LeoFinance - Look at Terra's Kujira (Auto Buying Dips)

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Terra blockchain has some really interesting projects going on and today we will briefly look at another. This one is called Kujira and basically it front runs the liquidation of bLuna on Anchor protocol's collateral held by users. In simple terms Kujira allows users to set buy orders if and when bLuna falls within price range and automatically purchases bLuna being sold by Anchor. This is a way to buy the dip in Luna but have it automated.

Anchor's bLuna

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In order to borrow on Anchor Protocol users need to provide colletral called bLuna, or bond Luna. Luna that is looked up at least 21 days is bLuna. Once user provides bLuna they can borrow UST at a rate of up to 60% of the value of bLuna they have given in collateral.

As we all know cryptocurrency can be very volitale and so is the price of Luna. In fact since bLuna is essentially locked Luna they are almost pegged 1 : 1. Therefore in times where Luna prices dip significantly so will the price of bLuna.

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Over the course of a year Luna has been rising up but not without some draw downs. Some as large as 50% down from all time highs such as that seen in last May 2021. During these draw downs if users who have borrow UST and can not pay for the difference as their bLuna values drop they are hit with margin calls. The margin calls essentially means users are required to provide addition capital to fulfill their collateral and if not done have their current collateral liquidated.

In May 2021 there would have been some who had their collateral liquidated since they borrow more than the value of their collateral as prices of Luna fell. This in turn mean there were bLuna being sold out into open market by Anchor to cover for the borrower's deficits. The opportunity to buying cheaper bLuna exists for anyone partaking in the open market and Kujira can assist in this process.

Kujira Buying Liquations

Kujira is a protocol in itself that tracks Anchor's bETH and bLuna that hits margins calls. Once bETH and or bLuna is being sold into the open market Kujira has a list of bidders looking to buy either bond tokens at certain discounted percentage from current marked value. The discounted percentage is set by users.

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Looking at chart from Kujira above it shows majority of users putting in UST to the protocol have set their buy orders at aroun ~5% to 13% discount. In the tune of over $50 million in hopes of picking up cheaper bLuna.

The way it works is when Luna price drops swiftly then some users on Anchor may have their collateral fall short of the protocol's requirements and are automatically liquidated. During liquidation Kujira has a buyer list with highest bidders around 1% discount of Luna mark to market price be the first to buy. Once those buyers are filled with their purchased bLuna it will go down the list until all the liquidated bLuna have been sold.

The whole process is automated and all the buyers of cheaper bLuna have to do is place their bid prices and put on UST into the protocol and wait for the buys. This may not happen if Luna price continues to rise, where nothing gets liquidated on Anchor. Still having some UST set aside on Kujira sets up the opportunity if a price in Luna does drop it will be an opportunity to buy.

Conclusions

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Any time when cryptocurrency market is dipping it becomes difficult to time when to buy or even buy. Just like in May 2021 where Luna dropped over 70% from $16 down to 4$. Well setting up a buy through Kujira it will await for prices if and when they do fall to such percentage and help you automate the purchase order. Will it ever happen? Maybe not but sure helps to know having a protocol to help you buy on dips is awaiting on the side to process the buy orders.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!



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