces.org, I’m Finn. Thanks for listening.