Transcript: The Luna Hour Second Wallet for Luna Strategies

Cephii
Cephii

Finn 0:42
Hello and welcome to The Ether. Today is Saturday, March 12th 2022. This episode of The Ether is brought to you by Glow Yield. Glow Yield is the ecosystem of Terra decentralized apps like Lotto and Creators all powered by DeFi yields. Glow Creators helps artists and influencers give their fans exclusive perks through membership NFTs and more. Glow Lotto is a price link savings account with a weekly chance to win the big jackpot. Tickets are free and perpetual which means there’s zero chance to lose money. Be sure to follow Glow Yield on Twitter and join the Discord community to stay up to date with all the glowing projects and check them out online at glowyield.com. This episode of The Ether is also brought to you by Talis. Talis Protocol is the NFT platform for independent artists on Terra. Talis helps to provide artists with the tools and resources needed to transition from traditional arts into the NFT world. With their V1 launch coming soon, Talis will be the place to see real world art reflected on Terra. Be sure to join their Telegram and follow Talis on Twitter for updates on their roadmap, validator, and other Talis news. Find your next favorite artist on talis.art. TerraSpaces appreciates the support from all our sponsors. Today on The Ether, a Cephii Space, The LUNA Hour, Second Wallet for LUNA Strategies. Let’s take a listen.

Cephii 2:03
Hey, everybody. We’ll get some folks in. I had a little time before work this morning. [chuckle] Pulled into a drive-through, got some food, and figured I’d share some theory here with folks. Let’s wait for a few folks to come in, but basically revolving around strategically using second wallets to do things that you wouldn’t do with your primary wallet. And these kind of ideas could get interesting.

Lucky Luciano 2:33
I think the first question is what drive-through did you pull through?

Cephii 2:38
Sonic for the bacon croissant, which obviously… [chuckle]

Lucky Luciano 2:45
Good one.

Cephii 2:48
The sonic number one costs, I don’t know, $10 today, I think. [chuckle] Which is kind of ridiculous, but okay.

TheGrumpster 2:55
At this point I pumped gas. I’m like, well, there goes maybe one LUNA. Two LUNA.

Cephii 3:00
Yeah, exactly, fuck it. [chuckle]

Lucky Luciano 3:03
No, it’s good. Yeah, it’ll be exciting to hear some second wallet strategies. How you think about the price? It’s basing pretty well, I was watching it yesterday and today around the 80, 90.

Cephii 3:13
Yeah, nothing too exciting going on. Whether you think that there’s kind of a double top pattern or not, or whether that even matters, which I don’t think it does if you look at the monthly, you really just have just a big rising wedge on the monthly. So looking pretty good to me. And transactions are escalating. Raoul Pal came on to Real Vision doing a Twitter Space, I guess, for the first time. And I guess since a lot of us have plenty of folks that follow, he had thousands of people on there. And he did mention LUNA briefly. It’s interesting how he doesn’t post about it at all, but he’s clearly an owner, as is Remi obviously, who works with him at Real Vision. But he mentioned it as one of the few non-bullshit blockchains with real use case and actual real transactions on the network, and just talked about how you can basically price the value of a network based on the number of transactions on it. And of course, transactions on Terra have been on a parabolic tear, actually, if you pull it up on station.terra.money.

Cephii 4:33
Anyway, we could probably just hop to the kind of idea at hand, this kind of came about because of what danku said the other day where he was borrowing… So he was moving LUNA to a second wallet because he needs to be able to spend his money, and he needs to do so in a way that is tax efficient, and he wants to do things with his LUNA that he wouldn’t do with his main wallet. And that kind of led me to some thoughts about how we could use that thinking to do some different things. You could just basically look at your secondary wallet, some of us use it, obviously, as a public facing wallet, like if you want to interact with, say whatever, you care about NFTs, or like a debit card, or whatever, having a separate wallet that you do not transfer funds into, that you load up via a centralized exchange just for privacy purposes obviously makes sense. And then what he had mentioned was, okay, he’s moving his LUNA to a secondary wallet, and then he was borrowing against that LUNA for UST, taking on leverage on Anchor, using that UST to do whatever the hell he wants with it. And then presuming that that LUNA is essentially gone, as far as he’s concerned, meaning not that different from just selling it. So if you do that at a reasonable pullback, similar to how you might borrow LUNA to buy more at a bottom, or just simply borrow at bottoms, because it’s less risky, you can technically take that loan out with the full intention of never paying it back.

Cephii 6:36
And let’s say you have 100 LUNA and 25% of it gets liquidated, you’ve now sold 25%, of your LUNA, so 25 LUNA, you still have 75, the odds of getting liquidated dramatically go down even further. But now you have access to all that UST, you still have your LUNA basically, if LUNA does really well, heads off to 200, well then great, you can just basically sell some LUNA at that time, pay off your loan, and you’ll still have all your LUNA and now you have had UST to spend with it. Worst case scenario, let’s say, I don’t know, 50% of your LUNA gets liquidated, sort of like whatever. You allow that to happen theoretically, or manage the LTV on it, quite frankly, if you really had the ability. And now you can just keep your exposure to LUNA without having to sell it, necessarily, to use it, especially since the cost to borrow is so low, obviously.

Cephii 7:43
The second wallet basically helps allow you to have a totally different risk profile on your wallet versus what you have on Anchor on your primary, which can really help you formulate new strategies to go about. So I was thinking about this overnight, I was kind of looking at these bonded LUNA arbs that we’re doing, right. So we’re getting a sizable chunk of new LUNA to the extent that when we’re getting 2% arbs, you can imagine increasing your LUNA stash by, let’s say, 10% within five months, which is pretty decent, possibly more depending on how good your arb rates are. And you could take that bonded LUNA that essentially now… Or the arbed LUNA, or whatever, the new LUNA that you just got for free sort of, use that as house money. And then you could actually, instead of doing what danku said, you could move that house money, basically over to a new Terra Station wallet. And you can basically loop that, right, similar to how you’d loop LUNA normally. But if you’re not so comfortable looping your entire stash, but you have LUNA that you’ve already gotten for free, and you do a full looping, which means basically going into Anchor, posting that bonded LUNA as collateral, so you have let’s say 100 LUNA, you post that as collateral, you borrow to the max borrow possible on that, I don’t know what that number is, its like 75% or 65% or whatever that is, and then you go and take that UST, get yourself more LUNA, and of course do this again and again until you max that out. So that gets you to approximately a 2x… Let’s say a 1.75x-2x leveraged position on LUNA, and let’s say you’ve gone from 100 LUNA to 180. And I don’t know what the max efficiency on that is if you go all the way through this, but if…

Lucky Luciano 9:58
I don’t have a calculator coming with this so I’m writing this down.

Cephii 10:01
Yeah, so if you basically, were to get liquidated, you’re gonna go down from, let’s say, 180 LUNA down to, whatever 25% of that is, so let’s say you lose… What does that come out to? You lose about 50 LUNA, let’s say. So, in theory, you’re still ahead in your leveraged position, even in the face of a liquidation. But you can get a tremendously higher leveraged exposure using house money. And basically play that game a little bit more aggressively. And you could use some common sense when it comes to doing that, too. You’re not going to necessarily do this at a top, necessarily. You could kind of wait till some pullbacks happen. So there’s a 10% pullback from the top, let’s say, right now. You could start doing this at maybe 15%, 20% pullbacks and get into a reasonable safe zone where you’re not likely to get badly liquidated either way. But now you have substantially more exposure to LUNA in the process. Other ways you could theoretically do something like this would be a perpetual on KuCoin. The problem is, is that on those perpetuals… They are perpetual, but they sort of suck if you go long term, the fees will eat you alive. And it doesn’t make sense to hold that for a multi-month period.

Cephii 11:36
In crypto, if you realize that basically, significant… Even dead cat bounces and trend reversals happen usually over a six month time period, off the bottom. You don’t really want to be in a KuCoin perpetual for that whole time, right. Anchor Borrow is cheap. Your accrued interest is relatively small, especially with the ANC rewards, which you could use those and also, of course, get more LUNA with those if you’d like. Or you could end up using those ANC rewards and selling them and paying down the loan if you wanted to just like usual, or you can just stake them if you think the price of Anchor is appropriate and you can get the yield off of that as well. Or you could take that ANC and combine it with some UST, you can play some games on Mars Protocol, which has some interesting leverage capability there. You could do ANC-UST in Spectrum, which has a 200% APY autocompounded. So there’s some interesting games you could play with your Anchor tokens that you get, obviously. But the concept here is you can be way more aggressive with a small wallet, with house money that you’ve sort of already earned to take on more exposure than you would with your regular wallet, where you wouldn’t want to be going to crazy levels of LTVs and manage large quantities of money that you might have.

Cephii 13:17
So this, I think, judiciously used in small quantities can do what danku does, which is to extract UST and just assume that liquidations fine if it happens. Use that for spending money instead of selling your LUNA or the opposite of that, or a slightly different approach would be to use that UST and just lever up LUNA with extremely low risk to yourself because you’ve got it through the bLUNA arbs. So I’m not necessarily saying “Oh, yeah, everyone go in and lever up on a wallet with your life savings.” What I’m saying here is that, you want to do this using low risk small amounts. And you could use a separate wallet for each looping strategy, theoretically. There’s some other concepts I was looking into as well where you could potentially do a strategy where the last loop results in getting something with a fairly high consistent yield, and then using the yield to pay down the loan also. We’re going to be getting bonded Avalanche and essentially bonded Ethereum, and other things. You could also manage your strategy by using bonded Ethereum as a possible position, because its price doesn’t move as aggressively in any given day as LUNA’s. So that could be potentially used as a way to sort of mitigate the volatility of that position as well. So there’s a lot of interesting ways to play with this. But maybe kind of open it up for a little discussion here about what people have been doing. And maybe you’ve tried something like this before.

Lucky Luciano 15:05
It sounds… I mean, one, I think the one thing that I’m trying to still figure out is the separate wallet. I tried to keep it detached from my main wallet, so I keep going back to KuCoin to go back. I don’t know if you’re just connecting them, and you’re saying screw it. But I’m trying to make sure they’re never linked together on the blockchain. Have you done something similar to that or are you just connecting them regardless?

Cephii 15:27
I think if this is not meant to be a public-facing wallet, then it doesn’t necessarily matter if you’re gonna keep it private either way. If you’re trying to keep it obscured for any number of other reasons, then yeah, there’s different ways to consider doing that. Once we have Void Protocol and other tactics, it’s going to make secondary wallets a little bit easier to keep private. You could also potentially achieve some privacy ultimately, in the not so distant future via THORChain as well, where you can swap to some things and then create a wallet with that route.

Lucky Luciano 16:06
Yeah, that makes sense. That’s kind of like a KuCoin in the middle, then for me once THORChain can switch that. So that’s a good point.

Cephii 16:13
Yeah. So anyway, but the concept here is not for folks to necessarily go crazy. It’s really to take small positions, which you are comfortable with a higher risk profile, but not having to blend that risk profile into your existing Anchor, because Anchor doesn’t obviously allow you to take multiple separate positions, which is perhaps a weakness of Anchor where you can’t manage multiple loans simultaneously. And they’ve did it that way to keep it simple, but from a functional perspective…

Lucky Luciano 16:50
Let’s take a bunch of LUNA that we have, let’s create an offshoot of your free arbs or free that you’re getting, kick it over to a wallet, and then keep leveraging that up to the max to max out what you can get from UST and use that for whatever you want. And if that gets liquidated, who cares, it’s house money. So it’s kind of showing that faucet drip in there to see what you can maximize from that perspective.

Cephii 17:13
Yeah, exactly.

Lucky Luciano 17:14
And Zach came up, what’s up, Zach?

ZVinnyS 17:16
Hey, man, I just want to say when LUNA gets on Coinbase, it’s gonna be real easy to transfer that money over to be able to use in real time because they have that card where you can immediately transfer into UST. And then you’re immediately spending and earning Ethereum back, which is kind of insane. And that’s how I’ve been basically earning my Ethereum as well. I buy in and whenever I earn I transfer it to my card, and then I use that for my daily living and I’m earning back Ethereum right back. So whenever LUNA gets onto Coinbase, I think everything’s gonna be a lot easier for everyone.

Cephii 17:53
Yeah, you’re referring to the Coinbase debit card?

ZVinnyS 17:56
Yes, I am. Yes, I am.

Cephii 17:58
Yeah, I use that a bit too. Unfortunately… Well, the problem so far with that Coinbase card is the yield on the thing, the cash back rewards are high. It’s like 4%. But the yield on the available coins that they have is basically nothing, which kind of sucks unless you go and stake your Ethereum and all that jazz. But I think… Yeah, that’s what I kind of posted earlier today. An even better thing is going to be when Voyager’s 3% cashback debit card comes. And USDC is like a 10% APY there while it’s sitting there. And then you can basically use your cashback… That system is interesting, because you can pay your mortgage and other major expenses that you can’t normally use with a debit card. You can use ACH on that and get 3% cashback rewards if you have sufficient VGX tokens. So that’s a little bit of a different program. So that’s coming out in the next few weeks I think, for the debit card. Lucky, right?

Lucky Luciano 19:00
10 days, next set of cards are going out.

Cephii 19:02
Yeah, I gotta check my mail. So see if they already sent me mine. [chuckle] But anyway, it’s gonna provide another interesting cashback and saving opportunity as well. But anyway, yeah, the…

Lucky Luciano 19:18
Let’s say we take a little bit of the yield, and we max out our Borrow with the UST. Where’s the best place you think right now, Cephii, to take that free money to leverage back up again? Where do you go to leverage up that UST? So you really max this out, so who cares if you get liquidated on this?

Cephii 19:37
Oh, I see what you’re saying. I haven’t fully investigated and this is where I wish Hutch was on right now. I haven’t fully investigated the max opportunity on looping via Edge Protocol, or Mars Protocol, or some combination of those. The other thing is going to be super interesting with this strategy is going to be the Kinetic Money situation as well, right. You could go borrow off your future yield first. So let’s say I have 100 LUNA, and Kinetic Money comes out. And they’re gonna basically give me a self-repaying loan and give me cash for something that can’t be liquidated essentially, then I take that cash, and then loop the heck out of it, right. [chuckle] And so again, you’re playing with your future yield, and the risk is, again, super low. And then you can loop the crap out of that in this context as well. But I haven’t fully investigated all the different ways that are coming to Fields of Mars, and Edge. And Edge is kind of in beta too, so I would caution people about that. I think their audits are still being done. But if you go play around and look at it, you could probably get some idea of what type of possibilities might emerge from that.

Lucky Luciano 21:09
And I think even if it’s beta, but we’re talking about your arb yield, and it’s free UST, it’s kind of still okay, because it’s still house money in that case.

Cephii 21:19
Yeah, exactly, exactly. And if you wanted to be a little bit less aggressive, what you could do is the last looping that you do, so in other words, you got your bonded LUNA, you have borrowed against it, got UST, you got more LUNA, you deposit that as collateral, you borrow more UST, and then maybe on the third loop in you don’t actually loop it. And you just take that UST park that last bit in Anchor Earn. And you could manage your LTV with that just like you would otherwise. Or you take that last bit of bonded LUNA, throw it on Nexus Protocol with a self regulated APY of 14%, or whatever it is, and then you just use the bonded LUNA to… So you max it out all the way through and the last loop of bonded LUNA you have, you can use that and park it in Nexus and get yield from it on Nexus, and then you can use that to… As you acquire bonded LUNA with that strategy, you can use that to manage your LTV downward using the profit that you’re getting from the yield. And then even derisk that position so that you don’t get liquidated necessarily. So there’s two different ways to look at this, you max it out to the point where you’re almost surely going to get liquidated and see ho… And that’s one possible tactic. And then there’s one tactic where you don’t intend to get liquidated, but you’re able to do more looping than you feel comfortable with on your main account. Either way, it’s just a matter of personal preference.

Lucky Luciano 22:50
Yeah. I think we have Tripleyak come up. Triple.

Tripleyak 22:54
Yeah. Hey, Lucky. Can you guys hear me okay? I’m driving right now.

Lucky Luciano 22:57
Yep. All good.

Tripleyak 22:59
If you’re not worried too much about necessarily getting liquidated or anything, and it’s totally house money, but you don’t want to have the volatility exposure, and you just want to max your yield on the Anchor Earn side, you can do the looping on Mirror where you take some aUST after you’ve deposited money into Anchor Earn, you go over to Mirror, and you basically borrow and then sell a stock that you think is either just gonna not move too much to the upside or potentially go down, and then you just loop that. I mean, you can loop that 9, 10 times. And on the first amount, the first borrow and sell, you’re getting that Anchor yield on that full amount, plus then you get the extra cash back. And then you just get the progressively less and less cash back each loop you do. But it can jack up your stablecoin yield on the UST from 20% to 70%, or 80% if you do it 6 or 7 times. So that’s another thing, I mean, obviously, there’s the risk if the stock goes up you could either not make that much or potentially even get liquidated.

Lucky Luciano 24:25
Yeah, that’s a good point, Triple, because right now I look at the traditional markets a lot. And if my theory is holding up right with the SPY, maybe a little bit lower, going back down to the 4,000 range, I might take something like that, create the spin-off wallet. When the SPY hits that 4,000 mark, I might just go all in and loop some SPY calls for a time period and just max it out and say, for the next three months if the market just climbs a little bit I can maximize that. But if it goes the other way, then if I get liquidated, I get liquidated, who cares.

Tripleyak 24:59
Well, you can’t really do the strategy on the long side, you can only do it on the short side because it involves selling, right. So you wouldn’t be able to do it with calls, or… Well, there’s no options on Mirror anyway. But you would only be able to do it if you want to go short something, basically. And that allows you to use aUST. So you’re still getting your 20%, then you buy the stock with aUST, you sell it, you get your UST, rinse repeat a bunch of times.

Lucky Luciano 25:27
That’s more like a delta neutral then, to maximize something or something over there.

Tripleyak 25:32
Yeah, you could do that you’ll get less yield, you’ll have less price exposure… Well, you’ll have almost no price exposure. But yeah, you can do that. I’ve been playing around with this. I’m not doing it significantly but I’ve been playing around with this with the Coca Cola stock, because I just don’t see it 2x-ing or anything anytime soon, although you never know. [chuckle] But, yeah, it’s an interesting little strategy if you just want to generate a little more stablecoin yield using Anchor.

Cephii 26:02
Do you foresee a strategy where there’s a mix of the two somehow? A mix of the Mirror and a mix of the Anchor Borrow, such that it might be more feasible to unwind a position, perhaps if you needed to?

Tripleyak 26:28
Well, maybe. I’ve never thought of that. Do you mean that because LUNA is volatile to the upside, it just makes it easier to unwind a position because you have more cushion there in case the stock goes up? Or…

Cephii 26:43
Yeah, you could take a different risk profile on your last loops such that you could somehow exit if you needed to, if you felt like managing that Mirror LTV situation you’re talking about.

Tripleyak 27:00
Maybe, yeah, I mean, it’s honestly never something… I haven’t thought about that. But I can look into it. I mean, I think that ultimately whenever you’re using aUST outside of Anchor, in my opinion, not financial advice, but it’s always a good idea to make sure you never use the full amount of your aUST in anything outside of Anchor, right. In fact, I never go more than 1/3. If I’m going to do something with aUST, I always ensure that 2/3 of my aUST is still sitting in my Terra Station wallet. And that’s…

Cephii 27:37
So you can manage and unwind, essentially, or exit a position if you don’t like it.

Tripleyak 27:41
Exactly, exactly. And I never do a half I actually just stop it at 1/3 because movement can happen. You don’t want to get in a situation where all of a sudden you have to bring in external capital really quickly and it’s just stressful.

Lucky Luciano 27:55
Hey, Triple, why can’t I buy a long and SPY but then just sell on the market and reloop that? ‘Cause I can buy a long.

Tripleyak 28:03
Yeah, you can buy, and then…

Lucky Luciano 28:05
I can buy a long SPY.

Tripleyak 28:07
Yeah, you can. But you’re gonna…

Lucky Luciano 28:09
I can sell that straight to the market, right, and then reloop it or no?

Tripleyak 28:14
Well, but you can’t use… I don’t think you can buy it with aUST.

Lucky Luciano 28:17
Oh, using aUST. Okay, okay.

Tripleyak 28:20
Maybe you can now, I don’t know, but you might want to check that. But as far as I know, you can’t buy it with aUST.

Lucky Luciano 28:27
Because I… Yeah, I’ll look at it. I’ll see what the options are. I know the short strategy that Hutch did and, I think, was it Rebel Defi with the…

Tripleyak 28:35
Gold or something like that. Yep. Yeah. Yeah. And I’m glad I learned about that from Hutch when I did because I was able to do that for my mom and my stepdad with SPY. I actually went short SPY through Mirror right before it tanked with their funds, not… I should have done it with my own fund too. But I did it for them because they’re older and they’re super exposed to the SPY. I watched that video that Hutch put together about shorting the SPY with Mirror and it was such good timing because I was like, “Oh yeah, my parents are super exposed to SPY.”

Lucky Luciano 28:52
It was a week before the market crashed. I was so pissed back then.

Tripleyak 29:15
Yeah, his timing was amazing. But anyway, yeah. Good chatting with you guys. I’ll go back to listening.

Cephii 29:23
Cool.

Tripleyak 29:23
I think Logan came up. What’s up, Logan?

logan shippy 29:27
Yo, yo, so got a question about kind of current price action, obviously, we had somewhat of a double top on the daily and we’re kind of obviously retracing a bit down. What are we at, like 90 something? I don’t even… I haven’t looked at price to know exactly what we’re at, but I’m just curious to know or what your guys’ opinion is on price. So we’re, yeah, right at $90. What your guys’ opinion is on price retracement, are we going to consolidate, do you think, in the $80 range or possible dip back down to $50. Just kind of curious where your guys’ thoughts are on kind of best case scenario for consolidation. And then worst case scenario before, obviously, the next leg up.

Cephii 30:21
I kind of like this $80-$100 zone, it has the least amount of volume in terms of fill for building a floor. Just judging by past one and a half years’ price action, it takes about a month to have a new floor price in the $80-$100 range. If we spend about a month in this range, so the remainder of this month and a little bit into April, then we should have a price floor that’s very similar to the $50-$70 zone. So it’s actually fine if we went sideways for a little bit, because we’re still well above the 200 day moving average, which is at, I think, $56 now. So as long as we’re above the 200 day moving average, and that moving average continues to rise upwards, our mean is essentially picking up pretty quick. I think the odds of getting LUNA again below $55 is approaching… I think it’s approaching zero in my opinion, again, so of course it’s going to go there. [coughs] Excuse me. But then I think the LFG buy at $51… Or the LFG sale of LUNA at $51 to a bunch of VCs and large wallets helps cement a price floor there. Because you can imagine…

Lucky Luciano 31:58
Yeah I mean, these guys don’t get in to make a 1x or 2x gain, you know what I mean? They’re not getting in at $50 to go make it to $100, they’re getting in to at least go to $250-$300.

Cephii 32:07
It’s more than that. Those LUNA buys were actually vesting for between one and four years number one, but number two, let’s say you spent on average, let’s say you spent $55 and you bought a $50 million worth of LUNA at that price. Don’t think for a second those people are going all in. And if you get another dip down to $50 or $45, they don’t have dry powder waiting for that event. So there’s a tendency to size positions such that you can buy the dip larger, more of a dynamic DCA is the smart money way to do this. So the odds of getting there again are low only because you know you have cemented a good solid chunk of dip buyers at that range. The other reason I think it’s improbable to get down there again is that we just have way less supply of LUNA than we did then. We have way less supply. The speed of supply reduction is really, really aggressive still, it doesn’t appear that we’re going to be stopping burning LUNA till… Or slowing down below maybe around $20 billion UST market cap, which would be awesome. And because of the rate of burn being somewhat capped, unless that cap is raised, we appear to be consistently above peg and demand is high on a daily basis. So yeah, a lot happening I think, plus the LFG announcement that more money is going to go to the LF G for more Bitcoin and whatnot, has a good appetite…

Lucky Luciano 34:03
What exactly does that… Obviously it’s… I mean, Do’s playing 4D chess with… I mean, I think the biggest problem is obviously the cannibalization or just the tribalism between blockchains, obviously, and you see division whereas, I think, what Do’s doing brilliantly is creating unity instead of division, and connectedness. And with that Bitcoin move obviously it’s great marketing, but when it comes to the use of that Bitcoin, what exactly is that Bitcoin being used for? It’s used in what, as collateral to back UST? What was the real purpose of sizing up that Bitcoin position?

Cephii 34:46
No. It’s not for collateral, it’s simply to establish a money market where if UST depegs to the downside, then that can be solved by basically converting that BTC to buying UST transiently, and repegging if necessary, right. It doesn’t have to back anything, it just simply has to be present in a money market. So what would happen is if UST regained its peg, then that would be converted back to Bitcoin and that’s the end of it. The idea here would not be to back it in the typical sense. The concept is is you would use it just like the LUNA burn mechanism to stabilize UST if needed. And just because as the system gets bigger and bigger, is it going to be as reflexive or not? I don’t know. But it’s also just to quiet down naysayers who are like, “Oh, you have it backed by something.” And then it’s sort of a handshake to the Bitcoin folks, of course, as well.

logan shippy 34:54
Yeah.

logan shippy 35:17
So what about… I mean, if Bitcoin… So the reason why… I mean, there’s only so many assets that you would necessarily want there to use to then try to get UST the peg, I mean, obviously, UST can’t use UST to back UST or whatever. [chuckle] So was Bitcoin kind of… It almost seems like it’s one of the only options as far as movability, right. Because if you had cash, there’s no way to really move back… The only other thing is a stablecoin, almost. But it’s like, obviously, UST is the dominant stable coin, so they’re not going to keep money in USDT, because who trusts that? So it kind of almost seemed like Bitcoin was the only option available, right?

Cephii 36:46
Yeah, Bitcoin was among the few options. Because if you were to hold a substantial portion of another asset, like a Polkadot, or whatever, pick your L1. The issue with the other L1s is they’re inflationary, and you don’t want to necessarily be holding a whole lot of something that is falling in price or has the possibility of falling in price substantially also, worse than BTC. So Bitcoin has, for better or for worse, the least amount of volatility risk compared to some of the others. Now, one of the reasons to get a basket of things would really just be a handshake to other layer one communities. So for relatively low risk, let’s say you bought, I don’t know, small amounts, like $10 million worth of a variety of L1s that participate in the LUNA-UST network. There’s a nice meme effect that goes with that, too. So it might be worthwhile, just for that reason alone. It’s just cheap advertising. You have basically every layer one in the world is now tweeting about it at some point. And then that creates a…

logan shippy 38:16
Yeah that makes total sense, because they spent, what, $40 million on the baseball team partnership. And it’s like a lot of those people aren’t in crypto that are… And it’s good to get exposure to normies, if you will. But then if you want to get more people into the Terra ecosystem that already have money in Bitcoin or other digital assets, that is an amazing strategy to essentially leverage other communities to get them talking about Terra and get that exposure. So that’s definitely a beautiful strategy.

Tripleyak 38:21
Logan is definitely right. Logan, I was just talking to my friend the other day about how for every… This is probably the most valuable in terms of marketing, this is the most valuable dollar for dollar spend that you could do. Because yeah, the value of the Bitcoin reserve isn’t just that it acts as a Fort Knox kind of thing for UST. But the marketing is incredibly, incredibly valuable. And what’s been super surprising for me, just kind of getting into this community over the last six months is it’s not a given, typically, that very technical people have a deep understanding of marketing. But Do Kwon and the TFL people seem to have a very instinctive kind of intuitive sense of how to market. And we all benefit tremendously from that. Because you can have… It’s kind of like Elon Musk, he’s not what most people would consider to be a great marketer, he’s a technical engineer, but for whatever reason he’s an amazing marketer. He gets how to market. And Do Kwon seems to have taken a page out of that book.

Lucky Luciano 40:05
I mean, I think where more valuable marketing is, to be honest, is getting people to utilize the UST. So to me spending $40 million for Alice, for something at Washington Nationals, that’s where the power starts coming for us as LUNA holders. I could actually care less if no more people by LUNA, I care more of the adoption of UST and how fast that can start hitting the US market or anywhere in the world.

Tripleyak 40:30
Yeah, for me the whole Washington Nationals thing was… It’s been really interesting, because I completely agree now. Going back, if I could vote on any proposal that directly impacts adoption, I would rather vote for that than for a sponsorship or something like that. But I guess we’ll see. Because maybe they’ll introduce Alice or something to the people that go to the baseball stadium or something like that.

TheGrumpster 41:01
Go ahead, Mandivs, I know you’re gonna say something. You’re muted, Mandivs.

Cephii 41:05
And before going too far off the beaten path here, if anyone has any questions regarding the topic of discussion originally, which is managing risk differently in a second Terra wallet to do different degen strategies, or if someone has ideas that are interesting I’d love to hear it. I was dreaming up a Prism refracting looping strategy too, which maybe we can get into whenever Mandiv gets done.

Cephii 41:05
Yeah, I don’t have much to say I was just trying to say why LFG is spending in BTC, for depegging asset for UST. Just think about the reason why Saylor is accumulating BTC. If you’re putting $1.2 billion right now in buying BTC, but over the period of time, as the value rises for BTC, how much reserve you’re gonna have at that time, right. Just think about that perspective. So, 4 or 5 billion right now is not gonna matter for them, as long as the price of BTC will rise exponentially, and it will be billions. And that depeg thing is not going to be possible by anybody.

Cephii 42:23
That’s a great point. Certainly. I am with you on that for sure. I think BTC’s price right now is very reasonable from a buying perspective as well. Just where it is on its overall trajectory. And then not only that, but there’s plenty of TFL LUNA sitting around if we get a dip in BTC you can damn well be sure they’re gonna buy more because you don’t go buy that much Bitcoin without planning to buy more on a dip. That’s just how it works.

Mandivs de’ Medici 42:55
Yeah. And at the same time, LUNA price also rises, right, and he has a target. So TFL is not a great marketer by the way, Tripleyak, means they didn’t do any single marketing up to now. The football stadium was the first one, I guess, and then this is the second one, right. But marketing is not something they want to do, I mean spend money and get product to sell, that’s not the objective. They do this for the adoption at the wider range, like globally. How they can make it, so they are shooting for the markets which has larger audience involved and it will be easy going sell for them not like, okay, spend every single day certain amount on advertisement and stuff like that.

Tripleyak 43:43
Yeah, Mandiv, I disagree. I think they’re amazing marketers because they focus on adoption and…

Mandivs de’ Medici 43:48
No, they are. But I’m saying they haven’t done any marketing till now, which has started. And now they started, they are bang on, they are just hitting a nail on the head, where to do, how to do. And they know how to do it. So they are not wasting money like crypto.com, right, you see everywhere. Billboards, TV ads, and whatnot. They are not doing that.

Tripleyak 44:12
Do we know how much LUNA they have? Not Luna Foundation Guard, but TFL itself?

Mandivs de’ Medici 44:19
Yeah, somebody tweeted yesterday about the whole Rizzo and how exactly they’re doing it. What’s the proportion looks like, how much TFL holds, how much they have for LFG, and what’s the plan for that. There’s a whole thread out there.

Tripleyak 44:35
Okay, cool.

Cephii 44:36
Anyway, yeah, getting back to this. So, one of the possibilities I was thinking of with use of LUNA in a specific while it would be… So, if you look at the refracting process on Prism, the most price neutral way to get yLUNA and pLUNA, use the yLUNA for staking, especially if you have plenty of PRISM tokens, is obviously to refract them, not necessarily buy the individual tokens. But let’s say you did want max yLUNA exposure, it’s ultimately the best way to do that, to take your pLUNA and just buy yLUNA. I’m not so sure that is in fact the way you would want to do that. And Lucky, maybe you can do some math or run a couple of simulations on this, but imagine this instead. You take your… And pLUNA’s price is actually a little bit higher right now. So it actually is maybe more effective. But imagine you refract your LUNA, you take your pLUNA, you sell that into LUNA, not into yLUNA, you take that LUNA and you refract it again, you take the yLUNA and you stake it, you have whatever pLUNA again, convert that to LUNA, refract and just loop it over and over again, until you have maxed out the amount of yLUNA exposure that you want. Now why would you not want to just buy it outright on the AMM? The reason you don’t want to buy it outright would be because yLUNA’s price doesn’t make sense to buy it outright. It’s just too high compared to your pLUNA. So I don’t know that you get the most effective math there

Lucky Luciano 46:29
Are you saying do this with the borrow that you did off of the second wallet? Or just in general?

Cephii 46:33
I think just in general, this is a strategy, I don’t know that you have to do with that particular wallet because this is not a unsafe strategy by any stretch of the imagination. So you’re basically getting more of your yield potential. And especially if you have sizable amounts of PRISM token too. You’re getting crazy yield anyway. And this creates a pretty effective looping situation where a large wallet, right… Because part of the problem on PRISM right now is if you try to buy too much of one thing, so let’s say you’re in there and you’re spending 10,000 LUNA at a time, and a large wallet had to do this, then your problem is there’s too much slippage and whatnot, because the AMM’s simply not liquid enough yet. So if you were to loop it instead, you remember refracting gives you a perfect one to one conversion, to where you get an exact amount of pLUNA and an exact amount of amount of yLUNA, and you can use this tactic, I think, to your advantage and ultimately wind up with quite a lot of yield exposure pretty readily.

Cephii 47:42
Now, the downside would be of course, if your value of yLUNA were to go down over time, then your position is more exposed to that price action. But if your goal is to have just income, but still have general LUNA exposure, sort of like what danku was talking about, and you did this in a wallet where you ultimately are going to take those, either vested PRISM tokens, or you’re going to get your vested yield off your yLUNA, and you want to just extract that and spend it in life, then that’s another possible way to have a cashflow stream while preserving a tremendous amount of LUNA exposure, either way. Because obviously, even if LUNA goes to $200, your yLUNA is probably going to approximately, let’s say approximately double. And in this process of refracting, you’ve actually gotten your yLUNA for cheaper than the market rate anyway, in a sense. So it might work out mathematically to where the risk is very low by doing a refracting looping instead of just selling your pLUNA and buy yLUNA. So it’s worth, I think, putting maybe a little spreadsheet simulation.

Cephii 47:50
Yeah, I can put it on a spreadsheet today and maybe get it out by tonight on that and see what comes out.

Cephii 49:04
Yeah, that’d be a fun little… Yeah, fun little strategy I was thinking about. And it’s especially effective because if you have a substantial amount of PRISM token, let me look at… See what my yield is right now on my yLUNA here, one second. Okay, so I’m looking at my staking for yLUNA. I am currently personally getting… Yeah, 72.48% APY total, which is a base APR 44.6%, and then the AMPS APR of another 27.8%. Some people have way more PRISM token compared to their yLUNA, so obviously their AMPS APR may be higher. I don’t know what the perfect balance is, by the way, in terms of ratio of PRISM token to yLUNA, and maybe there isn’t a perfect balance because that’s going to vary depending on the price of PRISM and the price of yLUNA, but it’s still a pretty damn good APR, honestly. And I think is considerably more lucrative at the moment, at least, than simply straight staking my LUNA somewhere. But with that looping process, you can generate quite a bit of cash flow to live off of if, like danku said, he needed to kind of live off of his crypto.

Lucky Luciano 50:35
Yeah, cuz I think I have more PRISM, less yLUNA, I’m getting 95.72% APR.

Cephii 50:41
You’re at 95%?

Lucky Luciano 50:43
Yeah.

Cephii 50:43
Yeah. So that’s a pretty good ratio, I think. Well, assuming that holds, of course, you know, that’s going to depend on the price of PRISM. Because if PRISM goes up then the value of your yield is higher if you’re in the Prism Farm. But you don’t have to necessarily farm PRISM token with that if you don’t want to, you could use yLUNA like you normally would as well. I don’t know if the yield is different if you accept it as PRISM token versus not. But even the PRISM token though, has amazing yield as well. Right now my PRISM token in governance is making me… Let’s see, it’s making me a good solid 77.8% staked. I’m sorry… Sorry. It’s making me a 33.82% APR as well, which is pretty damn good. And it’s been fluctuating between, I guess, like 30% and 45%, something like that, which is pretty decent. And the more of these kinds of interesting strategies emerge, the more traction you’re going to get on the Prism AMM, and essentially you’re going to get a lot of decent transactional volume, which will keep that APR high, since the APR comes to the stakeholders as yield from transactional revenue, and that APR is not necessarily just the token emissions or something like that. So I like the token economics situation here. I’m pretty happy with how both the Prism system is working, I’m liking the AMPS concept. I think it really helps gamify holding pressure of the PRISM token and really creates a reason to hold the PRISM token if you’re a heavy yLUNA user. But really, really good feedback mechanism.

Cephii 53:00
I think that the Prism AMPS concept, I think Jimmy and others have mentioned that you could consider using that for a governance tactic as well. The longer you hold, the more powerful your governance vote becomes, in the context of the discussion about Anchor Protocol and the issues that are around voting and changes. And it also came up in the context of this Juno governance fiasco going on. [chuckle] And ultimately, this AMPS concept could be applied to that governance situation on top of what it’s being used for right now. It’s pretty interesting using time in the market, essentially, to reward your position. So I don’t know, it’s certainly a concept to consider. Even on a second wallet, it might be an interesting concept to consider as a cash flow source that one might use to fund your daily life if you have a chunk of LUNA that you want to do this with, seems like.

Lucky Luciano 54:08
Alright, I think we had TheGrumpster come up first, and then we’ll knock more out as we go. Go ahead, Grumpster. Can you hear me, Cephii?

Cephii 54:16
Yeah, you’re there. You’re good.

Lucky Luciano 54:18
Maybe he’s not there. Okay. When he’s back. Go ahead, Nick.

Nick 54:22
Hey, guys. I see that Jimmy and Ryan the Lion are on, I was just thinking about Cephii’s proposal for how to loop on pLUNA. I guess a couple things, one, I’m just curious to see if when they originally put out the AMPS protocol, the amount set aside for the AMPS pool versus what was given to the standard pool, there was some suggestion that based on what the participation and/or the interest rate that was being provided to the AMPS pool, that the amount tokens may eventually shift to the greater benefit of the AMPS pool. And my question to Jimmy and/or Ryan is, is that still on the table? And when would they make an evaluation about shifting that to kind of even increase the amount of interest that the AMPS holders would have? And then the second question I have is, now that they have the pools, or they’ve iterated into the AMPS, my question is, is when are they going to start increasing the Hashed holdings into the pool so that there would be more liquidity because just buying even 10 pLUNA or 10 yLUNA can throw off the price enough to where it doesn’t match what’s on the spot price. And so I’m just curious to see, you know, if that’s in the works as well.

Cephii 55:52
I don’t think there’s any formal announcements on the timing of any of that, nor is there any… Nothing fixed in stone as far as changes to the way AMPS work. All of those are ideas in the background. And until they’re brought about in governance strategy, where some policy is put in place, I don’t think there is anything just yet. The Hashed thing, yeah, I’m interested in… I’m not sure what exactly they’re going to be doing. But I’d rather have more PRISM token before they do it. [chuckle] That’s kind of how I was looking at that alpha. So you want to be in before that happens.

Lucky Luciano 56:35
He just requested, just so you know.

Cephii 56:37
Yeah, we’ll grab him on. Yeah, so anyway, yeah. Good points. I think, yeah, Jimmy’s here. Jimmy, any comments about this discussion? Anything that seems rational to you about it? [chuckle]

lejimmy 56:49
Yeah, sorry, I’m at the gym. So it’s a little loud in the background, but for changing the ratio between base and boost, maybe in about, say, 30-60 days, if we have governance up, we might let the xPRISM and AMPS holders kind of decide on what the new ratio should be, right. And by that time we should get an idea what are people doing, are they just claiming, claiming and staking, or claiming, staking, and going all the way to pledging? So I think, yeah, maybe in about 60 days, we might have some more data on user behavior and we can put to a vote, what the new ratio should be. So we’ll kind of let the community decide on that and we might propose some new ratios for you guys. And then, what was the other part again? I forgot.

Cephii 57:51
Well, does the…

Nick 57:53
Liquidity with Hashed.

Cephii 57:54
Oh, the Hashed liquidity question as far as what’s happening with that.

lejimmy 57:58
Oh, yeah. Soon.

Lucky Luciano 58:01
Did we lose him?

lejimmy 58:05
It’ll be soon. So we’re just working out details, schedule details. But, yeah, just letting things stabilize a bit now that the farm has been out for about more than six days, five, six days or so. And then, yeah, so look forward to announcements soon.

Cephii 58:22
Cool. Yeah, thanks. Who’s up next, Lucky?

Lucky Luciano 58:28
rpelosi.eth

Cephii 58:30
Oh, rpelosi? Yep, Pelosi go.

rpelosi.eth 58:32
Hey, what’s up guys? How’s it going?

Cephii 58:35
Good. Good.

rpelosi.eth 58:36
I just started screwing around with Prism, I refracted 30 LUNA or so. And I just wanted to see if I’m doing this right, or if you guys are using any other strategies other than this one here that I’m seeing. But what I did was refracted the LUNA, took the pLUNA, swapped half of it to PRISM, put it into the LP, and then took the yLUNA and I’m staking in the Farm. My question is, is that the most common strategy? Is that what you guys are doing? Or should I be taking the pLUNA, trading it into yLUNA and then staking all of it that way? Or is that the same difference?

Cephii 59:24
It depends. It depends, I would say… So when pLUNA’s price was what I considered too low or depressed, like at $12 and whatnot, right around that price is when I did exactly what you’re talking about, is basically throw that pLUNA in with PRISM, and threw it in the LP. Now the value of my LP’s higher, the yield on the LP is decent, it’s sustainable in my opinion, and the autocompounding of the LP should pretty much let me ride it now indefinitely with no particular concerns. If the price of pLUNA falls, some of my PRISM token in that LP is going to go towards pLUNA, if the price of the PRISM token falls, vice versa. I think they’re both tied at the hip to some extent anyway, and that PRISM is somewhat deterministic to LUNA’s price right now. And ultimately, I think they’ll both tend to rise and fall together, which is exactly what’s been happening. And in certain circumstances, like now where pLUNA went up to I think it’s $18 or something, it’s fine because I ended up getting more PRISM token and vice versa. So it’s just a slightly different yield exposure, slightly different price exposure. But I think you want to be sure that you’re happy with the price you pay for both sides of the LP at the moment that you enter it. So in my example, it worked out well because I timed it well.

Cephii 1:01:15
I think what you can do is the nice thing about the fact that yLUNA and pLUNA are different in price is you can take advantage of that difference both in the refracting process, and in the acquisition process when you have dry powder available. To me it’s like, if I have dry powder available it makes sense to buy whichever is cheaper. And then what I do, I have a plan… So for example, if I buy pLUNA today at $18, then it goes down to $12, them I’m just going to double it, and have a strategy for exponentially ordering the pLUNA and that’s the strategy I’m continuing with. Once there is an actual order book, or limit order strategy system on Prism, which I think is coming at some point because it’s hinted at at the bottom of the page on Prism Swap, then I will ultimately just leave limit orders for prices that I like, possibly, to acquire what I need. And so I think when you do the LPs, I think you should be really cognizant of what price you’re paying for the components of the LP, and not just simply look at the APY and have a strategy for what it means if the price of one or the other goes up. So if the price of one side of the LP goes up or down, are you comfortable with what that means in terms of not really just impermanent loss, but the fact that the counterbalanced coin you want more of it, right, so if you don’t mind having more pLUNA or more PRISM, then the that’s a perfect LP. You could also do the yLUNA LP as well, or any of the other LPs on that system, depending on what your thesis is for getting into them.

rpelosi.eth 1:03:09
Perfect. Thank you for that. Could you also talk about how do the AMPS work? You take the rewards you’re making from the staking and the LP, and then you stake the PRISM, you get the xPRISM, then you boost yourself or did you allocate your PRISM…

Lucky Luciano 1:03:29
For me a couple weeks ago, when we were on that dip, I bought a bunch of AMPS, I staked them, and then I convert them over to AMPS and I started accumulating AMPS. And then what that is, is when you’re in the farm for the staking of the yLUNA, you get a boost APR based off how many AMPS you’ve accumulated. So it’s not based off rewards. You can use rewards to get rewards but if you had PRISM before, you can just go to the bottom and stake them and then kick them over to AMPS, and then you’ll start accumulating AMPS, which is just like a booster.

rpelosi.eth 1:04:02
Okay, gotcha. Thank you for that.

Lucky Luciano 1:04:03
But if you did that today, so let’s say you want to go by like 100 PRISM, you could then go stake it, move it to AMPS, and then utilize it for whatever you’re going to use as it accumulates. The one thing to know though, your AMPS are continuing accumulating. So if you staked… Like for me, I every periodically, every two days or three days, I go in and just kind of re-up my booster. So it’s like a snapshot in time per se. So don’t forget to kind of do that if you guys are accumulating.

Cephii 1:04:35
Yeah, at the bottom it tells you what your AMPS per day that you’re accumulating is and you’ll notice that the AMPS per day is a fixed quantity in a sense. And compared to your total AMPS at the very beginning when you’re getting a lot of AMPS, let’s say for example for the first month, you probably want to compound that much faster because it’s a greater proportion of your total AMPS that you have. A few months goes by and the new AMPS coming in are just a small fraction of your total. It may not be so imperative to be rebooting them every day or whatever. So yeah, keep an eye on the mathematical effect on the total boost effect. But what it does is it punishes the saver… I’m sorry, punishes the seller and benefits the saver in that the AMPS are… Your proportion of the total yield pool is increasing, versus someone who plays games and sells their PRISM or just has yLUNA staked without the PRISM token. So it has a pretty strong deterministic effect on the PRISM token price by providing not just utility, but a time based exponential utility and autocompounding effect. So yeah, there’s a lot of good math that goes into how that works.

Lucky Luciano 1:06:01
I don’t see why I’m ever going to unstake these PRISM things for at least a year. I don’t see any…

Cephii 1:06:07
Exactly, exactly. If you’re gonna bother doing this, you might as well just push it to make the max use of the thing.

Lucky Luciano 1:06:14
So like my numbers, right, I get 1000 AMPS a day, per se. So for me, it’s like, okay, I probably have to go click it every day just to boost it because it ups my other APY. And as more things come onto this platform, it’s just a benefit to hold these forever.

Nick 1:06:31
So just as a point of clarification, though, I mean, once you put the xPRISM into the AMPS pool, as long as you continue to… You can keep adding xPRISM, but if you remove any of the xPRISM, your AMPS vault goes to zero. So that vault is untouchable to the point where you can keep adding and you’ll earn more AMPS but each xPRISM in there has a limited 0-100 that accrues over time, I think Jimmy said that was 100 days or 150 days. So each xPRISM will earn up to 100 AMPS. But if you ever remove an xPRISM from that vault, your AMPS counter goes to zero, and then you have to start over.

Lucky Luciano 1:07:18
Yep. And that might go back to then the question of the claim and pledge, or claim, pledge, and stake then, because then if you’re earning the PRISM, are you kicking those back over to the vault to kick up your AMPS, then do you just start claiming those and just holding them? That’s probably a personal strategy, I don’t know what you want to do.

Nick 1:07:35
And that happens at 30 days from the beginning you start to accrue your actual PRISM, and that’s like a running total and it’ll show you because it starts to catch up, but you don’t get to withdraw for 30 days for the ones that you started accruing 30 days ago.

Nick 1:07:54
Yep. Yep. Yep. All good commentary, though. All right, I think we had… Is TheGrumpster there? ‘Cause his mics off, but…

Cephii 1:08:03
And we could probably take a question or two, but I’ve got to jump off to head to work here in a second, so…

Lucky Luciano 1:08:09
Okay, go ahead, USTBroker, you’re next.

USTBroker 1:08:12
Okay, is anyone else wildly curious about what that the heck Cephii does for work and why he does it when he does it?

Lucky Luciano 1:08:20
Yes,

Cephii 1:08:21
I’m a pulmonary critical care physician. And I run an army of people so they’re already working this morning. I just show up and like bless everything.

Lucky Luciano 1:08:33
I need to hide in a closet and get on the phone, but I got to Space to do guys, leave me alone.

Cephii 1:08:38
That happens sometimes you know. So sometimes you hear beeps and whatnot in the background. Yeah, it depends on… Fortunately, it’s gotten a lot less busy this week because the number of COVID cases has plummeted. We were down to one in a couple of the ICUs I have oversight over, so that’s really good news. So hopefully I’m gonna get some vacation time before too long.

Lucky Luciano 1:09:08
You watched that Leonardo DiCaprio movie, Cephii, Catch Me If You Can? And he’s like, “I concur.” Do you just do that like someone comes up and you really…

Cephii 1:09:16
The crazy thing is, I don’t know what I signed up for but the… I remember in the maximum situation the government sent me a letter. And you can’t go anywhere for 90 days… But I actually had to sign the thing saying I won’t leave anywhere for a period of time during the hardcore part of this. There’s are certain things I do that require me being there… One of those things. But yeah, [chuckle] which I can’t really get into but it’s kind of funny. Those kinds of situations do arise even if you are not officially, let’s say active duty military and things like that. There are certain scenarios where you’ll get a letter from the powers that be and tell you you can’t leave. [chuckle] You can’t go on vacation. Yeah, anyway, but things are going great now.

Lucky Luciano 1:10:16
Well, I didn’t bring up anyone else unless you want me to, Cephii, so now if you want to cut it you can cut it.

Cephii 1:10:21
No, yeah. Did you have any… Brokers, did you have any question?

USTBroker 1:10:24
I did have a real question. But yeah, that was cool. Yeah, so I don’t know if anyone else is in this position, super interested in the second wallet strategy. So I had to buy an apartment and where I took out everything that wasn’t LUNA and of course, I live in a… Where the short term capital gains are just awful, right. And so I’m only mildly leveraged right now and certainly getting antsy. How would you walk back from a… I don’t know, I’m stuck in a full LUNA position with zero extra dry powder. I don’t exactly know what to do with myself anymore.

Cephii 1:10:58
You don’t have any…

USTBroker 1:10:59
I mean, I bought an apartment, and that’s where all the powder went. And it was great. But that’s where I am now.

Cephii 1:11:04
So you borrowed off your LUNA or you…

USTBroker 1:11:06
No, it’s only minimally leveraged right now. So it’s only minimally borrowed, but I guess I’m out of dry powder. I have a ton of LUNA and I don’t know what to do next.

Cephii 1:11:15
Oh, okay, okay. Well, if you have LUNA that’s sitting around, like I said, one option is, of course… Well, we talked about staking in Prism, if you want to get price exposure to the PRISM token, then it’s actually more effective than simple staking. Other possibilities are, you could do the just LUNA-bLUNA strategy, which is quite effective, right. And if there’s any doubts about it, do that, because it’s simple and it works for now. And as long as that’s a effective strategy, why not take advantage of it? So

USTBroker 1:11:59
Thank you. That’s what I’m doing for sure, it’s just… Yeah.

Cephii 1:12:02
So Lucky and I have every three days bonded LUNA coming out of burns. And we just go and keep recycling that. The reason to do that instead of doing it all at once, might be in order to… If let’s say a situation arise where you need to either borrow off your bonded LUNA or use it as some collateral for whatever reason, then you know within a period of, let’s say nine days, you have three tranches of that coming out. And you can use it if necessary, right. Let’s say, to capture, say for example, a LUNA dip and you want to borrow again, because there’s a deep drop, then that allows you to sort of take small nibbles. It’s almost like dollar cost averaging your collateral availability. It’s kind of weird. Yeah. But it’s it works pretty well.

USTBroker 1:12:48
That sounds great. Thanks so much.

Cephii 1:12:50
Did we catch… Oh, Marty’s here. What’s up, Marty?

marty schoffstall 1:12:52
So what happens on April 6th, when the PRISM staking starts flowing in? What’s gonna happen to the price of PRISM, of yLUNA, and… Lejimmy, I really would like a LUNA-yLUNA pool. So I could just go directly to yLUNA in one step. So what’s the thinking today?

Cephii 1:13:20
Well, to go to one step because you’re… Oh, you don’t want to make it a two step process? But it comes out to be about the same, doesn’t it? If you swap to…

marty schoffstall 1:13:31
No. I just want to put in one LUNA and get you know, 1.35 yLUNAs right.

Cephii 1:13:39
Oh, I see what you’re saying. I think you can do that now, can’t you?

marty schoffstall 1:13:42
No, there’s no pool that does that.

Cephii 1:13:44
But I think it routes it automatically, though. So if you just go to Swap, and I think you can just do exactly what you just said. In the background it’ll route it…

Lucky Luciano 1:13:53
Marty, if you go to swap, and then you put LUNA. If I put one I get 1.24 yLUNA.

marty schoffstall 1:13:59
Oh, I didn’t even think of Swap.

Cephii 1:14:01
Yeah, the Prism swap…

marty schoffstall 1:14:03
I was just looking at the pools. Sorry.

Cephii 1:14:05
Yeah, the Prism Swap, the way it works is just like Osmosis. It’s like the PRISM token is the swapping token of the entire system. That’s one of the reasons why I like owning the Prism token because it has a value accrual from those transactions, which every single time someone plays on Prism, it creates transactional yield to the stakeholder which is sweet. So I just really like it. I like it more so maybe then even how Osmosis works, because it’s more of an inflationary model. Right now, I guess some of the PRISM tokens are being emitted to holders as inflation. So when those vesting periods end there probably will be some selling pressure for the PRISM token, but the nice thing about that is if the PRISM token goes down some in value, then I can ultimately get more of it, which is nice, because then I can use it to further boost my yLUNA stash. So it could work out to be good if people sell the PRISM token, and people that don’t have it can get it.

marty schoffstall 1:15:11
By the way, I wholly agree with you that my gray day blue chip Osmosis game is now over and replaced with a Prism game, okay. And I’m not selling the Osmosis, just letting all that stuff generate income essentially. So, back to this Prism thing. What’s the tax thinking here? So the prison that comes out was a staked kind of PRISM, and so there’s no tax aspect of basically having new PRISM? And then if that’s true, where can I borrow against my PRISM, is that going to be Mars? Or where’s that going to be?

Cephii 1:16:00
In theory, when you claim your vested PRISM, I think in most jurisdictions, that is some kind of an income event. And then when you re stake it… If you don’t claim it, you just let it ride for a year, then it would be one taxable event I think, but that defeats the purpose of… You almost want to claim and stake it, because you’re trying to boost your yield as time goes on. Otherwise, you wind up with less and less of the yield pool.

marty schoffstall 1:16:26
I thought the court case there down in Tennessee, that’s still ongoing was basically staking rewards are not taxable.

Cephii 1:16:34
I think staking rewards are not taxable if you don’t claim them. I think once you claim them, they hit your wallet, it’s basically income, I think.

marty schoffstall 1:16:41
That was not my read, but definitely we have to look at that.

Cephii 1:16:44
Yeah, and that’s the other thing too is I don’t know how much of that is now necessarily official law in the US too, that’s a different entirely… It might be a case by case nuisance that you have to deal with depending on the situation. [chuckle] So that’s why I just gifted my wallet to my friends and family overseas, and they take care of this and can deal with the taxes there. So I just declared the amount as a gift and call it a day. Anyway, not financial advice.

lejimmy 1:17:16
I’ll just comment on the next 25 days or so we’re gonna try to ship as many of the features that we’ve kind of leaked and talked about such that you guys can see additional value accrual for the PRISM and xPRISM holders. So that will definitely influence what people decide to do when the vesting PRISM comes up. But that’s kind of our tight deadline on, and we want to get out as much as we promised as possible. Like you mentioned, the limit orders, some of the charts that we have, and of course we’re working on the details on assessing the risk for collateral on Edge, Mars and others when the market pumps.

Cephii 1:18:02
Yeah the collateral utility could be super useful especially for people that need to have ways of generating immediate cashflow or income. Yeah, the permutations with Kinetic Money and whatnot represents some really good flexibility especially if you have to go buy something with your Terra money essentially, without reducing a substantial of your investment exposure itself, that’s just amazing. I think Kinetic Money, once it’s fully realized and audited and everything else, I think will have a lot of use. And again creates good reasons why people don’t want to sell their LUNA and that’s really, really important besides the UST adoption. So while Lucky likes the idea of as long as UST is adopted, it’s great, I think having lots and lots of utility for LUNA is super important as well, which is why I’ve been so strong of an advocate for things like Prism, or really any form of platform where LUNA is usable as a collateral is super helpful for every one of us that holds it and therefore creates a strong holding pressure for LUNA. Just imagine if you’re in Kinetic Money and you’re like, “Okay, I’m gonna borrow UST off of this. I’m going to have a self repaying loan that pays over two years.” That’s LUNA that’s essentially staked for a couple of years possibly while you go out and drive a Lambo or whatever, and that’s a pretty cool concept in the holding pressure for LUNA and the possible price appreciation for LUNA that it creates. It’s pretty cool stuff.

Lucky Luciano 1:19:56
So, Cephii, TheGrumpster came back and then we have people waiting to come up, do you want to take one more and then we’ll call it? Or what do you want to do?

Cephii 1:20:02
Let’s just do Grumpster your last and then I’ll head out here.

Lucky Luciano 1:20:06
Sorry, guys we’ll have to get the ones requesting later. Go ahead, Grumpster.

TheGrumpster 1:20:10
Hey guys, sorry I was showering. I woke up late and I caught between the whole… This Space her, it went halfway I’m gonna re-listen to this later. So if I have a question and you guys answered, I’m sorry, I’ll re listen to the cast or the Space again. But my main question I have is I’m in a lot of different other blockchains like Avalanche, I am in ATOM and Osmosis that you guys actually answered my question before. Is there I guess another lending platform, right, where I could probably lend, let’s say, BTC or Ethereum out to get some UST, right, or borrowing it from another platform, maybe get some APR there, sending it to LUNA and then either doing… I don’t know, put it in Anchor, put it in Prism, and gain rewards from another chain while I’m borrowing against them to bring into LUNA to do… Maybe this is too much. I’m not sure if that even exists, but is there…

Cephii 1:21:12
There’s a lot of possible options. You might look… Because Celsius has been posting some concepts in terms of UST and LUNA yield directly on Celsius, number one, but you could technically borrow off your BTC on Celsius and possibly do kind of a liquid stake idea right there on Celsius. I think their yields are pretty high. So you might want to dig into that a little bit before anything else. I think Celsius is one of the good options for low risk, low interest rate lending off of Bitcoin. Lucky, any comments on that?

Lucky Luciano 1:21:55
No, I was gonna say Celsius, BlockFi, i don’t know what BlockFi has, and then with the AVAX comment, I mean, I think someone just posted a screenshot, soon you’ll be able to use AVAX on Anchor so you can actually…

Cephii 1:22:07
Yeah, in fact there’s a vote on Anchor right now if you guys are Anchor token holders hop on to Anchor and vote for the addition of the sAVAX, which is staked AVAX to be a potential collateral. So yeah, Grumpster, you’re going to have AVAX and subsequently at some point, ATOM as well as possible things that you can import into Terra via various bridges and such to borrow off of.

TheGrumpster 1:22:40
No, that’s awesome. That’s exactly what I actually was thinking was Celsius, or even I think Nexo is another one, but I think they caught off the LUNA rewards they had at one time already, if I’m not mistaken. And then the last question is, Lucky I was in your chat when you were going over the whole Anchor beginners lesson. I kind of overheard you guys saying that you’re getting Arbie rewards daily? How do you do that? Because 21 days is I guess when it takes for it to go, do you guys do LUNA every single day?

Lucky Luciano 1:23:16
Well, what we’re saying is that we have a window of three days, unbatching every three days. So 60 days ago or whatever it was I started burning, and then I’d catch the three day batch and then I burn again and catch the next three day batch, then burn again and catch the next three batch. So I can have seven of those running essentially. So every three days, I’m getting something coming out and I’m reburning, and then the next two days I’ll get something back, right.

Cephii 1:23:42
And the nice thing about doing that, by the way, is let’s say the arbitrage rate for your LUNA to bonded LUNA is not that favorable, let’s say you don’t like it, it’s only 1.6%, and you want to hold your LUNA to do the arbitrage, maybe hold it a week, you’re not having to lose that much time in the unbonding process again. With all of your amount of LUNA you’re just only having to hold a small amount until you get a favorable rate. You stick that rate, so let’s say you get 2.5%, boom, you arb it, and then you burn that. So by having numerous tranches happening every three days then what ends up happening is is you can take advantage of those without having to have your whole stash waiting a week. Well, nothing’s happening because you don’t like the arb rate, you see what I’m saying? So you’re sort of dollar cost averaging into the arb rate, but it also reduces your lack… You want to have your bonded in a burning, most of it at any given moment. And you want to have a little bit of it that you could hold until your arb rate is nicer or where you like it. Because if you think about it the biggest choke point is the time it takes for unbonding, right. So you want to have most of your LUNA burning most of the time in that process, and some of it able to hold out for good arb rates. And that’s what we’re talking about.

TheGrumpster 1:25:14
Got it, got it. Okay, that was what I was confused about. Guys, great job. I’m so happy I found you guys. You guys are doing an amazing job. Thank you.

Lucky Luciano 1:25:22
Grumpster, feel free to DM me if you have questions. My DMs are open always, always wanna help. I think Lejimmy has a hand up. Go ahead, Jimmy.

lejimmy 1:25:29
Yeah, I wanna just kind of mentioned that now on Arbie, you can even look at cLUNA-LUNA. It’s obviously a bit thinner than Astroport’s stable swap pools, but I have alerts on when there’s a discount for cLUNA by about, I think, like 3%. And then the other way around, I’m trying to get back in maybe around -0.5% or -1%. So it’s not quite as guaranteed, as what Lucky and Cephii are doing, but if you’re watching that you can get in more arbitrage swaps in 21 days. And then lastly…

Lucky Luciano 1:26:10
Yeah, I got like 5% off of that, Lejimmy, it was nice. There was a 5% one night.

lejimmy 1:26:15
Yeah, yeah, sometimes it’s large, some people, I don’t know, rage quit out of it or something. [chuckle] But you can take advantage of that. And then for, I guess, for wrapped Bitcoin, if you want to generate some yield on that on-chain, maybe check out Solana, maybe like Katana or Friktion Labs, they have some covered call vaults that I think it’s generating around 20% APY on wrapped Bitcoin. And there’s some like small waiting periods if you want to withdraw for a week or so. But definitely take a look at that. And then I see Sigma in the audience as well. They’re trying to build the same thing natively on the Terra ecosystem, which essentially is just like an options protocol and then they kind of automate things for you with these vaults where they set pretty safe option prices, and you’re able to get these premiums. And I think 20% is probably the best yields that you can get on Bitcoin right now. And I’ve got a bunch of other vaults too, but that way you can generate additional income on your apex assets and if you want, you can sell those rewards for UST or LUNA or what have you.

Lucky Luciano 1:27:24
Hey Jimmy, I had a question for you. I was looking at your burn cycle, are they the same burn cycles as the Anchor, or are you offset from them, do you know?

lejimmy 1:27:36
no, actually, I don’t know I think tomorrow…

Lucky Luciano 1:27:39
Because ideally they’re offset. I would love to throw… Get in the middle of my other burns and then just maybe keep a real small pool even on Prism, if you know what I’m saying.

lejimmy 1:27:50
I think tomorrow was the next batch.

Lucky Luciano 1:27:52
Tomorrow is?

lejimmy 1:27:53
Yeah, we’re working on… I think on our… If you click Withdraw on the slow burn on our platform, if you have anything slow burning it’ll tell you like how much and what day it’s slow burning now so…

Lucky Luciano 1:28:09
I was going to tell you guys it doesn’t right now. So I have some that’s coming out. And if I hit Details, it actually shows me… Oh, now it shows me. Okay, it was showing me my Prism yesterday. Okay, it’s fixed. Okay. Yeah, I see it.

lejimmy 1:28:20
Yeah, it was just a little typo because we also have that same window for vesting period on the Prison Farm.

Lucky Luciano 1:28:27
Yeah. It said my PRISM’s unbonding now. I was like, “That’s not right.” I was like, “They’ll probably fix this.”

lejimmy 1:28:31
[chuckle] Yeah, it’s fixed.

Lucky Luciano 1:28:34
Cool. Okay. Yeah, I’ll take a look at that because I’m thinking of starting another arb burn strategy through Prism, but real small quantities, because obviously liquidity is not there. And then essentially every two days I’ll have something burning and coming out.

lejimmy 1:28:45
Yeah, how much cLUNA can you work with at any given moment, Jimmy? Is it like… How many LUNA can you effectively do this without slippage problems?

Lucky Luciano 1:28:55
Did you catch that Lejimmy? I think he asked how much LUNA do you think we can actually burn without moving the liquidity pool?

lejimmy 1:29:00
Yeah, I’m not sure I haven’t done it too much myself. And not with a huge bag or anything, I’m usually way too slow every time I see it, and then by the time I’m on it on my phone, it’s gone.

Lucky Luciano 1:29:11
Got it. Alright, Cephii, I’m not gonna pull people up now if you’re good to go.

Cephii 1:29:16
Cool. All right. Let’s break guys. Hopefully people got some useful info out of that. Interesting strategies.

Lucky Luciano 1:29:22
Thanks guys.

Cephii 1:29:23
Catch you later.

Finn 1:29:24
Thanks for checking out another episode of The Ether. That was a Cephii Space, the LUNA Hour Second Wallet for LUNA Strategies. Recorded on Saturday, March 12th 2022. This episode of The Ether was brought to you by Orbital Command, a community validator on Terra dedicated to educating, expanding, and promoting the LUNAtic community. Follow Orbital Command on Twitter using the link in the show notes to receive regular threads on Terra protocols and yield strategies, news, resources, and Twitter Space discussions. You can also support their community efforts by considering them next time you’re delegating or redelegating your LUNA. Find out more at orbitalcommand.io. This episode of The Ether was also brought to you by Luart. Luart is the first gamified NFT platform built on the Terra network. Luart provides a seamless minting and trading experience all while earning you rewards just for being a user. Be sure to follow them on Twitter and join the community in the Discord server for the most up to date news and announcements regarding all the hot new NFT launches, platform upgrades, and new projects hitting the secondary marketplace. Are you ready to #PutYourHelmetOn and join the movement? Find out more at luart.io. This episode of The Ether was also brought to you by WeFund. WeFund. WeFund is a community crowdfunding cross-chain incubator on Terra and it’s the first launchpad that implements a milestone funding release system to protect investors. All money raised for projects is deposited in Anchor Protocol and it’s refundable, and all decisions are based on community voting power. WeFund is community focused and designed to be a user friendly experience for both project creators and investors. Be sure to follow them on Twitter and join the Telegram for more information. Links are in the show notes and check them out online at wefund.app. TerraSpaces appreciates the support from all our sponsors. For terraspaces.org, I’m Finn. Thanks for listening.