Regarding rates, I agree that rates should not change drastically. I agree that doing so now could erode confidence in Anchor (and thus UST), which is an untenable outcome given the circumstances.
With regards to the community pool. The mismatch in interest-bearing assets (mostly bLuna) and liabilities (100% UST) puts the protocol at risk during a crisis of confidence in the collateral. MakerDAO faced a similar issue when their stablecoin was backed by a single collateral (ETH). Here is the math for us at Anchor:
- With $267M in deposits @18% and $74M in loans @14% (a utilization ratio of 28% - well below the levels contemplated in the protocols stress tests), the protocol is losing $3.1M per month in net interest margin.
- With LUNA at $6.81 and assuming a 9.5% staking yield, the collateral generates $2.5M per month in yield.
- The difference comes from the yield reserve wallet, which has $5.4M UST in it now. At these levels, it will take about 8 months for reserves to go to zero. This estimate is highly sensitive to the price of LUNA (the driver of collateral yield) and the utilization ratio (the driver of the negative NIM).
I appreciate that between prop 90, expansion of UST to new exchanges, and upcoming support for other b collateral, help is on the way. But we cannot predict the market’s vicissitudes between now and when help gets here. For example, if LUNA goes back to $5, the reserves will last 5 months. With $4 LUNA, we would have 3 months. Do we really want to be cutting it that close?
When there is the risk of ruin, and you cannot assess the probability of the outcome distribution, my risk management policy is to prepare for the worst and hope for the best. I would want the yield reserve wallet to have at least 12 months of reserve in ANC’s case, assuming that LUNA was at half of today’s price. These are conservative assumptions, but we need a fortress balance sheet that can survive the next crash - which might be worse than the last. With ANC at 2.70, the community pool is worth $270M. Plenty of room to top up reserves if we need it.
If it were my family business, I would give up 10% of ANC to ensure that it survives the current cycle. We don’t even have to do that here - we could approve the usage of the pool in an emergency, which would give stakeholders confidence in the integrity of the protocol’s balance sheet.