Anchor yield reserves running dry in less than 40 days

I mean thats what they are working on this whole time. My thought eventually is that UST will be larger than USDT or USDC. Then it will be used as trading pair for all assets. Although, hopefully Terra system can last that long for that to happen.

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Just look at liquidity on 4 pool. Order books wouldnt have strong liquidity on a decen stablecoin. DeFi liquidity for UST is massive and growing. You can EASILY convert to USDT on dex then ramp off for little to no slip regardless of size.

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My thoughts exactly.

Ideally UST (and also EUT, AUT, KRT, JPT, etc.) become the de faco standard pairs for crypto (and later not just crypto) trading. With less risks that are obvious in USDT, and less regulatory risks as fiat-backed stablecoins have, the potential is there.

But as you say, the big question is for Terra to last long enough for that to happen. (In my view that means for those on the inside not to get too greedy. And for proper governance to be put in place, removing the undue influence of one egomaniac.)

I’m not sure if I agree on the “EASILY” part. Doesn’t that involve the risky proposition of moving UST off Terra chain? If it can’t be done within Terra Station, or at least within the Terra ecosystem, then it’s not “easy.” Doable, yes, but not easy.

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Actually, look what happened when cryptodotcom cut rates…

…or look at what happened to the OUSD supply and liquidity as the 30-day average rate went down from 15%+ to 5%.

So what happens if Anchor yield reserves run out? Do we all go broke?


Yup, UST to depeg to zero… if everyone is selling their ust… what do you think is going to happpen? lol

So you’re thinking the same thing will happen with ANC, but isn’t it very possible that UST could depeg from all the sell pressure? And Luna would probably also take a hit as well wouldn’t it?

And arbitrage would only come to buy ust if they thought that ust could survive and repeg in the short term, id imagine.

OUSD is still holding its peg though so for anyone who holds it, its still fine? Also no UST wouldnt depeg to zero lol. why would it? Yeah when CDC cut rates CRO crashed. Anchor would crash too. thats what I’m trying to say.

@Real1 good eye on the drop in liquidity in OUSD, that, combined with larger whales leaving, like what happened with CRO, would probably tank ANC price, and lead to a large loss in both borrowing and deposit demand. That would hurt growth long term. I’m not sure if the 4 pool would suffer the same fate given the large backing in the project but I would assume a comparable drop in liquidity would take place.

UST would be somewhat harmed. Money markets would be fine, anchor? maybe not. It would also be harder for bigger players to get into the game again due to the drop in liquidity. Hurting future growth and therefore ANC price being the primary loss. Probably UST would drop in liquidity as well, hurting adoption.

As someone else said, you are quite wrong to be throwing around 12%. With no yield reserve, the sustainable APY would be around 5%. It’s fairly easy to calculate.

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It is probably worth it for them to top-up because by coughing up $1 billion they can hold up an edifice worth many multiples of that (Luna + UST market cap if $50+ billion). However, $1 billion would run out in about 6 months. Can things fundamentally change in 6 months or have you just kicked the can down the road? Or do you have many more billions to keep topping up the yield reserve?

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The two are very different. Each OUSD is backed 1:1 by USDT, USDC and DAI. UST is not. It’s like apples and monkeys. Two totally different things, not really comparable. It’s not like you have the safety of always exchanging 1 UST for 0.33 each of USDT, USDC and DAI, which is how OUSD works (you either sell it in the open market, or via the OUSD contract directly at the 1:1 exchange…while you eat the high Eth fees, and have no say in how much of each of the three backing stablecoins you get). UST is a different design. And when and if actual functionality to exchange 1 UST for 0.99 worth of BTC comes on, it still won’t be the same thing, as BTC is inherently volatile.

OUSD would only depeg if one or more of USDT, USDC or DAI depeg.

UST can depeg if there is more supply than demand either way, especially at CEx’es, which is where most would change UST into real money. UST already has low volume and has consistently sold for well over 1.0 (at times over 1.01), given the high inflows and more buy than sell demand. With the tables turned, UST would definitely trade at 0.9x at the very least during a big outflow event. In best case scenario. Technically it may not even be a “depeg,” if it’d be localized to certain exchanges, where most of the funds flowing out are.

AFAIK there are no stats whatsoever in regards to the number, size (i.e., depth of pockets) of the UST arbitrageurs. In case of a massive outflow event, I fear there simply aren’t enough arbitrageurs with deep enough pockets to keep the peg.

According to Grafana it’s 4.5225% at the moment.

It changes constantly. If deposits go down while borrowing stays the same, then it’d go up. So it’s a complex and fluid rate that constantly keeps changing, as, among other things, it’s based on the exact proportion of loans to deposits, and the composition and nature of the loans.

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I understand OUSD is a debt backed (or treasury backed stable, which is debt backed since its backings are all debt backed, since all US dollars are debt backed iou notes) which require the US Federal Reserve to frequently top up with new liquid cash or all major industrial societies will collapse

. Besides, we are talking about liquidity versus interest rate, not peg behaviours, in your OUSD example.

When we’re talking about the peg I would look at UST this way instead:

How much Luna would need to be minted to depeg UST? Let’s start the discussion around that versus fear and greed. Otherwise there isn’t a discussion to be had around UST peg.

Let’s also assume another factor. How much UST would need to be burned to consume the entire Btc reserve? Let’s stress test it at Btc 10k and see where we end up?

Neither of those have to do with fear and greed but absolutes that we can ration and calculate. Don’t forget that people who are trading against (people in fear, uncertainty, and denial) will be eating losses on top. Also because there absolutes we can for instance prevent them. Say by adding more Btc to the reserves for the UST mint burn mechanism.

We could even take usdt and have that for the mint burn mechanism as well? Do you see how it becomes a non issue? Because the peg is something that’s controllable.

Keep in mind UST isn’t the only currency, there are British pound euro dollars, etc. with the same mechanics. I don’t see a reason to cherry pick the data to serve UST will depeg.

Now we don’t (as anchor users) control what or who UST maintains peg by, that’s for TFL and LFG to decide but they act in our best interest since they have the most to lose.

The type of event you and many others suggest (anchor run off = UST depeg) is a one off, one time event, that could happen with no known certainty. What about the recovery after the event? Are you saying that the mint burn mechanism would no longer restore the peg? Why? How long would the depeg last for? How much would the discount on UST be? Why wouldn’t people just wait for the peg to be restored instead of taking a major loss in a black swan event? Why wouldn’t people arb the cheaper dollars until the peg is restored again?

When proposing a UST depeg you have to answer all of these questions and more because as it stands UST has experimental proof of concept behind it and as we can see it is working in real time. Many blockchains are adopting the same stable-stake coin swap mechanism like Terra so what does that say about the rest of the space? Why even waste your effort here if you believe you can lose all your money? For 20%? That doesn’t seem like sound risk assessment. Why wouldn’t people start leaving now to protect themselves against this risk instead of waiting and crying about it? Doesn’t the old age addage “put your money where your mouth is” apply, especially in this situation?

Agreed, topping up the Yield reserve (and maintaining 15% rate) would be the low lying fruit…if & until the crypto market turns & get out of the crypto winter. Alternative is NOT to fill up the Anchor reserve which may result in mas investor exodus from Anchor & sale of UST resulting in LUNA price crash,which may cost much more than 1 Billion to TFL.

VAULD is a CEFI alternative I’ve read about…yearly 12.7% (for 1 month lockup of USDC/USDT) sounds pretty good for a CEFI.

Yeah sorry, didn’t bother doing an accurate calculation, I guess other alternatives at that point with time lock or CEFI would be even better than Anchor Earn then.

Having the Anchor Earn Rate as the USP was a bad decision as market conditions change all the time.

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Even relying on ANC price is bad, because borrowers are only incentivized with ANC up to 4 years (unless things changed).

This looks promising