Transcript: LUNAomics Master Class 2 Risk Management


Finn 0:42
Hello and welcome to The Ether. Today is Saturday, January 1st 2022. This is the LUNAomics Master Class #2: Risk Management Space. Happy New Year, everyone, hell yeah. Let’s take a listen.

LUNAomics 0:57
Okay, shall we get into it? So today we’re going to be talking about risk management. And the overall goal for this morning is just to… I was kind of talking to Hutch about one of the things that we’re noticing when we’re listening to the different conversations in the previous Spaces, is that there is this fear of borrowing. And in having a fear of borrowing, there’s leaving a lot of potential profit on the table. There’s correct ways to do it, to mitigate risk and to expose yourself to the reward without losing everything. And so I put out a tweet yesterday of why not to borrow, and there’s a whole bunch of different legitimate reasons of why people are afraid to borrow. I think in this space we’ve experienced that May crash where a lot of people got liquidated, nobody was expecting a drop that big. And then there’s been several times where we’ve seen retracements of 50% or more in Terra, and a lot of people who weren’t prepared for that got liquidated. You can see on Kujira, there’s just a lot of people that keep their loan to value way too high, and they get liquidated even when the market is hardly moving. And I’m not sure why people keep their loan to values close to 60%, but some people do and we can actually see that data. So there are people that don’t know what they’re doing as far as leverage, but if you do know what you’re doing, there’s just a lot of money, that additional to what you can make. My sister, she has been a Dave Ramsey fan for her whole life, never borrowed. Her whole goal is to pay off her house not to be in debt at all, and would look at what I was doing as risky because I would take out different loans against my house, against my car, and she would say that I’m being too risky, and judge me, and give me hell, and make my life miserable, telling me how dumb I am. And it’s interesting, now she’s liquidated her 401(k)s and she’s jumping into DeFi, just because she sees the power of it. And she’s actually getting involved in borrowing in a responsible way, and she’s making a killing as well. So I understand the whole “debt is bad” mindset, and I kind of want to address that today.

LUNAomics 3:36
So the flow for today is going to be, I’m just going to talk a little bit about what are the reasons to borrow, what are the advantages in borrowing, because this whole strategy depends on borrowing. And then I’m going to go through some of the questions, yesterday everybody brought up really good concerns of what are the concerns of borrowings, so I’ll go through some of those. And then go through the actual tweet on risk management strategies and then open it up for questions and answers. So are there any input or anything anyone wants to say before we jump in? So, Hutch, would you be able to… I don’t see you as a co-host anymore. I gave you an invite to co-host. Rebel Defi, I’m giving you an invitation to co-host as well. Hutch, anything you want to add before we jump in?

Hutch 4:36
No, I was just gonna say I got demoted. But you know, in the insurance space, we come across the Dave Ramseyites too. And what we’ve noticed is when people get to retirement, a lot of times they have their house paid off, which is the Holy Grail, but then they don’t have any assets that have compounded for them. And they’re kind of scrambling to create cash flow for retirement. It’s like, “Okay, great, you got this asset that’s totally paid off, and now you get a medal or whatever, but you can’t eat your house, so now what?”

LUNAomics 5:13
Yeah. And the thing to that, too is, the more that you own your house, and the less that you owe in your house, it actually becomes a greater liability. Because if you look at the balance sheet of the bank, if there ever comes a time where you have a small loan against your house, and the bank has a small lien against the house, and for some reason, when you get older, you lose your job, or you don’t have that cash flow anymore to make payments, the first people that the banks foreclose on are the ones that have the greatest amount of equity. The ones that have the greatest amount of debt on their homes, they’re not going to foreclose on because they want to give an opportunity for that person to build equity in the house that they have on their balance sheet. So in a weird way, we feel more safe when we’re getting rid of debt, when actually it’s more of a liability because your risk for foreclosure goes way up.

Hutch 6:08
One of the things… That’s a great point, one of the things that we tell them that, I think actually plays into with LUNA, is if you have a liability, meaning you have a loan, you have a debt, but you have a corresponding asset, that you could wipe out that debt in a moment’s notice, are you technically in debt? And once people get that they get more comfortable with it.

LUNAomics 6:34
Hmm, that’s a great point. That’s a super good point. And that’s the way I manage all my debt. I try to make sure that any kind of, especially when you’re borrowing off of Anchor, that you never put that money in a place that’s inaccessible, you never lock it up. I mean, I don’t even like to… When I borrow and buy LUNA, I don’t like to convert it to bLUNA just because you got to eat the spread going back if you have to pay your loan off. I think what would be really cool is if you could convert bLUNA straight to UST and not have a spread. And I think White Whale and these other protocols that are coming on that allow you to… That are bringing liquidity to the market to narrow that spread actually helps. I like that because even though the arb disappears and I know a lot of people use… Arb that difference, it really, for the borrower who’s taking out money and then buying LUNA and then converting to bLUNA to do different things with it, the narrower that spread, the way easier to get back to LUNA to convert to UST and pay back your loan of any money. So I kinda like that.

Hutch 7:44
Oh, thank you answered one of my questions. I was wondering why you weren’t trying to get as much bLUNA as possible because I thought it had more utility in that now you could use it as collateral to borrow more, but you just answered it. It’s because if you have to manage there’s an extra step in managing it. Okay.

LUNAomics 8:03
Yeah. And I know that when you go to bLUNA, you get more LUNA so that when you convert back, it’s kind of a wash. But I mean, even that, I feel a little bit uncomfortable, because that spread goes back and forth. And it actually you… during a crash. So when you’re converting bLUNA back to LUNA during a crash, which is the only time that I would really convert it back, you end up paying through the nose for that. So I just like having everything liquid and accessible, that I can move around really quickly. Any other input before we jump into this? Okay, let’s just jump in. So one of the main reasons for borrowing that I think is the most powerful reason, is that the dynamics have vastly changed since 2019. When the Fed started printing out money, they actually added to the money supply 40% of the existing supply. So if you think of the inception of our country 250 years ago till now, close to half the money, 40% of all the money that’s in the circulating supply of US dollars, has been printed in the last… Since 2019. The damage that does to someone’s savings, we haven’t even seen it yet, because it’s not flowing through our economy… All of it is not flowing to our economy yet. But you have to understand the reason why the Fed has done that. The United States is in massive debt in the trillions of dollars, and the only way that… Just the interest payments alone are so huge that our GDP cannot handle… The taxes on our GDP cannot handle the debt that the US government is shouldering right now. So the only way that they can mitigate the risk of their debt so that they don’t go insolvent, is they have to print out tons of money to dilute that debt. So the more money that they print out, the less they owe, but what happens to people who have saved all their money in 401(k)s and in… 401(k)s are a little bit less susceptible because they’re invested in stocks and all the money that’s being printed is going into the stock market and driving it up. So there is a little protection there, but at some point, the stock market is going to crash, and then all of that buffers going to go away. But you can see that as the Fed’s printing out money and diluting their debt, it’s pushing the prices of everything up. So asset holders are benefiting from it. People that own homes, people that own anything that… Have gold, silver commodities, people that are holding stocks, they benefit from this printing of money. But people that are middle to lower class are just getting hammered by this because the only thing that they have is their W-2 income and their savings accounts. And so what people that are doing that are responsible, and you know, they have their savings and just working jobs, they’re getting decimated by the Fed printing out all this money, because the prices of everything are going through the roof, and the purchasing power of their dollars is getting disintegrated.

LUNAomics 11:24
And most people don’t understand that. They don’t look too deep into the impact of inflation on their paychecks, and then the government does a really good job of covering all that up. When they look at CPI numbers and different inflation numbers, they say, “Oh, it’s just this migratory or passing inflation,” when it’s really not. And if it was just the passing inflation, they wouldn’t want to raise interest rates, but they’re talking about raising, and I don’t think that they even could raise it that much. Because if they raise interest rates, it’s gonna affect the debt that they have. So it creates kind of a buffer for anybody who wants to borrow. So that’s way this year… When I changed my perspective on borrowing, and began to see borrowing as something that allows what the federal government is doing work in your favor. It just skyrockets your skills, the power of your finances. So to give you… I’ll give you just a couple of things that has worked for me this past year, and kind of the mindset behind it. So one thing to understand about debt, and whenever you go into debt, whenever you purchase anything, and it kind of goes into purchasing. So the foundation that we talked about in the last class is budgeting. You have to make more than you spend. So either find ways to make more or spend less. From that you have investing, you take the margin that you have, and you put it into different investments. And once you put it into investments, that’s when risk management becomes really important. And you have to protect your investment, so that you don’t lose that money that you put in. And then once you find something that works, then you scale it.

LUNAomics 13:21
So to give you an example of that, I’ve learned from trading, I’ve been an options trader for over two decades. And one of the things that we… One of the mantras that’s said in the space is that you manage your risk at order entry. So a lot of people say you make money on the sale, when actually you make money on the buy. When you get into the market, that’s really when you make your money. To give you an example, I have a friend that has a car business. He restores cars. And so he allows me to buy… I can buy cars from him under market value. And so because cars are a depreciating asset, I’ll never buy a car over Kelley Blue Book value. I always buy it under because that’s where the money is made. It’s not made on the sale is made on the buy. So to give you an example I wanted to… I bought a car that was a Jeep that was $10,000 under Kelley Blue Book. And so I bought a Jeep that was $10,000 under Kelley Blue Book that’s automatically a $10,000 profit if I turned around and sold it the next day. But the reason why I bought it was I wanted to put it on Turo, and I talked about that the last Space, but I wanted to put it on Turo to make some kind of cash flow. And you could do Uber, you could do Turo, you could rent out your car to somebody who’s doing Uber, there’s a whole bunch of different ways that if you had a car that normally drains funds from your pocket, you could turn it into an asset that creates funds by renting it to somebody that wants to do Uber, or renting it on Turo, or driving it yourself doing Uber. So I bought this car $10,000 under market and I didn’t buy it using my own cash, I bought it using a HELOC, so a home equity line of credit. I have a house that I can borrow against. The percent that I need to pay is about 3% on the HELOC. So in buying the Jeep I had… And taking out a loan on my house. And most people say don’t do that, that’s bad.

LUNAomics 15:37
It cost me $30 a month, interest only, $30 payment for that Jeep. So I took that Jeep, and I put it on Turo, and that generates about $2,000-$3,000 a month. But then it doesn’t stop there with the borrowing. If I had bought it just with cash, if I had to save up to $10,000-$20,000 to buy that jeep, it would have taken me… With my job and my current expenses, it would have taken me a couple of years to do that. But I could do that right away by getting into that loan, and as long as I could make that $30 payment, I was good. If the car got in an accident, I could still make the payment. And if I ever wanted to get out of it, if Turo didn’t work out, I could always sell that Jeep for $10,000 more, because I bought it $10,000 under market price. So I’m always looking at the risk of getting into something. So because that was a good risk to reward, I got into it. But on top of that, I put a lien on the Jeep. So I went to the bank. And because I went to a different bank, because the HELOC was a loan on the Jeep, but it’s against my house. So it’s paid off clear. There’s no lien on it. So I could go to another bank and take out another $25,000 off that Jeep. And that loan is a little bit different because you have to pay it off in a few years. So the payment on that is $200 a month. So I have a $30 payment from the HELOC. And then when I take a lien out on the Jeep, I have a $200 payment but I also get $25,000 cash.

Hutch 17:19
So you basically looped your Jeep?

LUNAomics 17:23
Yeah, I guess so. So then I took the $25,000 off my Jeep, and I put it into Anchor Borrow, because that was kind of like my first step into DeFi. You put it into Anchor Borrow, you’re making 20% on the loan of the Jeep. And then I’m only paying like 5% at the bank. But then I started putting it into the Anchor LP, which is making 100% yield, and Mirror which was at that time making 200% yield, and I broke it up between the different LPs. So on the DeFi part of the Jeep, I was making another $2,000 a month. So overall, through Turo I was making like $2,000-$3,000 a month. And my cost for that was only $30 a month, the $30 payment for my HELOC. Then with the DeFi part, I was making $2,000 a month, but the payment for that with a lien on the Jeep was $200 a month. So altogether I was paying $230 a month to satisfy my loans, but I was making $4,000-$5,000 a month in cash flow. So when I looked at that I thought, “Man, this is working,” with one Jeep and I’m making $4,000-$5,000 on one Jeep through the HELOC and the lien on my Jeep. I only have a $230 payment to make $5,000. I considered that a positive feedback loop. So a positive feedback loop…

LUNAomics 18:59
So the difference between a consumer mindset, and most people have a consumer mindset where they just look at debt as bad because consumer… When you buy things with money, you don’t have to buy things you don’t need to impress people who don’t care. That’s always a bad idea. And what a lot of people do is they do exactly that. The majority of the population are consumers with a consumer mindset. But corporate debt is different, corporate debt is looking for positive feedback loops. And it finds positive feedback loops, and what a positive feedback loop is, is you take $1 you put it into something, and you get $2 out of it. If I can find systems like that, which is like one that I just described, I put $230 into a system and I get $4,000-$5,000 out of it. It’s a positive feedback loop system that now I want to scale it. So the difference between consumer debt and corporate debt, consumer debt just buys things that produces no cash flow. But a corporate mindset looks for debt to get into that produces a positive cash flow. So once I found a positive feedback loop, which was that whole system that I just explained, now, debt is a good thing, because if I can do that with $1, I can do it with $5. So, what I did was, because I was making $4,000-$5,000 a month with a liability of $230 a month, I just scaled it up to like three Jeeps. So now I have three Jeeps that are producing between $12,000-$15,000 a month. And even though that’s a pretty solid income, and it’s way more than my regular job, my wife got to quit her job, and she just takes care of our Turo business. And the amount that business is making is actually way, way, way less than DeFi. But I mean, it almost doesn’t make sense to do it, because DeFi just pays so much more. But then I have to find something for my wife to do. [chuckle] So yeah, she does that. And I started seeing that just the switch in mindset between “save, save, save, save, don’t get into debt” and then flipping that to “not all debt is bad, there’s good debt”, as long as you find a positive feedback loop system, there’s so much opportunity in that if someone can just switch their mind, that perspective. So that’s kind of the underlying thought of why someone would want to get into debt and why someone would want to use the Fed on their side.

LUNAomics 21:56
And then after we did that we just thought prices for everything goes through the roof. And my friends who are stuck in their W-2 jobs or stuck in jobs that are not growing… Their income is not growing at the same pace of inflation, they’re all getting really hurt by the increase of the price of gas, the increase in the price of food, increase in the price of commodities. It’s hurting everyone who’s not switching their mindset. So because I’m on the other side, and I’m benefiting from it, I can borrow at these super low rates, create income with it, and then now with DeFi, I can take that $25,000 and I can make $25,000 a year. And the gas prices don’t hurt me… The increase prices of everything doesn’t hurt me because my income is far outpacing the pace of inflation. So yeah. Especially in the space of DeFi, if you do it right, there’s just so much opportunity and so much money to be made. And I think a lot of people aren’t looking at DeFi as a business. They’re not looking for positive loop systems within DeFi, they’re looking for that magic coin that’s like Doge, or SHIB, or whatever. They’re looking for this coin that’s going to 20x, and it’s just the gamble. It’s like a meme coin slot machine that people are looking to change their whole life, and you can take so much more control over your financial future if you look at crypto as a system of positive feedback loops, that if you do X, you’ll get Y. And that’s what DeFi has changed. DeFi has completely changed the game because it’s not about 10x-ing your return, depending on the chances of sending out a whole bunch of means and pushing the price of a coin up. People still do that, but it’s so much more like a business. It’s decentralizing banks. It’s decentralizing the stock market. It’s decentralizing the way people spend and the way that you look at…

LUNAomics 24:18
So one of the things that I saw was a post where they said, “I’m not borrowing because Anchor is… The rate to borrow is going down, and we’re just making Anchor rich.” And I think that mindset is not right, because decentralized finance doesn’t make anyone rich except the people participating in it. When it’s really decentralized. So a lot of people who are consumers, they look at Amazon and they say, “Oh, Jeff Bezos is the one that’s getting rich.” And he is, but the reason why he’s rich is because he’s decentralized retail. And what I mean by that is he’s made retail accessible to anyone. Anyone with a few thousand dollars can… Well, it’s harder now, but anyone with a few thousand dollars can put up a store, create a storefront on Amazon… Excuse me. And manufacture things in China send it over and actually become a retailer that threatens the big boxes. And because Jeff Bezos has given the opportunity for anyone to participate in retail, he’s made a killing doing that. He’s given opportunity to everyone. Same thing with YouTube, YouTube has taken the opportunity of media and you don’t have to be a media conglomerate to make millions of dollars through ads and whatnot. They have decentralized media. And so if you look at the amount of money that YouTube creates, just through decentralizing a fraction of the GDP of media and Jeff Bezos, what he has made just through the decentralization of retail, which is a fraction of the GDP, and people have made millions being YouTube creators, and made millions being Amazon storefront owners, the potential and the amount of money that you can make in DeFi is 10x that, 100x that, because it’s not decentralizing just a small sliver of the economy, it’s decentralizing finance itself.

LUNAomics 26:44
And so when you understand that Anchor is a decentralized protocol that is giving the profit of what would normally go to CEO salaries of big bank offices, employees, and it turns around and gives that income back to its users through a rewards, inflationary rewards, and in other things, it’s one of the greatest opportunities of our lifetime. Participating in providing liquidity was something that only large banks like JP Morgan and Goldman Sachs and these other companies that had hundreds of millions of dollars could do before. But decentralized finance has actually leveled the playing field so that anybody with even $500 can participate in that and get rewarded for that. It’s not a scam. It’s not a gimmick. This is traditional finance, being decentralized. So when you understand the power of it, that you can be a banker, that you can be a Wall Street bank, and you create positive feedback loops, and you borrow the same way that they borrow, and you utilize the dollar in the same way that they have utilized the dollar. It will create… I believe it will create a complete systemic change in our ecosystem, but the education… People have to understand the tools that they have, and the tools that they can deploy to create wealth. And that’s what I’m trying to do with these Spaces is try to not just help people get more money, but to change the mindset of what’s available, what you can use, how you can use it, not to be afraid of debt, but to understand how to manage the risk so that you can receive the potential reward. Any input on that?

Rebel Defi 28:41
Hi, LUNAomics, it’s Rebel Defi here. We’ve got a few people requesting to speak. Is it alright if I just bring them all up to ask questions and stuff? Cool. Defi Alpha, do you want to go first? Defi Alpha? Alright, we’ll jump to Ben Gainz.

Ben_Gainz1 28:57
Hi. Hello, everyone. Happy New Year. LUNAomics, thank you for doing this. It’s pretty early in Hawaii. I just wanted to… Selfishly, I think about it in my situation. Not everybody’s in the States. So access to cheap money is really something available in first world countries in Europe and of course the United States. Here in Mexico, the cheapest APR with excellent credit, I’m not talking about me having excellent credit but I have an uncle who has excellent credit, and the cheapest APR that you can get here in Mexico is about 3% monthly. You can get some cards that offer 0% purchases for maybe 1.9% monthly. I’m sorry, cards with 0% APR but you have to pay them within 6-12 months. And traditional lines of credit or maybe home equity lines of credit with a 1.8%, 1.6%, which is like the absolute lowest, people go crazy for that kind of interest. But that’s a monthly interest. What’s the cut off? I tried to do the math, unfortunately, I’m trying to first wrap my head around what can be earned, I’m still on stage five, or what you mentioned in one of your tweets, finding what kind of yield you can create monthly with the spreadsheet that you created, and that the other person, I forgot his name, optimized helps a lot. But what’s the cut off with being able to leverage debt? Because I understand I have to manage my risk for liquidation because getting liquidated puts me back and can create a cascade. So I’m walking to this being as safe as possible, maybe the 25%, 30% maximum, 20%-25%, 30% leverage, and then the other remaining 15%, maybe just sitting on the wallet for immediate or fast LP, like you mentioned. But what’s the cut off for actual paying of interest? Now of course that also, Anchor is offering a negative return from what’s being made to the distribution. It’s around negative -1.28%. So technically, we’re going to be paying 1.28% yearly, and that might go down to maybe even less, which is, I heard, 25% was the cut off for the earning side. But what’s the cut off in your mind for the paying of the debt? I could probably get a debt, or a substantial amount of start with a 1.6%, 1.8% monthly interest. What would your cut off be?

LUNAomics 31:39
That’s a good question. I think you just got to do the numbers on that. For myself, I just look at what… I start with what I can make. For the positive cash flow part, I start with what I can make. What is the potential of the positive feedback loop that I found? So when you look through the ecosystem, and you find something that can generate a yield of say, our assumption is that LUNA can 10x, that’s at the top end, right, that’s 1,000x return. But it’s very volatile, so there’s a little bit more risk involved if your timeframe is short. If your timeframe is long, then the risk drops considerably. So when you’re looking at debt, and what kind of debt to take on, you always calculate what’s the potential first. And then you look at the liability. And when I look at the liability, I look at it from all angles, so like for that instance that I gave you, it’s a $230 liability per month that borrowing would incur for me, and I wouldn’t just look at DeFi. In fact, I look at DeFi as like it could blow up, right? So from my job, and from the margin that I have in my job, can I cover that debt? And if I can cover that debt comfortably, then it’s a no brainer for me because I can take on that debt without stress. So I have my W-2 income, and then if I take out that loan that produces cash flow through a real life asset, like a Jeep, then it lowers my risk even more. If I have a solid asset that I can sell if that business doesn’t work, it lowers my risk even more. And then if I have DeFi coming in, on top of that, it lowers my risk even more. So the risk to reward on a decision like that, in a system like that, is just a no brainer for me. So you’re you have to look at the reward, and then measure it against the risk. And then kind of juggle all things. If you’re not super comfortable with DeFi, then do something to pick up, you know, work a W-2 work to lower your risk. There’s all different kinds of ways to lower your risk if you look at everything at your disposal, and not just compartmentalizing DeFi and real life.

Ben_Gainz1 34:13
Yeah, like in your situation, you basically get the debt and then create something in traditional finance that actually pays the debt for you. And then anything that is left over from that can… Or any additional leverage that can be done, it’s basically free money for DeFi. I understand that perfectly. But in the event that I’m just lost my train of thought.

LUNAomics 34:36
So to answer your question, at what point when I stop using Anchor Borrow, because the loan is getting more negative? Again, I just look at what is the potential reward and measure it against that. There’s not a solid answer for that because everybody’s finances are in a different place. Yeah, just look at one against another.

Ben_Gainz1 34:57
The way I see, it’s not as simple as, “Hey, I’m paying, let’s say, just a number, 10% a year. And I’m making 100% a year.” It’s not that simple, because yeah, if you think about it that way, you’re always gonna make the difference, the 90%. But things change, liquidations can change things like… That’s the only thing I’m trying to get my head around.

LUNAomics 35:19
Yeah, so the thing that… The place that you kind of want to get to or, maybe not you, but the place that I shoot for, and that I’ve exceeded this year is you have your W-2 income, income that’s outside of DeFi, and the perfect scenario for me was to get to a place in DeFi, where the money that’s generated in all these different protocols, and LPs and cash flow and assets and stuff in DeFi, far surpass the income that I’m making in the regular world, in my W-2. Because all of that is pretty much passive. And then once all of that is passive, and it exceeds by some number, the amount of money in your W-2, then you can kind of just do whatever you want. It gives you freedom of time, and freedom of finance. So that’s kind of been the goal for me. Sorry to cut you off, but there’s a bunch of other people waiting for questions, we can jump to the next one. And then I’m just going to jump into the next part of this. Just one more question. And we’ll jump into the next part.

Rebel Defi 36:42
Okay, shall we bring up Adam?

Adam Beachnau 36:44
Yeah, I was actually just… I just want to just add to that, I think it’s a great train of thought and, the key with debt is, you want to make sure that you can always pay the payments off, right. And so, I think some of the things that you’ve talked about, LUNAomics, in some of the other chats, being able to borrow off your house is great, because you can get fixed rates, but from a risk management standpoint, things to think about is like, “Okay, could the interest rate I’m paying on go up? And what if my assets value goes down? What will happened in that scenario?” And so I think, just thinking through things like that, from a risk management standpoint, as long as you can pay off your monthly, you never have to worry about selling the apex asset, as you call it, right. And that’s, to me, the critical thing that I tried to think about as well is, I just want to make sure I never have to sell the asset. And so as long as I can pay that monthly on it, even in different scenarios of the rate going up or down, and if I can get a fixed low rate, that’s ultimately what I’m trying to do. That’s the golden situation.

LUNAomics 37:46
Yeah, perfect. Yeah, fixed low rates are it, and I always get fixed rates whenever I take out loans. I don’t think I have one loan out that’s variable. And to the other person’s question on… I think he comes from Mexico and doesn’t have access to the cheap credit. Anchor really is the answer to that. Anchor, even if it’s -1% APR, -2% APR, that’s extremely low credit. And so the strategy that makes the most sense to me is you just buy as much LUNA as you can, because with the amount of LUNA you’re holding an appreciating asset that’s going to continue to grow over time, in my opinion, and everyone has to come to their own conclusion of that. But I am looking at LUNA as something that can outpace the value of my home, it actually has outpaced the value of my home by a huge scale. And not only does it grow in value itself, but now you can borrow off of it, and to be able to borrow off of your asset at one point something percent interest APR is a great rate, no matter where you live in the world. So that’s why Anchor is a very exciting thing for me. It takes away the… It kind of levels the playing fields for anyone in the world. Yeah.

Cephii 39:22
Hey guys, just… For just second. I had to run into work but, I finally survived COVID and got better and everything by the way, but I’m back to work. But real quick, I had some maybe alpha to throw out there before I run for people that might care. So similar to what you guys have been talking about. I’ll just have you note that… Just look at what… So if you look at your Anchor Borrow and however much you’re paying there, the other thing you’re doing along the way is of course you’re building various cash flow positions to overcome the cost of borrowing by orders of magnitude, so they don’t have to necessarily be owned in LUNA. An example would be like ATOM topped out at like $45 and got crushed to $20. And you see almost nobody talking about it, nobody buying it and its APR just skyrocketed because of the lower participation, probably in staking or something. And so it’s at like 14%. So I bought pretty much escalating buys to the bottom, and at nearly, basically the bottom got it at about $20. And now it’s sitting at like $36, so pretty soon I’m going to 2x my APR, essentially, on my buy to 30%, which has paid in kind. So really, I can just ride that to infinity from here on, there’s no obvious reason to pay off an Anchor loan, because I’m actually making sufficient money in something else, that it’s actually vastly outperforming the cost to borrow. So worst case scenario, it’s on Osmosis, or you’re on Cosmos, and you could swap to, say, UST and pay off the debt immediately, or you could use the cash flow to pay off the debt if you felt like it. Or if you felt like the longer term situation doesn’t make sense to pay off the debt then you don’t, and the alpha to sort of think about here would be, not only did I get it at the bottom, which is what I’m supposed to do, but there’s a shared staking situation happening on Cosmos, where in the future the concept is, is that ATOM will be able to be, essentially, liquid staked to multiple chains to provide more shared security. So your APY on ATOM may end up being like 200%, 300%, 400%, 500%, ridiculous numbers. So that’s another fascinating feedback loop that if you don’t have any ATOM, you might consider it.

Cephii 41:46
Even though it’s come up a bit right now, I know my sister in law bought like $1.5 million worth of ATOM at $45, or like $40, and she was pissed, because it dropped 50%. [chuckle] So I was like, “Dude, why did you buy that without asking me? I would have told you when to buy.” But then I called her back, I’m like, “Look, don’t let your emotions get ahold of you, don’t sell it, you’ll be fine.” It’s gonna not only come back up to meet its prior high, but probably double and triple from there if the shared staking situation persists. And not only that, but you’ll make such outlandish APYs, that are essentially no risk APYs that you could basically retire off that one move, and that would be the end of it. So really, these opportunities are out there, and you want to be paying attention to them. And sometimes, yeah, these things can be unbelievably lucrative. And then you just decide do you need to pay off your borrow or not based on not only the growth of your coin, and that’s awesome too, if LUNA goes up a lot, but if you can get your APYs, on something that you believe has a strong forward potential, and you’re getting paid in kind, like for example, with ATOM, you’re getting paid in ATOM, then when the price of the coin goes up, your yield actually goes up, and vice versa. So those are the kinds of things that you want to buy, in a sense, exponentially on the way down, because on the way up, you’re getting an exponential increase in your APY. Finding the bottom’s the hard part, and doing TA and whatnot is a waste of time, if you ask me. The best thing to do is just mathematically figure out all the way the bottom, and then that your biggest bias should be the lower the price goes. And that’s the simplest way to look at it.

LUNAomics 43:30
Thanks Cephii, that’s great. That’s awesome, thank you so much.

Cephii 43:31
Have fun guys, I gotta actually work today. So sorry, catch up later.

LUNAomics 43:36
All right. Yeah. And ATOM is also one of the underlying technologies that Terra works off of so. And it’s a layer 1 proof of stake that in the future, you can use as collateral on Anchor as well. So any kind of investment into Anchor, you can put into any kind of strategy that you’re putting into LUNA right now in the future, as soon as they make that available. So yeah, ATOM is another great buy.

Adam Beachnau 44:10
So, LUNAomics, one question I have for you, I know you have kind of a list of stuff to get through, so you don’t necessarily have to hit it now. But one thing I’m very curious about is like

LUNAomics 44:18
You cut out, Adam. Someone who hasn’t asked… Adam, we’ll get back to you. You’re cutting out right now. Maybe we can go with Bryan. And then we’ll jump into the next section.

Bryan Choate 44:29
Hey, thanks for the space. Happy New Year everybody. I had a question actually about the mechanics of liquidation because I think you had said that you experienced one, and maybe just use an example like on $10,000, if the loan to value goes to, say 70%, is there a waiting time to pay back that… To get your loan to value down? Or is it just an automatic liquidation? And…

LUNAomics 45:05
Yeah, it’s an automatic liquidation. So you never want to get to a place where you’re getting even close to getting liquidated. So I always manage my loan around 50% LTV, I’ll never get it above that. For me, it’s rarely gotten above 50% LTV. It’s not like a traditional bank, where they’re gonna call you… Or traditional brokerage firm where they’ll call you and say, “Hey, you have a margin call, can you bring in this much money? If you don’t, then we’re going to liquidate your asset.” It’s just a smart contract code. And it will just liquidate you soon as you hit 60% LTV. All the guys that are putting bids in Kujira, they’re all going to get their bids filled with your assets. So Kujira is actually a really good thing because it allows people to bid and they have more chances of getting filled the lower their bid is, and less chance the higher their bid is. And so you could potentially get liquidated and only lose like 1%, 2%, 3%, of your LUNA. In the event of a crash though, it will blast through all of those bids. And you could get only 60% or 70% of your LUNA, because it goes all the way to 30% bids. So the way that that works is you get your… When you get to 60%, it will push you down to a safe LTV. So say you have $10,000 and say LUNA… And, say you’ve taken a $4,000 loan off of it. And then LUNA drops 50%, LUNA will drop 50%, it’s gonna push your loan to value from wherever you are, 40% up to 80%. But right when you hit 60%, it’s gonna sell off enough of your LUNA, to get you back down to like 45%. If you’re holding less than 2,000 in your account, it’s just going to liquidate everything. So you have to be careful not to let that loan to value get above 50%. That’s kind of my… And for everybody that’s different, right? You can take out a loan to value at like 30% and then manage it at 45%. Everybody’s risk tolerance is different. So mine is at 50%. I never let it get above that. And I have alerts that call my phone if the price gets to that point. And then I have everything on my phone so that I can pay back the loan wherever I am. And I can do it in three minutes or less.

Bryan Choate 47:54
So it just basically liquidate you down to a loan to value. So it doesn’t necessarily… And that $10,000… Yeah, it doesn’t take everything out, it just kind of gets you down to where you’re back in the zone that you should be.

LUNAomics 48:10
Yeah, exactly.

Bryan Choate 48:12
That’s great, that’s my question.

LUNAomics 48:13
Unless you’re $2,000 or below. Yeah.

Bryan Choate 48:16
Yeah. Yeah, well I’m…

LUNAomics 48:17
So I think that’s a good transition into just the input. And thanks for everybody who inputted yesterday on the tweet that I asked why do people not want to borrow. So we kind of went over the advantages of borrowing and some of the advantages of borrowing. But the main concern was liquidation, and that’s kind of what we’re talking about. So liquidation, you can protect yourself from liquidation by stress testing, the same way that bank stress tests, when people can’t pay back their loans. And they do these different stress tests to see where their place of insolvency will begin. You can do that with Anchor very easily. So everyone knows that you’re going to get liquidated at 60%. And so even my kids, they use the Anchor loan to propel their returns. So my daughter, she has never worked a full time job, just put her income of a couple $100 a month, but she started when she was a sophomore, and so this is her fourth year in crypto, and her account is over $250,000. And she’s a freshman in college. And if she continues what she’s doing and manages her loan to value responsibly, she’ll have several million dollars before she even graduates from college. And then wherever she works will be not because she has to make money to pay back any student loans, but because she wants to do it. And my son is the same way. So there are safe ways that even high schoolers can figure out how to manage your loan to value in responsible ways.

LUNAomics 50:04
So stress testing, like 60% is the place where you get liquidated. So if somebody wants to borrow, they can leverage their positions through borrowing, and then just manage their LTV in different ways where they feel comfortable. So maybe you want to just borrow 20%, and if it gets to like 30%, that’s where you manage. So it’s all about just… If you manage it good, you’re never going to get liquidated. So lowering your LTV, having a plan for what to do when the market crashes. So people were talking about manipulation, and that is a legit reason. There have been these oracle malfunctions it seems, that people were getting liquidated far below market price. And when I saw that happening, I just pushed my LTV to 30% and pay back everything. So whenever you borrow anything, like Hutch said in the beginning, you want to make sure that you have enough assets liquid to pay down that loan at an instant. So it wasn’t hard for me, even though I was at 40% LTV, as soon as I saw those wicks, it was easy to pay back down to 30% LTV because all of it is liquid. I didn’t have to go through these complicated unwinds, or go to different exchanges to get my money back. Everything is in my wallet. Everything is in smart contracts, other smart contracts that I can easily liquidate and pay things back in three minutes or less. So anytime that you borrow, you have to have that understanding that you want to keep it liquid, you don’t want to lock it up, you don’t want to have it on other exchanges. You want to have it readily available to be able to pay back if you need to.

LUNAomics 51:48
That manipulation was a great a great example of why you want things to be liquid, you don’t necessarily need a crash. You just need something to happen where an oracle goes bad, and you want to be able to pay down that loan. And if there’s too many steps to get to that place, then you do run the risk of liquidation. So depending on where your loan to value is, people talked about stress. And I think that stress comes from not having a clear plan of what could happen and then formulating a counter plan to respond to that. So in defensive driving, there’s risks in everything that we do, like driving from point A to point B has a certain amount of risk. But just because it has a risk that I could get in a car accident and die, we make these assumptions every day of our lives, where we balance risk to reward and take the path that makes the most sense most of the time. I think the only time that we don’t make those logical decisions is when fear is in the picture. And when fear is in the picture, then we don’t think logically, it’s just like tunnel vision on the thing you fear. And I think because of the May liquidation, a lot of people just look at that term “liquidation” and are so scared of it that they don’t make logical decisions around what makes sense, risk versus reward. So yeah, the same way that we want to get from point A to point B in a fast way, and we don’t want to walk, or don’t want to ride a bike, we take the risk to jump into a car and get there. And we accept that risk because the risk to reward is worth it.

LUNAomics 53:35
So one of the things that… And we kind of talked about the consumer debt versus corporate debt. And one of the big things that I saw in the tweet thread was people saying, “Well, it’s so complicated, I don’t want to learn it. I have a full time job, I don’t want to manage it. I don’t want to get woken up at night.” And those are all valid concerns, because everybody’s busy. Everybody has a certain amount of stress. Nobody wants more stress. But I think one thing to keep in mind is, what are you leaving on the table in completely ignoring this? And I think a lot of people don’t understand the power of leverage, if you leverage in a responsible way. So I really appreciate that. And I couldn’t… I don’t remember his name, but I retweeted his spreadsheet. And his spreadsheet kind of took what I was saying, and he materialized it on the spreadsheet. So the strategy that we’re talking about is buying LUNA, borrowing off of our Anchor Borrow in UST, and then buying LUNA with that borrowed amount, and at whatever LTVs. And then as the price goes up, and the amount that you’re holding, gets greater than the amount that you borrow, you can take that surplus, convert it to bLUNA and then provide it to the Anchor Protocol so that you can borrow more in a safe way. Because you always want to have at least the amount in your wallet or liquid… You always want to have that amount to be able to pay back a loan. So I don’t loop things. I wait till the value of the things in my wallet get higher than the amount that I owe. And then I take the cream off the top, I convert that to bLUNA, and then provide that back to the protocol so that I can borrow more. And so you’re constantly managing that. And what he did on that spreadsheet kind of takes into account that principle.

LUNAomics 55:50
And so these are some numbers, just so that you understand what the reward is in doing that. So if you start just with $10,000, and we’re assuming that LUNA is going to 10x next year, go from $100 to $1,000. And you might not feel like it’s going to go that high. So you could actually do all these calculations based on whatever your assumption is, say you feel like LUNA is only going to go to $500 or $300, you can modify that spreadsheet to fit that assumption. There’s a lot of reasons why I think that LUNA is going to 10x this year. And I’m not going to go into that right now. So with these calculations, it’s with the assumption that LUNA is going to 10x. So if you start at zero and you don’t borrow anything, and you start with $10,000, that $10,000 will turn to $120,000. So that’s awesome, you’re going from $10,000, 10x. And I’m just doing $10,000. Every single month it’s going to gain 100 bucks, just to make it easy. So if you start with $10,000, by the end of the year, if it goes to $1,200, you’re going to come out with $120,000. But say you borrow off of Anchor 20%, and every single time that it goes up, you take the cream off the top, you turn it to bLUNA, you re-provide it, it will go $180,000. So just staying at the 20% loan to value, LUNA would have to pull back about 60% for you to even have to manage, for you to have to manage your loan. It’s a 57%-60% pullback that will get you liquidated. But it doesn’t mean you are going to get liquidated, it just means that at that level, you’re going to get liquidated if you don’t manage.

LUNAomics 57:53
So there’s a lot of time that it will take for LUNA to drop a whole 60%. It’s going to take way more than three minutes. So if you can manage your loan before that, you’re not going to get liquidated. And if you have certain levels that you manage at, say you take out a 20% loan, and you feel like you’re going to manage it at 40%, then you’re never going to get liquidated if you can do it in a short amount of time. But the difference between not taking out leverage at $120,000, and then only 20% loan to value, and you’ll get 180k, that’s the difference between $40,000. So for a lot of people that’s like a full time income. And that’s starting with an initial investment of only $10,000. So that’s a pretty amazing return. And to me, I believe that’s worth studying a little bit more and playing around with borrowed money a little bit more, to get comfortable with it and to learn how to pay back loans quickly, and setting LTVs that are very safe. So that’s 20%. If you go to 30%, you’d have to have a pullback of 50% to get liquidated. And that’s 50% if you do nothing. Again, if you manage it before that level, then you won’t get liquidated, but if you take 30%, it actually jumps up to $220,000. So if you live at that 30% LTV and you know how to manage it so that when it gets to 40% LTV that you manage it, and you kind of just play in that level, that 30% LTV will turn $10,000 at the end of the year if LUNA 10xs, it goes to $220,000. So the difference between not using leverage, and using a 30% LTV is $100,000, between $120,000 to $220,000. So $100,000 at that point starting with the in initial investment of $10,000 is just, I don’t know why somebody would not want to learn this stuff and not want to learn how to manage debt responsibly in the Anchor Protocol, when the possibility of making 100k off a $10,000 loan is there. I mean, it is crazy.

LUNAomics 1:00:19
And it is based off that assumption that LUNA is going to 10x, but there’s so many things that point to… And if you look at the history of Bitcoin and the history of Ethereum, and how LUNA is deflationary, it’s crazy to me that Bitcoin has a circulating supply of 21 million, and is at $50,000, and LUNA, right now, we’ve burned over 100 million in just the year, and most of it has been just in the last two months. So we’ve burned 10% of the total supply in the first year of the protocol’s existence, in the first year of the coins existence, a little bit more than a year. And just extrapolate that out a few years. And because it’s a deflationary token, so many people are staking it and they’re taking it out of the circulating supply. So right now, we’re like, right around 100 million that are in liquid circulation, and if you look at all the protocols that are coming out that use UST, the Forex protocols that are going to use UST, the Alice spending that’s going to use UST, that’s going to continue burning, at an exponential rate, the supply of LUNA. So as LUNA keeps burning, and we’re at 100 million, it’s very, very possible that we get to a circulating supply next year that is equal to Bitcoin. And if you look at Bitcoin being at $50,000 with just the function of transferring value, and what LUNA can do with borrowing and with composability, and splitting principle and yield through Prism, and all of these different functions that LUNA will have that Bitcoin never had, and the possibility that we could… The circulating supply of LUNA can get down to 20 million, the same circulating supply of Bitcoin, it’s not out of the realm of possibility that LUNA… I think it’s a given that LUNA gets to at least $1,000.

LUNAomics 1:02:19
I mean, Ethereum has an infinite supply. They have an infinite supply, and they’re at $4,000. So when you have a deflationary supply, and the demand for UST is increasing, and you look at the trajectory of where everything is going, I don’t think that it’s out of the realm of possibility that we get to a 20 million circulating supply of LUNA next year. And if that’s true, then $1,000 LUNA is very conservative, in my opinion. So then, if you go to the next tier of 40% LTV, and managing at 40% LTV, you’re looking at $267,000 at the end of the year, so the difference is $147,000. And that’s for an initial investment of $10,000. So again, there’s assumptions in there. And I’m very convinced of those. And if I get wrecked, that’s a possibility. So I’m not saying for anyone else to use the exact investment strategy that I’m using, but according to your level of conviction, you can tweak these numbers. What I’m saying is that there’s just an incredible amount of potential of income when you use leverage in a responsible way.

LUNAomics 1:03:46
And the amazing thing about understanding this type of skill set is that it’s scalable. So it’s not just like, you learn this and from $10,000, you could make $267,000. That’s true, but the human mind doesn’t really comprehend scalability, compounding or exponential growth. For me, the difference between zero and 40% LTV is going to be $70 million next year. I would be leaving $70 million on the table if I didn’t want to expose myself to any type of leverage. And that’s just an insane amount of money, but it’s the same skill set that will help somebody go from $10,000 to $200,000. But these numbers aren’t locked in there. So the skill set of managing leveraged money is so, so, so, so valuable. I can’t understand why somebody would not want to at least start learning with a small amount of money how to do this responsibly. And there’s so many… I mean, you can start at 10% loan to value and just learn how to manage 10%, and then move to 20%, and 30. So that’s the question and answer part.

LUNAomics 1:05:13
The last thing that I want to cover is the strategy part. And then we can jump into questions. So strategy’s super easy. The number one is to protect against liquidation. So if you read through the pinned tweets, protecting against liquidation, I always look at loan to value and think of worst case scenario that we drop about 50%. You can drop more than 50%, but because in my head, I am planning to manage that. And I’m not going to ever let it get all the way to 50%. I just take that 50% as a ballpark. Worst case scenario, that’s going to pull back 50%, because it allows me to look at my loan to value wherever my loan to value is, and double it and see where it would be if we did drop 50% from the all time highs, right. So our all time high was $100, so I’m thinking worst case scenario, or not worst case scenario, but a good stress test is that it would fall to $50. If I’m holding a 30% LTV, that means my LTV is going to double to 60% LTV, right at the point of liquidation. So then I know, I kind of have in my mind, what will happen if we drop that far. And then at what price I would start managing that loan to value to bring it down lower.

LUNAomics 1:06:38
And then the second thing is, don’t leave money on the table, borrow UST because UST is very accessible and very liquid. So for instance, if I’m calculating like a 50% pull back and I want to be conservative, I’m going to take out maybe 20% LTV… And this is my current strategy right now, and I’ll give you my current numbers like what I’m looking at. So I’m looking at like a 25% LTV of bLUNA. So I’m going to take 25% of my borrowing capability, I’m going to buy LUNA with it. And I’m going to leave it liquid in my wallet. So there’s 25% that I’m using of my borrowing power. And at any point, if we dropped 50%, I’m going to have that buffer to pay back my loan before we hit any point close to liquidation. But if I only take out 25%, I’m leaving a lot of money on the table, like all the way to 45%. I’m leaving, what is that, like 20% loan to value, I’m leaving all of that on the table. So instead of leaving that on the table, because that’s a lot of money, I take the difference between 25% loan to value and 45% loan to value, or 40% loan to value, it kind of fluctuates between 40% and 45%, I take that, borrow it, but I put it in Anchor Earn, right. So that’s the safe thing to do, you just keep it in Anchor Earn. So at least it’s earning you 20%. Because right now we have to pay one point something percent on our loan. And so you don’t want to just have that eat away at your capital. So instead of not utilizing it, I take out the difference between the 25% loan to value and the 45% loan to value, and then I put it in Anchor Earn so that it’s earning me 20% on top of the negative one point whatever percent it is. So I’m actually making 18.5% interest on that 45% LTV.

LUNAomics 1:08:54
So anytime it goes from 45% to 50%, I’m going to manage that with my UST. It’s kind of like what Nexus does with nLUNA. So when it gets to 50% I’m going to take UST out and I’m going to pay it back down to 40%. And then when LUNA takes off and my loan to value drops, then I’m going to borrow more UST and I’m gonna put it back in Anchor Earn. So it’s super easy to get that 18% between that 25% LTV and 45% LTV just by putting it in Anchor Earn. But I go one step further, and instead of putting in Anchor Earn, I’ll take it and I’ll provide it on TerraSwap. So now I’m pairing the UST that I have with the LUNA that I have, and I provide it to TerraSwap so that I can get 100% APR on both my LUNA half and my UST half. So I’m making money on that. And if my loan to value gets to 50%, then I’m going to take out my liquidity and then take out UST and pay down that loan. So to give you an example, a real life example of… Because we just saw a pullback from $100, down to around $80, $81. What I did was I took out 25% LUNA, and all the way up to 40% UST, I provided it to TerraSwap. And when we dropped from when we dropped from $100 down to eighty something, because of the way the liquidity pool works, I picked up an extra 600 LUNA because as the price drops, people are using that swap to sell their LUNA. So when they’re selling their LUNA, they’re giving their LUNA to the pool, and they’re withdrawing UST they’re swapping their LUNA for UST. So as a liquidity provider, I’m gaining more LUNA as LUNA goes down in price, and I’m losing UST so when we got down to like $82, I had 600 more LUNA in my wallet. And so at that point, I was like, “Oh,” but we didn’t reach the 50%, I didn’t reach the 50% loan to value where I would manage it.

LUNAomics 1:11:34
And so I did this tweet and I said “Hey, shucks, I gained 600 LUNA, and I kind of want to bank it.” And then Cephii said, “Why don’t you just bank it? And then when it goes back up, put it back in?” I was like, “Yeah, I guess I’ll do that.” So I withdrew my liquidity at $82. I banked to that 600 LUNA and I actually took my UST part, paid down a portion of the loan to get from 50% LTV down to 35% LTV. And then at 35% LTV, I pushed my loan back up to 40% LTV, took out UST and I bought LUNA there. Because my assumption is that it’s going to go up. So instead of just sitting on the sidelines with 35% LTV, I didn’t want to put it back in TerraSwap, because if I put it back in TerraSwap, then I lose LUNA as the price goes up, because the opposite happens, right? As the price goes up, people will they’ll buy LUNA, so they’ll take LUNA from the liquidity pool and replace it with UST. So even though the price is going up, I’m going to be losing LUNA, which is not that bad a deal because if the price goes up, my LUNA is gaining capital, I’m getting more UST in my LP, plus I’m getting the liquidity provider rewards of 100% APR. So it kind of… Even though I’m losing LUNA on the way up, it’s still… All the rewards balance out. But I wanted to be a little bit more aggressive. And so instead of matching it at 40% and providing it to TerraSwap I took the UST, and instead of pairing it I just bought more LUNA. So right now we’re kind of at $89, and so just in this past month, I started like 60,000 LUNA, I’m right under 70,000 LUNA in a month with this strategy.

LUNAomics 1:13:40
So I’m looking at this strategy and I’m extrapolating it out through 2022. And I don’t think it’s a very hard thing for me to double what I’m holding of LUNA with this strategy. And I’m doing it again, 25% LUNA and then matching LUNA with UST to provide it to TerraSwap. So if I’m at that 35% LTV, my whole goal is not really to increase my dollar amount. I just want to double my LUNA. So already I’ve gone from 60,000 LUNA to 70,000 LUNA. I’m pretty sure that by the end of the year, I’ll be able to get that to 100, at least 100, 120 LUNA. And if we 10x this year, and LUNA goes from $100 to $1,000, That 120,000 LUNA will be worth about $120 million. So that’s my goal this year is to get to about $100… Between $100 to $120 million. And it’s not… I don’t really care about the money, I just like to optimize stuff. I mean, I do but I was telling somebody yesterday like I’m not one of these lab guys, Lamborghini guys and whatever. I drive a 2006 Honda Odyssey, and my daughter drives a Honda Civic. We probably spend like $5,000 a month. Our lifestyle is very simple. But I just enjoy the game and I was talking to somebody else, and they’re saying, “Why do you want to make that much?” And it’s not really like I need to make that much. It’s just, I really enjoy trading and optimizing strategy, and then helping other people to do the same thing. So yeah. And then the last thing in that risk management strategy was, build a cash stash. But that was with the assumption that you’re doing cash flow LPs. So with this strategy that I’m doing this year, I’m not doing any cash flow LPs, I’m just stacking more LUNA so that cash flow isn’t there.

LUNAomics 1:15:48
And then the order of liquidation, because I’m not doing LPs. And the way that I’ll liquidate my LPs is to liquidate from strongest to weakest, and then all the UST first, and then take profit from the strongest token. And then liquidate everything from the strongest to the weakest on the token side, if I’m doing LPs. But for this year, I’m just going to be using my UST to pay off my loan, that’s the first order. And then the second would be to liquidate LUNA, the liquid LUNA that I’m using, and then pay down the loan with that. So that’s the risk management strategy that I’m using for 2022. So if there’s any questions, why don’t we go with…

Rebel Defi 1:16:38
Awesome, LUNAomics. So just can I just jump in for a moment? Rebel DeFi here. You might have thought Hutch went quiet a little while ago. And he did. He’s got a problem with his phone. So he’s wondering if you could kick him off? Maybe he can get… I mean, he can listen in, but he can’t speak or do any sort of admin at the moment, I’m afraid. And regarding the spreadsheet that you shared, it was written by Ed Plaskow, or Plaskow, I’m not sure how to pronounce it. I did see him in the call a bit earlier on. And I’m just wondering, would you like to invite him to speak if he wants to maybe add something about the spreadsheet?

LUNAomics 1:17:16
Yeah, sure.

Rebel Defi 1:17:17
So Ed, if you’re in the call, just request and we can get you up.

LUNAomics 1:17:21
Yeah, that spreadsheet was really helpful. I actually sat down with my son and my daughter yesterday and went through that spreadsheet, use that and helped formulate their game plan for next year. So kudos to Ed.

Rebel Defi 1:17:35
I don’t know if he’s still here. He’s not requested to speak. And one thing, can I just throw something out there?

LUNAomics 1:17:43
Yeah, of course.

Rebel Defi 1:17:44
I’m wondering… I’m loving what you’re saying. And the fact you’ve got so many people in here, we’re all loving it. But I’m just wondering, with so many people essentially going to be copying what you’re doing. Is there any risk of some sort of counter trade that could mess all of us up? I mean, I can’t think of it myself. But I’m just wondering about that.

LUNAomics 1:18:12
I think the biggest plus and minus is just people buying LUNA, and the price going up, and then in the case where LUNA is going down, that everybody’s selling. But I don’t think that the numbers that we have here are able to move… Would have a significant impact on the long term game plan of LUNA. So yeah, I don’t know. I don’t know. That’s a good question.

Rebel Defi 1:18:45
Right, we shall start to just getting some people up then. We got OHaraBiz. I’ll just invite him up to speak.

LUNAomics 1:18:52
Hey, how’s it going?

OHaraBiz 1:18:53
Good to meet you ever voice, finally, I’ve been listening to your Spaces for a while. And yeah, big shout out Plaskow for that spreadsheet, I was going hard on that the other day. I had a question related to when you… Kind of how you target moving your borrowed or newly owned LUNA back over as collateral to Anchor as the price appreciates. So, say you borrowed 10 LUNA at $100, and you’re borrowing some UST and LPing on TerraSwap or whatever. Do you have like a percentage target in your head or something that when my borrowed LUNA appreciates X percent against my collateral, then I’m going to move the extra, the newly owned bLUNA over as collateral? What’s that kind of target in your head?

LUNAomics 1:19:43
It’s just equal. So I don’t look at my collateral value. I look at my borrowed amount, the amount that I’m taking out, the borrowed amount, and then I match it against the value of what I use that borrowed money for. So, say I borrowed $100,000, and then I purchase $100,000 of LUNA, and then LUNA goes up and it’s now worth… It’s gone from $100,000 in value to $150,000 in value, I’ll take that $50,000 and then convert it to be LUNA and to provide it. And when LUNA drops, it will fluctuate, it’s not gonna just stay there, it will fluctuate back and forth. But my assumption is, long term it’s trending up. And so because it’s trending up, it might dip below that, but it will come back above it. So I’m just constantly providing more bLUNA as the price of LUNA goes up, increasing my borrowing to buy more LUNA, so every time it goes up I just take the cream off the top and re-provide it. Yeah.

OHaraBiz 1:20:54
And I get that. I mean, just like in your example you use when, say LUNA appreciates in your example and you have $150 or what, $200,000 versus $100,000 that you borrowed and you move the extra, the cream on top over. But do you wait until that cream on top is like 50% or greater? Or would you move, “Oh, now it’s $110,000 borrowed LUNA versus $100,000.” Do you move the $10,000?

LUNAomics 1:21:20
I see. No, I don’t have a set amount. I just kind of feel it out, and whenever it’s significant enough, then I’ll move it.

OHaraBiz 1:21:28
Okay, yeah, the biggest thing here you talked today that I’m wanting to understand better, that I’d love to hear you talk a little bit more about, at some point I’ll really push the floor, but… Is kind of the mechanics on the LP side, where as LUNA is dropping your… I get how the mechanics work, where you’re accumulating more LUNA on the way down, but kind of learning to time the, “Okay, now I’m going to…” I get that around 50% LTV, I would pull out my LP, manage my LTV down to a safer level with the UST. But then it’s like, okay, when do I choose to re-enter the LP versus just holding on to some LUNA on the way back up, kind of timing that reenter into the LP piece of it?

LUNAomics 1:22:15
Yeah, I think that that’s more the art of it. And there’s not hard rules for that. It’s just kind of how you’re feeling. And a lot of times I’m wrong, sometimes I’m right. But yeah.

OHaraBiz 1:22:26
Cool. Appreciate it, man.

LUNAomics 1:22:28

Rebel Defi 1:22:29
Awesome. Shall we get Montana up to speak? You there, Montana?

MontanaHaus 1:22:36
Hey, yeah. Thanks, guys. LUNAomics, thanks so much for doing this, Rebel DeFi, thank you guys. A quick question I have kind of related to risk management around wallets that I just haven’t gotten clarity on, is I guess, A, Ledger doesn’t even… Does Ledger work on the Terra blockchain in terms of interacting with it, and B, even if it does, if you’re LPing, if you’re on Anchor, it’s not like you can have your keys while you’re in DeFi, correct? Am I understanding this, right?

LUNAomics 1:23:12
Yeah, so Ledger does work with Terra Wallet, you can hook it up to Terra Wallet. I have a Ledger, but personally, I don’t use the :edger for everything that I’m doing in DeFi, just because I want to be able to manage the LTV quickly. So it becomes problematic if I’m using my phone because as of right now, I don’t think that you can use your Ledger with your phone, you can only use it with a computer and I don’t always have my computer with me. So for that reason, I don’t use a Ledger with what with what I’m doing. But with the facial recognition on an iPhone, I think that layer of security is pretty good.

MontanaHaus 1:24:01
And really like a Ledger, where it’s providing a safety net is when you’re pulling it out of, say an LP to the Ledger, and then putting it somewhere else or storing it in the Ledger. When it’s in an LP, or in Anchor, you can’t also have the keys on the Ledger, can you?

LUNAomics 1:24:18
Yeah, so… Well, your keys can allow you to control where your funds go. But when you’re doing DeFi, a lot of times your funds are locked up in the smart contracts, in these protocols, whether it’s Anchor or TerraSwap or whatever. You’re kind of giving custody to them for your funds. And so if you trust the protocol, I trust Anchor and I trust TerraSwap, of course there’s always risk of hacks, or oracle failures, or whatever. But I would rather have my funds locked up in different smart contracts and different protocols than having it all on my cold wallet. I mean, you couldn’t participate in DeFi if you had everything on your cold wallet anyway. I know that they’re working on some stuff that will allow you to custody your coins on your cold wallet and still participate in the smart contracts. But right now, you kind of locked it up into… And actually I feel more safe doing it that way. Because then people are going to have to hack into all these different protocols to get my funds, instead of just my wallet. So there is a benefit to that.

MontanaHaus 1:25:49
Yeah, thank you, that…

Rebel Defi 1:25:51
We’ve got Wall Street Mastermind.

Wall Street Mastermind 1:25:53
Hay, LUNAomics, thanks for doing this super helpful. Just a quick question on your decision to use the UST-LUNA LP. I’m trying to think through the pros and cons of doing that versus, say the bLUNA-LUNA LP. Because if the premise is that you think LUNA is going to 10x, I understand you’re getting more LUNA on the way down. But then aren’t you losing LUNA on the way up? So, what… Is it just that because you want… Because UST is more liquid, and it’s easier to pay back the loan? Or how are you thinking about that?

LUNAomics 1:26:30
USP is actually… If you use all of your borrowing capital. So what I’m assuming is, you’re saying instead of buying UST, by bLUNA, and then provide it to TerraSwap? Is that what you’re saying?

Wall Street Mastermind 1:26:47
Yeah, I’m saying, because the difference between the 25% LTV and the 45%, and you’re putting that into the LP, you’re putting it on to UST-LUNA, I understand that when LUNA price drops, you got the extra 600 LUNA, and so that’s awesome, but…

LUNAomics 1:27:03
Yeah, so I’m also protecting my risk, because if instead of buying UST, I bought bLUNA and the bLUNA replace the UST, in the event of a crash, the bLUNA part is going to be affected, there’s going to be price volatility with the bLUNA. So if I want to keep my LTV at 35%, say, I’m gonna use that 35% to expose myself to the price volatility of LUNA, so I’ll buy LUNA with 35% LTV. The remaining of it, I don’t want to be exposed to price volatility, and that’s why I buy UST. And so UST in an LP, even though it is affected by the price of LUNA in a small way. It’s not nearly as volatile as if I were just to hold, say, another half of bLUNA. So it’s really like I’m protecting against price volatility.

Wall Street Mastermind 1:28:09
Got it. So I guess you’re not as concerned about the fact that you’re losing LUNA in the LP as the price is going up, then?

LUNAomics 1:28:19
Yeah, and because when the price goes up, you’re gaining capital, right, as the price goes up. Plus, you’re also making that 100% APR, for providing liquidity to the pool. So there’s a lot of things working for you. You might be losing a little bit of LUNA on the way up, but you’re also gaining the APR, and you’re also gaining the price volatility as well. So you’re winning on the way up and then on the way down, you’re actually winning too, because you’re getting more LUNA.

Wall Street Mastermind 1:28:53
Got it. Okay, super helpful. Thanks, man.

LUNAomics 1:28:56

Hutch 1:28:56
Hey, LUNAomics, this is Hutch 2.0. I got kicked off. But that was my fault. I’ve made a new account just to be able to jump back on. What his question is great, because I read your pinned tweets a long time ago, and the level of detail you’re giving here is amazing. And I love it. And I’ve since got into LUNA-UST pool, but before that, I was mainly, instead of staking, I was doing the LUNA-bLUNA pool. And what I started kind of envisioning during this call is there’s almost like different risk tolerances. So I’ve never had to sell LUNA on the way down, but granted I didn’t acquire as much because I didn’t take as much risk. But what I have done is acquire a lot of LUNA, and then I’m constantly looking for good swaps to bLUNA. And then when things go down, I know there’s some skew with the LUNA-bLUNA pool, but then when I’ve had to manage, like on the December 3rd dip, when we went from $70 all the way down to $50. I mean I was scrambling like a banshee, but I picked up 4.7 extra LUNA. I swapped 300 LUNA that was in my LUNA-bLUNA pool, and I got 345 LUNA, so 15 Extra LUNA. Yeah. And so I was thinking, and I just wanted to get your take on this for everybody, because there’s… I know where you’re coming from as an option trader doing strangles, I learned those for a while, I knew a guy who was a master of it. And so really, like you told us on the last call, you’re just aping in as soon as you have capacity. On the way up, as soon as you have capacity, you’re aping in. And then you’re just content to manage it on the way down. And I think a lot of people on this call, including myself, we’re still in that kind of like, not the SHIB mentality that you’re talking about, but we’re still in the buy low, sell high. And maybe we’re not aping in is hard, but I’m trying to optimize at least that strategy, and you’re helping push me to a different model. But for those that are kind of in the mindset where I think I was at, I was trying to buy more dips, and I’d kind of over collateralize by having lots of bLUNA so that when things went down, I would never sell anything, and I wouldn’t have a lot of UST but I just parked extra bLUNA to make sure I wouldn’t get liquidated. And I’d even go so far as to over collateralize on the way down, like I did that during December 3rd, where I over collateralize, and then I threw money in Kujira and then got some more. And so it’s a different spin on things. But I was hoping you could maybe just speak to that. As far as your take on that.

LUNAomics 1:31:33
Yeah, I think that that’s an option to do that. The reason why I don’t do that is… So for those of you that are listening, I think, and maybe Hutch, correct me if I’m wrong, but what you’re saying is, you have a bunch of bLUNA, and I’ve heard that… I think I’ve heard that from Cephii in one of his Spaces that he has a bunch of bLUNA on the side so that when it dips, he can just throw the bLUNA in to the Anchor collateral, and then lower his LTV that way. Is that kind of where you’re coming from? Why don’t have bLUNA on the side to manage my risk that way? Well, I’m not sure if that’s what he meant, but I’ll just assume that that’s what he meant. When you use your capital in bLUNA, and you provide bLUNA to lower your LTV, you are actually only using half of the potential of paying down your loan. So if I have LUNA, and I sell my LUNA for UST and pay down my loan, I’m actually going to bring my LTV down by a magnitude of two, around two. If I turn my LUNA to bLUNA and provide it, it will lower my LTV but by a measure of only half. So I like having LUNA in my wallet just because if I get into a position where I have to manage that, if we were in a crash, there’s just one step that I need to do to bring my LTV way down. Instead of having bLUNA… And it does provide a big layer of protection. But because I’m trying to optimize what I’m doing with LUNA, I just kind of keep it in LUNA. And then the safest thing for me is to have LUNA and UST with my borrowed capital. So UST, I can pay it down at any time, LUNA, I can convert it to UST and pay it down and be at a pretty safe place.

Rebel Defi 1:33:40
Shall we get… You got time for more questions, LUNAomics, or what’s your thinking?

LUNAomics 1:33:44
Yeah, yeah, sure.

Rebel Defi 1:33:45
We’ve got masch… Is it masch1na?

masch1na 1:33:48
Hey, guys, can you hear me?

LUNAomics 1:33:49
Yep, I can hear you.

masch1na 1:33:50
Hey, I would like to ask about the APY opportunities that are available on both ATOM and LUNA. Are we talking about staking and providing liquidity? Or is there something else that I’m missing? And if it’s just these two, how do you find the best LP opportunities?

LUNAomics 1:34:08
I haven’t ventured out and done things on the ATOM blockchain but anything that’s a proof of stake if you speak it, you earn inflationary rewards. And so with ATOM, if you do buy ATOM and stake it, you can earn rewards on that. And then Osmosis is a place where you can provide liquidity with the ATOM token or with LUNA and you can get LP rewards which are higher than just single staking rewards. And then once Anchor makes it available, you can take ATOM and turn it to bATOM, and provide it the same way that you provide bLUNA and you can borrow off of it. So some people are planning ahead and buying ATOM and planning to stake it and use that as collateral to borrow off of. So those are strategies. And then in the meantime, if you want your ATOM just sitting there doing nothing, you could take it to Osmosis and provide liquidity and earn. They have pretty generous yields on Osmosis.

masch1na 1:35:18
Yeah. And some LPs have a very generous rewards. So, I mean, is there any strategy that you use to decide which one you want to use? I know, you mentioned one time, just don’t really go for the highest ones. So just wanted to pick your brain on this.

LUNAomics 1:35:35
Yeah. So I mean, I don’t go for the highest yields, I go for the ones that I really feel like the underlying is something that I could hold forever, even if the price went down. So say, like Anchor I really… Anchor’s one of the most useful protocols on the Terra network. So I wouldn’t care if it dropped to $3 or even $2. I would be comfortable holding Anchor forever. So Anchor is at 100% APR, and my plan, if I use the LP would just to be just to hold it. And even if the underlying dropped, I just hold it until it came back. And I do that for anything that I find useful. I think ATOM is one of those, definitely. So I would look for a token that I would feel comfortable holding forever. And then look at the APR as a secondary thing. And then if I had to pick between two, I’d pick the one that I liked the underlying better. But with this year, I really compare the difference between deploying borrowed capital into an LP, which could generate between 100%-300% APR. And compare that to taking my borrowed money, and instead of putting it into something that would produce cash flow of 100%, to 200%, to 300% APR, to put it into LUNA, that my assumption is that it’s going to 10x, or give me 1,000% APR. And the difference between the two strategies are just night and day. So when I saw how much… If my assumption is, and everything is based on that assumption, that LUNA is going to 10x. If that assumption is wrong, then this strategy will be the worst strategy to put your money into. But if that assumption is correct, and LUNA is going to go to $1,000 next year, then there isn’t a better use of capital than to invest it into LUNA.

Hutch 1:37:42
Hey, LUNAomics, since since this is probably going to be an evergreen class, one of my biggest a-ha moments in your pinned tweets, this was months ago, was looking at your cascading order of liquidation. I know you mentioned it briefly earlier, but maybe for people that are still going to do LPs and still have them, maybe they have a more income focused portfolio, maybe you can kind of walk through that hierarchy. Even though you’re singularly focused, and I think it’s gonna serve you well, it may help some other people on this call, or once LUNA pamps to the point where you do get into LPs just…

LUNAomics 1:38:17
Okay, yeah, so. So if your portfolio, you’re holding several LPs, and every LP… Say it’s an equal percentage that you’re getting on each one. But the underlying token for those three different LPs are performing differently, say the first one is up 10%, one is just at the same place that you bought it, and the next LP underlying token is maybe down 10%. And it gets to a place where there’s a liquidation, because LUNA drops, and you need to repay your loan. What a lot of people do is pick an LP, and liquidate the whole thing, and take all that money and repay the loan off with it. What makes more sense, is you never want to take a loss on a token, so I would always start with the strongest one. So I would start with the one that’s up 10%, the underlying is up 10%. And it would have a higher amount of UST anyway, so I would liquidate that LP, withdraw my liquidity for that LP first, and then I would only use the UST part, because I’m not taking a loss on the UST part, the UST half, and then use that to repay my loan. And then if I still need more capital, I wouldn’t sell that strong one. I’d go down to the next LP, withdraw that LP, and only use the UST half to pay down my loan even more. If I need more capital, then I’ll… The weakest one. withdraw my LP there, use the UST to pay back the loan. If I need more capital, then I’ll go back to the strongest token and take my profit, sell that and repay my loan. And then if I still need more, then I’ll go to the middle one, and then finally the last one. So that’s kind of the order of liquidation that I would use to repay a loan that is required.

Rebel Defi 1:40:25
Awesome. Thank you for that one. And we’ve got Danny, with a question.

DannyC 1:40:28
Oh, yeah. Hi. Thanks for letting me speak. Honestly, it was mostly related to LPs, so almost everything was answered. The only thing I’m kind of doing a mixture of a borrowing LUNA and then also doing LPs. Since you said that you had a UST stash when you were doing the LPs, am I… The ones that are producing straingt cash flow, like my Anchor UST, let’s say, if I have sufficient capital to cover loans, if I think, should I just be… Or could I just convert that straight into LUNA as I go along? Do you think that’s a…

LUNAomics 1:41:08
Yeah. So in the first spreadsheet that I made, I actually had three different scenarios. And that’s one of the scenarios is using the cash flow from an LP to purchase more LUNA. So yeah, I mean, the way that I view the overall strategy is, the first thing is you purchase the apex asset, which is LUNA. The second thing is to create cash flow, which is taking the borrowed money and investing it into things that will generate cash. So borrowed money is for cash flow. And three, remain liquid, so you can pay things down at any time. And then the third thing is investing the cash flow into whatever you want. So if you want to invest… The cash flow that you’re getting, if you want to put it back into LUNA, that’s a great, great choice. But I use the cash flow for spending as well. So I’ll take all that cash flow, and I’ll pull it into the real world and use it to live off of because that’s not borrowed money. All my borrowed money is making me money. And then the rewards that those LPs are throwing off, that’s for spending and then speculative investing. So I don’t speculatively invest in the borrowed money, because I need that money to pay down my loan at any time. I’ll use the rewards to get into things that I don’t understand, like KDA, or RNDR, or QRDO, or all the other tokens that I’m not super well-versed in, I’ll use those rewards to invest in those things.

DannyC 1:42:49
Okay, I get what you’re saying. I actually have those tokens you just mentioned. They’re basically my emergency reserve if LUNA was ever going to take a major dip. So that’s why I was saying that converting straight into LUNA with the rewards, cash flow rewards from LPs is probably what I’m gonna do. I just wanted to make sure that there’s not… Wasn’t anything wrong with that.

LUNAomics 1:43:19
Yeah, cool.

DannyC 1:43:20
Yeah. Thank you.

Rebel Defi 1:43:22
Awesome. We’ve got midasworks.

Mide 1:43:25
Hey, how you doing, sir? Happy New Year to everybody. Glad we made into the year. Thank you for hosting this Spaces. This is super, super informative. I have a question though, is kind of taking it away from the topic for the most part, but basically still the same. How do you handle using different strategies on Terra Station? Because I know it’s difficult. You can open multiple wallets on Terra Station. So how do you handle working with different strategies, all the strategies? Some strategies that you’re using now, and other ones that you’re using before, like the cash flow strategy, and this strategy. How do you handle doing it on one wallet? I was thinking about… And then second question is, there’s this wallet called XDEFI wallet, and I know that you can open several wallets on there to use the strategy of LUNA. What do you think about that? Is that a good strategy? Is that something that we can do? Or what do you think about that?

LUNAomics 1:44:36
So you actually can use different wallets on Terra Station, you just got to disconnect it and hook up the other wallet. Don’t delete the wallet, it will give you an option to disconnect it and then you can use a different wallet. So I have multiple wallets that I connect and disconnect for different purposes and different strategies. So you can use different wallets for different things. DEFI wallet, I don’t have any experience using that. I don’t know if it’s good or not. This next year, I’m kind of just hyper focused on stacking LUNA. So I have… Even though there’s a lot of things that have come out, they’ve actually messaged me and said, “Hey, check out this wallet.” And I was invited to the beta group. But I’m more focused on… If I can do it with the current world that I have, then I’ll just use the current wallet that I have.

Mide 1:45:32
All right, thank you very much. I appreciate you and I appreciate your time. Thank you.

Rebel Defi 1:45:37
Awesome. We’ve got BD Moves.

BD Moves 1:45:40
Yo, yo, yo, can everyone hear me?

Rebel Defi 1:45:42
Yeah, man.

LUNAomics 1:45:42
How’s it going?

BD Moves 1:45:43
My man. Great, man, happy New Year.

LUNAomics 1:45:47
Happy New Year.

BD Moves 1:45:47
Aloha. Yeah. So I got a question. As far as wherever you borrow on Anchor, and you buy LUNA with borrowed money, do you suggest or even practice taking that borrowed LUNA and borrowed UST and put it in a completely separate wallet?

LUNAomics 1:46:08
No, I just keep it in the same wallet.

BD Moves 1:46:09
Just keeping the same wallet?

LUNAomics 1:46:11

BD Moves 1:46:12

LUNAomics 1:46:14
Because that’s the wallet that holds the liability. So if everything goes down, I’m gonna have to pay down the loan in that wallet. So I want to have the smallest amount of steps to do.

BD Moves 1:46:26
Okay, okay. And so, make sure I understand this, because I think I actually did this last year before I even heard about this method. I bought, I think like 71 LUNA at like $40 or $38, somewhere around there. And now that it’s… ‘Cause I was keeping it liquid because I didn’t know what to do with it. So it’s just been sitting in a wallet, just not doing nothing for the past couple of months. And now that we’ve been kind of ranging this $85, $80-$100 range, I take it now that 35 of that LUNA is technically kind of ready and available to swap over to bLUNA and kind of provide to borrow more capital. That’s kind of… Isn’t that kind of a strategy?

LUNAomics 1:47:14

BD Moves 1:47:14

LUNAomics 1:47:16
Very cool.

BD Moves 1:47:17
Okay. Yeah, I think yeah, that was my only question. Thank you, my man.

LUNAomics 1:47:22
Cool. Yep.

Rebel Defi 1:47:22
Just bringing up Michael, with a question.

Michael 1:47:26
Thanks for all your wisdom that you’re sharing. My question was about the different LPs, earning the LP UST-ANC versus UST-LUNA. What do you use in deciding which one to use? Is more based on what you believe about the underlying token that you’re LPing with?

LUNAomics 1:47:50
Yeah, yeah. So I think somebody asked that question, just a couple questions ago. But yeah, the underlying token is probably the most important because you don’t want something that’s going to go to zero, or just completely disintegrate, you want something that you’d be comfortable holding forever. So that’s the first thing. And then the second thing is the yield. So then you compare the yield, with that to other things. So one thing with the TerraSwap LPs is you don’t need to stake it. And so I think that kind of hangs some people up because they’re used to staking their LPs on different protocols. TerraSwap just allows it to be liquid, so you just need to provide it, you don’t need to stake it. And then there’s no TerraSwap rewards, they don’t have a coin. So they just take all the fees, and then distribute it to the people that are providing liquidity in the pool. So the only way that you can really know how much you’re getting, you can go to Terraswap Dashboard, and you can see the APRs there on Terraswap Dashboard by ALPAC, I think it’s ALPAC, I believe. But Terraswap Dashboard gives you a list of all the APRs for the pairs that they provide. And then you have to use Apeboard finance to look at how much LUNA and how much… Or whatever the pairs are. What I do is I just go to Apeboard finance, take a snapshot of how much I have of each token that I’m providing liquidity for. And then, one week later or one month, or however long, I’ll go and take another snapshot and then just see how the balances are being affected by price action.

Michael 1:49:14
What do you with… Regarding ANC, I’ve been really trying to dive in with the use case for ANC, you mentioned you thought it was going to continue to hold long term value, what’s going to be the use case besides just the governance with ANC token?

LUNAomics 1:49:56
Well, the reason why I’m bullish on Anchor is… The main reason is the utility of it and what it provides to the whole Terra ecosystem. So when Anchor first came out, and they provide the function of bLUNA and allowed people to borrow off of their LUNA, it gave us a whole new utility for LUNA, just the LUNA token. At that point, there was a massive amount of not only deposits, but people contributing their LUNA to and converting or contributing their bLUNA to Borrow. And what it showed was a product-market fit. Product-market fit is when there’s a need of the market, and somebody provides that need. There is no marketing that’s needed. There’s nothing that’s needed, it just takes off because you found product-market fit. Product-market fit is something that every business tries to achieve. And it’s one of the hardest things to find, because the market only speaks with their dollars. You can take a whole bunch of different polls, and you know, “Do you want this? Do you want that?” And for the most part, it’s very elusive to people who are business owners. And a large part of that is because people don’t know what they want. So when Anchor provided a protocol that was a product-market fit, and in the first month went to $2 billion, and currently over $10 billion total value locked, that’s like one of the hardest things to do. The tokenomics and the value capture, and all of that can easily be changed. So that’s kind of my underlying… Why I value the Anchor token. They’ve done the hardest thing, which is finding product-market fit, and then also being one of the main foundational pieces in this whole ecosystem. So I don’t believe Anchor, a $10 billion total value locked protocol, is going anywhere. And because of that, if they’re offering 100% APR on their LP, that’s a no brainer for me. If somebody is going to give me 100% APR on something that’s almost like a blue chip stock. I’ll take that all day long. But this next year, I’m not even considering that because I’m just stacking LUNA.

Michael 1:52:34
And I know you’re switching strategies. Do you feel like the other strategies that you’ve used in the past, I mean, for those of us that are kind of just starting out, that necessarily isn’t a bad way to go either?

LUNAomics 1:52:48
There’s nothing bad about making 100% APR. But I mean if you… And that’s why that one tweet that I did, LUNA Strategy for 2022, it compared your bottom line at the end of the year of doing 100% LP versus using your borrowed amount just to stack LUNA, and it’s significant. The difference between the two strategies are very significant. So after I did the numbers, and it looked at that, I just… My first question is how convinced am I that LUNA is going to 10x this year? And the second question is, if I’m 100% convinced of this underlying assumption, then I need to map my strategy to that assumption. So I know most people don’t do that. And they’ll diversify their strategies, which is the smart thing to do. I don’t think what I’m doing is necessarily smart. But I just like trying to go all in. So we’ll see at the end of the year, it’ll either be like the smartest or the dumbest thing.

Rebel Defi 1:53:59
Awesome, Do you still have time for more questions?

LUNAomics 1:54:02
Yeah, we can go for six more minutes.

Rebel Defi 1:54:05
Okay. We’ve got Lucas up to speak.

LUNAomics 1:54:08
Hey, Lucas, how’s it going?

Rebel Defi 1:54:09
Lucas, you might need to unmute your mic.

Lucas 1:54:11
Oh, yeah. Sorry. Sorry. Thanks for having me. I have just a quick question. Big shout out to LUNA fam, and LUNAomics, and Rebel Defi, your content are very instructive to me. So I want to be sure about what you do with the borrowed money because I really want to apply to the strategy this year. I want to accumulate a lot of LUNA as possible. So is it right that, maybe I’m gonna make repeat you, but is it like, step on your borrow, you go to LP with the strongest/safest pair and you buy LUNA with the reward, is that right?

LUNAomics 1:55:02
If you want to stack LUNA, it’s very simple, you just provide the LUNA that you currently have. And then you borrow off of it to buy more LUNA, and then just leave it in your wallet. That’s it. Super simple.

Lucas 1:55:15
Okay, and…

LUNAomics 1:55:16
Yeah, you don’t even need to do the LPs or anything. I mean, if you want to get extra capital and utilize the margin in your borrowing capacity to get more UST and then pair it and put it into an LP, you can, but it’s not necessary. Those are all just… You’re optimizing.

Lucas 1:55:37
Okay. So basically you’re buying LUNA with the borrowed capital, and you wait that the price of LUNA going up, and then you add the extra LUNA to Anchor?

LUNAomics 1:55:52
Yes, yeah, kind of go through the spreadsheets. And if you go through the spreadsheet, it give you very clear metrics of what to expect for every price target.

Lucas 1:56:09
Yeah, I would just use your spreadsheet, but I’m a bit confused. Because you said, “Yeah, with the money from the LPs, you can buy extra LUNA.” And we have your 2022 strategy. I’m a bit confused, because you don’t say that you have to buy LUNA with the rewards.

LUNAomics 1:56:32
Yeah, so yeah, there’s different strategies. And if the 2022 strategy tweet… I should actually pin that I haven’t pinned that into the index, but that’s the one that I’m following this year.

Lucas 1:56:47
Okay, okay. Great.

LUNAomics 1:56:49
Not saying anybody else should follow that. But that’s what I’m doing.

Lucas 1:56:53
Okay, okay. So thank you.

LUNAomics 1:56:56
Yep, no problem.

Rebel Defi 1:56:57
Okay, one last question, if it’s quick, from LunaRick.

LunaRick 1:56:59
Quick question. I’m on vacation, so it’s a stupid question. But where can I find the spreadsheet?

LUNAomics 1:57:04
Spreadsheet is… It would be under the 2022 Strategies and then on… I retweeted Ed’s sheet on my timeline. But I’ll add those to the indexed tweet, so you should be able to find them on indexed tweet.

LunaRick 1:57:23
Thank you, sir. Happy New Year.

LUNAomics 1:57:24
Happy New Year. Let’s do one more.

Rebel Defi 1:57:26
Oh, well, I’ve not called anyone up yet. So yeah. Anyone interested in the spreadsheet, you can wait for LUNAomic’s retweet of that. Or if you follow Ed Plaskow on Twitter, that’s @eplaskow, P-L-A-S-K-O-W. Right, Chorizo_Cards coming up.

Chorizo_Cards 1:57:49
Where do you hold most of your crypto? Is it on the actual protocols themselves? Or a mixture of hard wallets and online?

LUNAomics 1:58:02
Yeah, it would be on the protocols itself, in the smart contracts. Probably all of those… Except the liquid LUNA that I have in my wallet, are in smart contracts.

Chorizo_Cards 1:58:16
And you’re confident that no hacks or you won’t be losing your money through any sort of hacks?

LUNAomics 1:58:24
There’s always the risk of hacks. Anytime you have… And this is just something that I am convinced of. Anytime you have high rewards, you’re gonna have high risks, even if those risks are unknown. The only reason why there’s high returns is because there’s either market inefficiency, or there is high risk. And the reason… Yeah, so I’m not 100%… I know that there’s ways to hack into these different protocols. You just need somebody that’s smart enough to do it. So nothing is 100% hack proof, but when I look at the reward that you can generate, to me, it’s worth that risk to reward. So I make the decision to expose myself to the risk that is there, to get the reward that is also there.

Rebel Defi 1:59:29
Awesome. Thanks for sharing. My wallet is, like many of us on this call, I imagine, a lot smaller than LUNAomics’ one, but I do use a hardware wallet for one of my… Just because I started to get a bit scared. It’s the most money I’ve ever had in my life. So I went down the hardware route.

LUNAomics 1:59:49
Yeah, and that amount is going to grow next year.

Rebel Defi 1:59:52
Well, I think I’m loving this 10x story you’re telling us, so thank you very much for sharing that. And thank you very much for the honor of being your co-host. It’s been great fun, and I’m sorry that there’s so many people still wanting to speak. It just shows the popularity of your message.

LUNAomics 2:00:09
Let’s just do one more and…

Rebel Defi 2:00:11
Wow. Okay, one more. I’m gonna have to go after this one as well. I’ve got some dinner coming.

LUNAomics 2:00:17
Rebel DeFi. Thanks for all the videos you’re doing is really… I actually direct people that I’m teaching in real life to your videos, because you do a great job.

Rebel Defi 2:00:29
Oh, wow. Well, thank you very much for the kind words. Sorry about that confusion where I was looping bLUNA straight back in, I was kind of muddled up with… I sort of had a bit of a misconception.

LUNAomics 2:00:40
Are you in the UK?

Rebel Defi 2:00:42
Yes, yes, I am in the UK. So for anyone who’s still hoping to ask questions and stuff, we’re going to be doing a sort of more beginner-y type one. So if people are beginners then Monday morning, 9am. We’ve got a little space not affiliated with LUNAomics, but I just thought I’d mention that. I’ve just called up Jordan. Can you unmute, Jordan?

Jordan 2:01:02
Yeah, thank you so much for doing this. Maybe a good question to wrap up, but I’m just curious, macro or micro, what kind of inputs or signals would make you rethink your strategy?

LUNAomics 2:01:14
Right now, the biggest macro perspective that I’m looking at is the trend of decentralization. And that trend is… It’s the trend that’s been in our face for the past, I don’t know, eight years. And what’s happening with decentralization of finance is kind of, to me, the last… One of the last things to level the power playing field across nations. So typically, people with the money hold the power. And so those are central banks, mainly the Fed Reserve of the US has held power over the world for the past two centuries. So on a macro perspective, I think decentralization is… It’s a trend that I don’t think can go backwards at this point. So to answer your question, I would have to see… And maybe it will happen at some point. I mean, what’s really interesting is that in the trend of decentralization, it becomes centralized. So you have Google who decentralized information, and they monetized it. So they took this macro trend of decentralization, and they monetized it, and they controlled it. So Google now is one of the richest companies in the world, and the guys like Eric Schmidt at the top, they have profited the most. And so it’s like a centralized form of decentralization. The same thing with Facebook, same thing with YouTube, same thing with Jeff Bezos and decentralizing retail.

LUNAomics 2:03:14
So you have this trend of decentralization, but it’s a centralized decentralization. With finance, because there’s so much at stake, I think that governments will not just hand over their power, and banks won’t just hand over their power without a fight. So there’s gonna be… And I don’t know where this is going to go, but I think there’s going to be a conflict in the future. And I think one of the greatest fears that I have is that a central bank or a central entity will somehow ban all cryptocurrency, decentralized finance, and have some sort of centralized stablecoin that will monitor everything that we buy and sell and put all of our information on the blockchain. That to me is a very scary thing, because blockchain is not just… It’s a ledger based system. So pretty much any of your information, what you buy, what you sell is a part of that. But your identity is not linked to your wallet. Right now, the security that we have, all of our identities is our security. So if I can go into a bank and prove that I’m somebody, I can get into all of their stuff. And so you have identity theft, because that’s where our level of security is. Now, there’s a new level of security, which is blockchain, and a level of privacy, where all of our stuff is not linked to our assets. But if at some point in the future, they link our identity to our wallets, they will have access to not only every transaction that we make, because it’s all stored on the blockchain. But they can store whether you’re vaccinated or unvaccinated, what your political leanings are, what things you like or don’t like, what’s your mental health history.

LUNAomics 2:05:18
And once all of those things are linked to a wallet, and it’s controlled by a central agency, that becomes very dangerous because they could press a button… In a world like that, they can control everything. So if you could imagine like a legislative body saying, “We don’t want anybody who’s had mental health issues to own a gun,” and everybody… Great thing and they press a button, and your wallet is linked to your identity. And on your wallet, or on the blockchain, your mental history is there, as well as your purchase. You go into a store to buy something, and you scan your wallet, and they say, “Denied. You can’t you can’t buy a gun because of your mental health.” Everybody’s going to be, “That’s great.” But then they can get into things, “Well, we want to prevent heart disease, so if you have cholesterol of over 200, then you can’t buy meat.” And when you go into a store, because everything’s linked to your wallet, then you won’t be able to buy meat. And then with that kind of power, political parties can say, “If somebody has this political leaning, then they won’t be able to do anything.” So there’s this massive… You talk about macro view, there’s a massive trend toward decentralization, but at the same time I think that there’s this war for the power of that. I don’t know. What would make me bearish on it is… I think the problems that a centralized form of cryptocurrency would bring, would bring about problems that are way more than just money. And that’s the thing that I’m most concerned about.

Jordan 2:07:12
Cheers. Thank you. Yeah, yeah.

Rebel Defi 2:07:16
Awesome, what a philosophical question to end on. Hutch sends his apologies. He seemed to get kicked and couldn’t get back in. So hopefully things will be better for him next time. I’m gonna have to go guys, but thank you very much, LUNAomics. It’s been awesome.

LUNAomics 2:07:29
Thank you so much. And thank you guys for taking time out of your new year. I know a lot of you have different things that you’re doing. But I’m glad to be a part of this community and to help out in any way that I can. So have a happy new year and I’ll talk to you guys in the next one.

Finn 2:07:47
Thanks for checking out another episode of The Ether. That was the LUNAomics Master Class #2, on Risk Management. Recorded on Saturday, January 1st 2022. From, I’m Finn. Thanks for listening.