1/ This past week has been filled with great news. It culminated in the furious launch of $bETH on @anchorprotocol
Fast forward two days, and we already see 121m dollars of $ETH on Anchor.
But: What happens in case of liquidation? 🔫
Let´s break it down 👇🧵
Fast forward two days, and we already see 121m dollars of $ETH on Anchor.
But: What happens in case of liquidation? 🔫
Let´s break it down 👇🧵
2/ As a quick recap: If you provide collateral on @anchorprotocol, be it bLUNA or bETH, you are allowed to borrow against it.
The loan-to-value ratio (LTV) has recently been raised: Borrow up to 45%; Liquidation at 60% LTV.
The loan-to-value ratio (LTV) has recently been raised: Borrow up to 45%; Liquidation at 60% LTV.
3/ So, if you provide 1000 dollar collateral, you can borrow 450 $UST (or less). Your LTV is 45%. 🤝
If your collateral drops in value, you will get liquidated at 60% LTV (so 750$ collateral) if you don't repay your borrow ⚡️
If your collateral drops in value, you will get liquidated at 60% LTV (so 750$ collateral) if you don't repay your borrow ⚡️
4/ For one collateral, the LTV ratio could be easily translated into a price target.
With bETH, this is no longer the case, as two assets build together the sum of your collateral.
So, what happens in the case of liquidation crossing 60% LTV? Which asset will be liquidated? 🤔
With bETH, this is no longer the case, as two assets build together the sum of your collateral.
So, what happens in the case of liquidation crossing 60% LTV? Which asset will be liquidated? 🤔
5/ A look into the docs says this 🖼️👇
Thus, until further notice of the developers, the liquidator is free to choose which collateral he decides to liquidate as there is a parallel liquidation queue.
Thus, until further notice of the developers, the liquidator is free to choose which collateral he decides to liquidate as there is a parallel liquidation queue.
6/ Most likely, he will choose bLUNA, as a swap pair at @terraswap can be used to lock his gains in UST.
At the point of writing, there is no bETH-UST pair on @terraswap. Thus, the value capture of the liquidation process is more difficult for bETH (plus gas fees on ETH)
At the point of writing, there is no bETH-UST pair on @terraswap. Thus, the value capture of the liquidation process is more difficult for bETH (plus gas fees on ETH)
7/ Hope has arrived. The guys of @terraswap_io are already working on getting bETH-UST on-chain. Thanks, guys! (Also for saving us millions in gas fees!)
https://twitter.com/terraswap_io/status/1426884474353045506?s=20
8/ So, what to do?
For me, the solution is in any way to provide collateral for bLUNA and bETH on separate Terra wallets.
Thus, you can control your liquidation price🙋
A farmer has to protect his $bLUNA stable with everything he got while living a peaceful life 👨🌾🌾🕊️
For me, the solution is in any way to provide collateral for bLUNA and bETH on separate Terra wallets.
Thus, you can control your liquidation price🙋
A farmer has to protect his $bLUNA stable with everything he got while living a peaceful life 👨🌾🌾🕊️
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