Thread by @JackNiewold

If you're a $SPELL holder and follow byebyedai.money, you might have noticed that fees have dropped heavily over the last 7 days.

But that could be good for $SPELL in the long term: here's how @danielesesta used smart tokenomics to create a downward-resistant protocol👇

$SPELL, for now, generates fees for stakers of sSpell via three mechanisms:

• Position opening
• Position closing (liquidation)
• Interest on debt position

Unlike other forms of debt, you can pay your interest on your $MIM ( $SPELL's stablecoin ) position all at once:

1. Lock up your collateral for $MIM
2. Your collateral accrues interest
3. You repay all of the debt plus the interest
4. Interest is distributed to sSpell stakers

So what does that have to do with the fees generated by the protocol?

Well, when the market is exploding, people will be levering up, and not repaying positions (or interest).

No one is getting liquidated either, and thus there will be no fees from liquidations.

When the market is going up, most fees come from borrowing, which is the smallest-sized fee.

Below is an example fee schedule for an asset on Abracadabra Money.

So let's simplify the market into three conditions:
1. Up
2. Down
3. Sideways

We know what happens when the market goes up: no liquidations, no interest repayments, low fee revenue.

When the market goes sideways, people will be rotating in and out of positions, levering, de-levering, leading to a relatively stable fee schedule and upward price pressure for $SPELL.

You can see this on the chart below.

Orange: $SPELL
Candles: Crypto Total Market Cap

You can see this pattern over the last two weeks, although it's subtle. $SPELL moves up when the market trades sideways, down when the market pumps.

But what about a MAJOR liquidation event?

Well, liquidations mean CRAZY fee revenue for SPELL.

So while $SPELL would probably dump alongside alts, once fees are distributed, it would create a demand-side spike for the asset.

I'm not saying $SPELL won't experience painful drawdowns, but owning an asset that:

• pumps in sideways conditions
• has downside protection

Will be attractive for value-oriented investors interested in diversification against traditional crypto assets.

P.S. $spell to $1