for the Lunatics: Volatility vs Opportunity..did you find the right Time to Settle Up? — Feb 28, 2022

/ooooh boy, this month has been a doozie! (..cringe…i know right…)
..in hindsight it was inevitable! (..doubling down on the cringe..)
..i’ll do my best to make some sense of the late-Jan:early-Feb market action in the first half of this post, then in the second half, we will contrast to the narrative shift as Russia invaded Ukraine.
–/


Apparently we should’ve seen a downturn correction cycle coming considering the undeniable potential of interest rate increases from the US Federal Reserve Chairman to combat inflation. This of course is all part of our long and arduous trail towards eventually repairing American monetary policy (it’s been a long couple years amiright…)

I tune into a broad network of commentary with some bias towards crypto markets. As the pandemic struck, I found myself in the lucky position to reinvest my stimulus benefits. The obvious play in March 2020 was Gold and Silver..in March 2021..the play was LUNA, ETH, BTC.. What does March 2022 have in store….morrrrrLUNA ser we are just getting started!


However, I must hedge my bullish optimism a tad.


Just a few weeks ago, (approximately Valentine’s Day to jog our memories..) it felt overwhelmingly as if A) prices were near a local bottom for most assets, but also B) that prices would continue to consolidate at the local lows in anticipation of Federal Interest rates beginning to increase.
–smart influencers were telling their audience that things could certainly go lower…leveraged players should proceed with caution in both directions.

— gpoly (@polymathsguild) February 22, 2022

Everyone on Crypto Twitter (CT) will keep telling you to zoom out, and they aren’t wrong. If you are like me and 2021 was the first year that you’ve purchased any Crypto assets, you just had a premier opportunity to cut out the losers and consolidate the winners. If you haven’t already started this..get after it..


As a Lunatic, it has been hard to look away from the charts..my head has been spinning back and forth between de-Peg FUD aimed at the Terra Flagstaff Stablecoin, UST; and 3 – REDACTED announcements: Formation of LUNA Foundation Guard, Terra Partnership with MLB via Washington Nationals, and LFG’s OTC BTC trade with partners at Jump Capital et al.


UST stablevalue of 1.00 never flinched on any exchange.
Luna market dominance vs BTC and ETH looked strong.
I have also been impressed at ATOM’s ratios when compared with other L1’s.

Frankly, no one can stay up to date on every project on every blockchain. HODLing idle assets on an exchange is quickly becoming outdated. The trend is moving steadily towards Earning interest in the form of staking rewards from the blockchains that maintain a steady flow of daily transactions. But blockchains realize that investors need a way to measure their profitability over time, and therefore stablecoins are an even more important trend to track.

The other side of the //Proof of Staking X Validator Reward Distribution// relies on Liquidity Providers to power the exchanges where blockchain transactions occur. On Terra, there are currently 3 exchanges for Liquidity Providers (LPs) to pool their funds: Astroport, Loop Finance, and TerraSwap. LPs earn rewards in proportion to their share of the pool; each exchange defines the percentage of transaction fees to be distributed.

With 3 exchanges competing for on-chain transaction volume for all of the trading pairs on Terra, the savviest traders can capitalized from tightened spreads as liquidity increases and many also are taking advantage of arbitrage opportunities among some of the more lucrative trading pairs (e.g. LUNA->bLUNA ; mETH->bETH); strong hands and a bit of patience required.
LPs enjoy the rewards from increased trading volume whether prices are increasing or decreasing–in a way, they ensure that trades will process with minimal slippage — aka trades process at the advertised price.

I use Coinhall to track the latest rates across Terra Assets.

In a previous post, I referenced the Net APR of -4.48% for borrowing UST against bonded assets on Anchor Protocol. As expected, this encouraged many bAsset holders to repay their borrows, but also, sharply cascading prices on bLUNA and bETH made the issue even more urgent for some over-leveraged accounts.

However, Anchor continued on its track towards becoming one of the most efficient lending protocol in all of DeFi and bolstered their Yield Reserve, largely to the benefit of responsible borrowers, who once again are able to earn a positive borrowing rate paid in Anchor’s governance token $ANC. Anchor’s governance holders have also been relieved to see the $ANC/$UST trading pair regaining an upward trajectory. The ultimate vision for $ANC might eventually restrict the premier lending rates to those who hold a significant portion of the governance token. In the meantime, manage your leveraged collateral wisely.

At the time of original posting, Anchor borrowers were earning about 0.63% Net APR paid via the $ANC governance token. Update March 6th: ANC net borrow: 4:27% while LUNA trades for 84.23 UST via Astroport Swap.



Note: Anchor formerly has allowed borrowers to take out as much as 60% of their bonded LUNA value in the form of the UST stablecoin; this has increase to an 80% limit thanks to a governance proposal. bETH is still limited to the 60% borrow limit, as the bETH pair is much less liquid compared to bLUNA; Anchor users with bETH and bLUNA as collateral should be aware that a dynamic weighted average of both assets will affect their liquidation price.

If the collateral value decreases below the maximum borrow limit, (as many saw during the price drops in Late Jan-Early Feb), then Anchor liquidates the collateral and auctions it to the pool of wallets with the highest bid to repurchase those liquidated assets through the ORCA queue — Kujira has designed their protocol to incentivize the purchase of these liquidated assets through their simple to use interface.

Those collaterals have rebounded well this week despite geopolitical warfare and sanctions, or perhaps in spite of them.

Nevertheless, LUNA has outperformed any and all charts as it threatens to establish another all time high in the triple digits.

https://cryptoslate.com/terra-luna-gains-70-in-7-days-overtaking-cardano-and-solana-by-market-cap/

..and again, I am not a financial advisor, none of this information is to be construed as financial advice, I’m just helping to spread around publicly available information!


..ps. Coinbase offered a guide into taxes related to Crypto Capital Gains..read more about that from them in this blog post.
Of course, talk to a tax professional to best understand your own particular situation. I am not a financial advisor, this is not financial advice, I’m just helping to spread publicly available information!

Thanks for reading, I know I missed a bunch, and I plan to sweep back through with some addtional back links..until then DYOR…#fortheLUNAtics

I wish you the best of luck… 🌖

Follow me on Twitter for shitposts, RTs, and the best alt-commentary!

Published by Chad Ambrose

I am 30 years old, and focusing my energy on mentoring strategic thinkers. I continue to Coach Chess in Austin, Texas for The Knight School. I also am assisting with the virtual enrichment programs at Synthesis School. As I continue along this blogging adventure at CoffeeForDessert, I will be aiming to establish several newsletters and a podcast! Stay tuned into the progress by subscribing!!

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: