Thread by @Route2FI

What if I told you that it's possible to get 160% APY (yearly interest rate) on a stablecoin?

Let's say you have $100K.

One year later that would turn into $260,000 while you do nothing.

A deep dive into how you can do this yourself & how this is bullish for crypto.

/THREAD

Let me present Anchor Protocol which works as a savings bank.

You deposit the stablecoin $UST.

In return, you get a 19,5% interest rate.

$1 UST = $1 USD.

I've explained everything here:

https://twitter.com/Route2FI/status/1442835869879181312?s=20

But you wanted 160% APY, didn't you, anon?

Read on 👇🚨

2/

When you deposit $UST on Anchor Protocol, you get aUST.

aUST is a yield-bearing-collateral.

1 aUST = 1.12 $UST

Back to our numbers.

If you have $100,000 $UST and deposit this on @anchor_protocol, you'll get 89,286 aUST back.

So how do you go from 19,5% to 160% APY?

3/

Let me introduce $MIM (Magic Internet Money) which is another stablecoin.

$1 MIM = $1USD.

What's magic about $MIM is that you can borrow/mint it with aUST.

You have 89,286 aUST and you want to borrow $MIM for 80% of the aUST.

89,286 aUST x 0,80 = 71,428 $MIM

4/

With your 71,428 $MIM you can convert this to $71,428 $UST.

Why?

Because 1 $UST = $1 MIM

You deposit it back to Anchor Protocol and you now have your original $100K + $71,4K = $171,4K working for you.

You increased your APY from 19,5% to 33,42%.

But it gets crazier...

5/

This was only one loop.

You can take your $71,4K $UST and its equivalent 63,75K aUST, borrow $MIM, convert $MIM back to $UST --> deposit to Anchor.

You can do this process 10 times!

How?

6/

1. Deposit $UST into Anchor Protocol for $aUST
2. Borrow $MIM against your $aUST at a set LTV (80% in this example).
3. Convert $MIM to $UST
4. Repeat the steps above another 9 times.

After doing this 10x, it will be possible to increase your 19,5% to 160%.

Crazy ain't it!?

7/

I know what you're thinking:

"Should I sell my #BTC and go full degen on these stablecoins?"

"WTF is the point of owning anything other than stablecoins if you can get 160% per year by just chilling at a beach?"

As always, there are some risks.

Let's talk about them

👇

8/

There are 3 main risks I can see:

1. Smart contract risk
2. Peg risk and leverage risk

1) 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 tech failures.

9/

2) Peg risk and leverage risk

$1 UST represents $1 fiat.

But what if $UST loses peg?

Let’s say we enter a bear market and the market drops 50%

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

And what about $MIM? How do we know for sure that 1 $MIM = 1 USD?

10/

The honest answer is that we don't know for sure what will happen.

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

Read more about peg risk here:

https://twitter.com/Route2FI/status/1442835916737978372?s=20

11/

Another thing about peg risk:

Normally it wouldn't be too scary if $UST or $MIM loses its peg for some hours, because it would most likely go back to $1 again.

But with the $UST-$MIM-leverage strategy you can be liquidated if $UST or $MIM goes below a certain level.

12/.

Let's say you're a crazy degen seeking max yield and loop $UST 10x to get 160% APY.

You will be liquidated if $UST or $MIM goes below $0,97. (If your LTV-ratio is 97% which is required to get 160%).

A stablecoin can go lower than $0,97.

It has happened before, but 👇

13/

What if you reduced the probability of getting liquidated to 0%?

Read the thought experiment from my brother, @CryptoHarry_ introducing @NexusProtocol into this strategy. Read his full thread here:

https://twitter.com/CryptoHarry_/status/1450122573199527937?s=20

14/

Anyway, without @NexusProtocol I think it's a huge risk borrowing $MIM with a 97% LTV.

In this example I've used 80% LTV as an example, meaning that you'll get liquidated if stablecoins go lower than $0,80.

You won't get 160% APY, but around 100-120% which is also great.

15/

Will I use this strategy myself?

Yes, sir!

I'll keep you posted, so follow me on Twitter for more alpha around this strategy and all Terra Luna strategies in general.

16/

Why do I think this is bullish for crypto?

Think about all the money that currently sits in the stock market.

The US Stock Market alone has a market cap of approx. $50 trillion dollars.

Imagine what will happen if 5% find out that they can get 19,5% APY almost risk-free?

17/

Remember I was one of them.

I was a Wall Street bull.

Wouldn't listen to anything other than stock market talk.

If @PrestonPysh could change his view. Why couldn't I?

The easiest way to increase the crypto total market cap is by presenting easy products for the masses.

18/

Anchor Protocol is so simple that even a 5-year old would understand the concept easily.

The leverage yield strategy with $MIM is a little bit harder for freshmen to grasp, but I believe that the masses would be more than happy with 19,5%.

19/

DeFi has made incredible opportunities for everyone and you can get wealthy no matter how much you start with.

I would love it if you could share this thread by retweeting as many of the tweets as possible.

Thank you!

/20

Would love to hear your thoughts about this:

@CroissantEth
@PastryEth
@TheCryptoDog
@DivCultivator
@LayahHeilpern
@KoroushAK
@AltcoinGordon
@bloodgoodBTC
@cr_zilla
@AlphaSeeker21
@NicolasFlamelX
@TheRyanLion
@danku_r
@Wealth_Theory
@BowTiedBull
@thewealthdad

/21

If you could help me spread the word by retweeting the first tweet I would be forever grateful 🙏

https://twitter.com/Route2FI/status/1450771403490447363?t=pPRxKIWPI7VAFVS9SFed5g&s=19

/22

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

Check out my newsletter where you'll learn more about this.

I write about financial freedom and crypto:

It's ofc completely free 👇

getrevue.co/profile/route2…

/23

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/24

Wen $MIM om Terra, ser @danielesesta ?

Just to clear up 🚨

We don't know the date for when you can take your aUST, mint to $MIM, convert to $UST, deposit it to @anchor_protocol and then loop it 10x.

Please help me share this tweet so that @danielesesta or @stablekwon can give us an answer

wen ready, sers?🌖

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Er dette noe du har lyst til å prøve deg på, @sveinol ? 🐸

Is this something the pro tech stock investors might be interested in?

@ParrotStock
@BackpackerFI
@AlphaBetaAnil
@SatoshiAlien
@InvestmentTalkk
@StockMarketNerd
@SixSigmaCapital
@PelotonHolder
@BuyandHoldd
@Invesquotes
@BahamaBen9
@jablamsky
@dhaval_kotecha
@LiviamCapital

Important update!! 🚨

Tomorrow you'll be able to aUST --> $MIM --> buy $UST --> deposit to Anchor.

160% APY here we come!

Hey, @danielesesta

The #lunatics are more than ready to flow their aUST into the aUST-$MIM pool (including me!)

wen launch of the pool on Curve today?

wen support for Terra Station?

https://twitter.com/Route2FI/status/1451422205880016896?s=20

(🎩, 🎩) LFG!