I deposited $216,000 into Anchor Protocol.

A thread that will give you a deep dive into how a crypto savings account can generate $3,500 passive income per month (19,5% APY).

Earlier on I’ve heard about people receiving 10-12% APY on stablecoins.

In my mind that sounded awesome.

If you’re a hardcore crypto-dude reading this, remember I made my wealth in the stock market where 10% per year is what’s expected long-term.

As I started to dig deeper into stablecoins I found Anchor Protocol which is a part of the Terra Ecosystem (the biggest coin per market cap is $LUNA).

Anchor Protocol is a protocol that promises a stable savings rate between 19-20% per year on their own stablecoin $UST.

I started with depositing $100 as a test, everything worked fine and I started putting in more and more.

As of this writing, I have about $216,000 in Anchor Protocol.

But as with all investments, there are risks. I will come back to them later in this thread.

Here are some screenshots based on my expected earnings per year, month, week, and day.

$42K per year
$3,5K per month
$800 per week
$115 per day

To receive the same dividends from stocks you would’ve needed at least 5x the capital ($1,000,000)!

The ironic thing is that inside the crypto community no one thinks 19,5% APY is great.

The best traders earns this monthly on a regular basis for years, so why would they accept 19,5% for a full year?

How can Anchor Protocol offer 19,5%?

My bank only offers me 0,1% per year

Remember that banks don’t want what’s best for you.

They want what’s best for the banks.

When you deposit $1M to a normal bank they will use your money to buy assets on which they earn higher APY

Although 20% APY appears too good to be true, it is real.

Anchor protocol can generate at least 20-24% staking revenue on deposits.

After using Anchor Protocol for a month I have serious trouble defending my reasoning to continue investing in the stock market.

I mean, why would I take on risk in the stock market when I could have “no risk” in a stablecoin in crypto?

But I have to be honest, there are some risks that you need to be aware of, so let’s dig into them:

Smart contract risk: When you deposit money into Anchor Protocol, you’re putting your money in a smart contract.

Smart contracts may be vulnerable to cyber-attack and technology failures.

It’s therefore very important to check if the contract is audited.

Anchor is ✅

Anchor is a protocol backed by Terra Luna.

But what if the people behind Anchor Protocol one day just withdraw the money from Anchor and deletes all evidence?

I’m not expecting this to happen, but there are frauds in DeFi, so keep it in the back of your mind.

De-peg risk: $UST is a alghoritmic stablecoin.

$1 UST represents $1 fiat.

But what if $UST loses its peg?

Let’s say we enter a bear market and the top coin $LUNA drops 50% in value.

How does the Terra ecosystem avoid that $UST losing its peg?

If $UST trades below $1 market makers would quickly trade any coin for $UST for a quick profit.

This actually happened this year on May 19th when $UST dropped to $0,85 (see the picture below).

So why did $UST drop from $1 to $0,85?

Remember, May 19th was an absolute bearish day in the market.

People who got afraid sold both normal coins and stablecoins to USD or Euro, many of them to never return to crypto ever again.

$UST hovered between $0,96 and $0,99 from May 20 to May 24, before climbing back to $1 25th of May.

Comparatively, the USDC stablecoin fluctuated between $0.99 and $1 in that whole time period.

But what if it’s different next time?

“Normal” stablecoins are partly backed by the US dollar while $UST is algorithmically controlled.

$UST’s drop was in part driven by a sell-off in Terra’s native cryptocurrency $Luna, which plunged by as much as 80% to $4.18.

$UST relies on $Luna for its stability.

The Terra protocol acts as a market maker, making sure that when the supply of $UST goes up, the $Luna supply goes down, and vice versa.

The system is designed to handle $20 million of redemptions with a 2% spread.

But the sharp price declines in $Luna, compounded by large amounts of liquidations on Terra’s lending protocol Anchor, drove redemptions from $Luna to $UST to exceed $80 million, forcing $UST to trade at a discount.

To summarize: this can happen again, but I know the Terra team has improved the peg algorithm stability since the May crash to prepare for new bear markets.

In the September crash $UST was the most stable coin of them all (see tweet below):

And to just end this, you can buy insurance for both smart contract risk and peg risk on Anchor Protocol (see picture below).

As of what I’ve heard this would cost you 2,5% APY per year, reducing your yield from 19,5% to an acceptable 17%.

How can I buy $UST?

You can buy $UST:
-Directly on Anchor Protocol via Transak
-Directly on Kucoin, Coinbase, Uniswap or Terraswap
-By buying $LUNA on most exchanges –> send it to Terra Wallet –> convert $LUNA to $UST

Overall, I think Anchor Protocol is great.

I’ve tried to be as neutral as possible with listing the risks.

However, there is no secret that I do believe in the Terra Ecosystem, so DYOR before you ape in with all your money.

On 30th September the Terra Ecosystem upgrades from Colombus 4 to Colombus 5 and there will be launched about 50 new dApps.

The one dApp called Mars Protocol looks really promising

Rumours says that you will be paid to borrow $UST by using your current $UST as collateral.

Let’s say you have $100K in Anchor Protocol earning 19,5% APY.

You use this $100K as collateral and borrow $50K more.

Then you deposit this $50K as well.

You now have an increased your 19,5% interest rate by 50% to approx. 30% APY.

That’s yield upon yield!

Btw, there’s a lot of strategies you can use to increase your yield.

Send me a DM on Twitter and I’ll share more.

Tag friends you think will like this thread.

And check out my newsletter where I write about financial freedom and crypto: getrevue.co/profile/route2…
If you liked this thread, I would love it if you could retweet the first post so more people will see it:

Tagging people that have inspired me to research both Anchor Protocol and the whole Terra Ecosystem:

Also a huge thanks to the dog that made me discover crypto in the first place.

If he hadn't written that tweet, maybe I'd still been in my 9-5?

If this is a lifehack 👇

Then @anchor_protocol is a super lifehack!
Are you dreaming of an escape from the 9-5?

Do you want to reach financial independence within 5 years?

Learn how I did it at 33 years old and how you can too in my book.

30% off with this link 👇

I've received several DM's asking me to show a video of the interface of Anchor Protocol.

Here it is:

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