Thread by @kaereste

I’ve been inspired lately by a famous OlympusDAO bank-run post by @ishaheen10 (

https://twitter.com/ishaheen10/status/1413369807450247168

), and it made me think - Asfi assumes that due to the bank run, almost 97% of people will walk away selling OHM to the LPs, leaving the rest for just the remaining 3.3%.

I started thinking - what would happen if more people stayed stuck in the protocol with no perspectives? So here’s my own 'worst-case scenario analysis': a whale dump.

Buckle up, as it's going to be a long 🧵

First of all, please keep in mind that I’m making some assumptions and simplifications here, the point is not to get concrete numbers but just to get a feeling about possible outcomes.

Right now the biggest whale has 112,725 OHM in his wallet (I’m assuming that he doesn’t own any other significant bags).

The biggest LP is Sushi OHM-DAI LP and it owns 193219 OHM and 192223427 DAI. The price of OHM is 192223427/193219 = $994.84.

Let’s say, that this biggest whale dumps his whole stack to this LP Let X = DAI that will be left in the LP after dump.

192223427 * 193219 = X * (193219+112725)

X = 192223427 * 193219 / (193219+112725) = 121398747

121398747 DAI and 305944 OHM left in LP, the new price is $396

This is of course huge hit, but rather not something that would collapse the protocol, this price is still better than the protocol’s RFV backing per OHM which is currently at $173.71.

So let’s think, how much would have to be dumped to bring the price by 90%, to ~$100, so much below the RFV backing that it theoretically wouldn't make sense to sell at this price anymore.

If the new price were to be ~$100, than #DAI/#OHM = 100, so #DAI = 100*#OHM.

#DAI = 100*#OHM
#DAI * #OHM = 192223427 * 193219

100*#OHM^2 = 192223427 * 193219

#OHM = sqrt(192223427 * 193219 / 100) = 609436

So we would have to dump into the pool 609436 - 193219 = 416 217 OHM at once to make it happen. That’s equal to 8 biggest OHM whales. They would have to all collude and dump altogether at once to be able to do it. And they would get just $360 per OHM which is ~ 2x RFV backing.

Moreover, each of them would end up much better by *not* colluding but rather dumping just their own bag - lowering the price, making it less reasonable for the others to dump the whole stack, and requiring more people to collide in order to pull the price down to $100.

And I took here just one LP - the biggest one, but making only 4/5 of the whole liquidity owned by protocol. So those numbers are a bit bigger than would be in reality.

But the biggest whales are rather not likely to dump and hurt the protocol anyway. But let’s look what would be the impact of a hit from a bit smaller, yet still substantial, the 26th biggest whale. That whale owns ~11k OHM.

192223427 * 193219 = X * (193219+11000)
X = 192223427 * 193219 / (193219+11000) = 181869553

So the pool now has 181869553 DAI and 204 219 OHM and the price is now 181 869 553/ 204 219= $890. So if 26th biggest whale dumps his whole bag, the price goes down by merely 11%.

Ok, let’s take it even further, let’s check what happens if 6th biggest whale dumps his bag. 6th biggest whale owns roughly 30k OHM.

192223427 * 193219 = X * (193219+30000)
X = 192223427 * 193219 / (193219+30000) = 166389144
166389144 / 223219 = $745.

Roughly 25% dip.

So even if some really big bag decides to dump all at once, the impact is rather limited. And the cost (slippage and future staking rewards) for the one dumping the bag is pretty big. It makes much more sense to take it slowly and unload only small portions at once.

I don’t know how about you, but for me - those numbers are relieving. When I started these calculations I was worried it will be much worse.

wagmi fellow ohmies.