Lots of speculation going on with the CUB market right now based on events that have yet to roll out. Soon™, The APR of the den will be multiplied x2 from x15 to x30. What does this mean for the market?
Exponential math is crazy at these levels.
Okay, so we're going to double the daily yield from 0.115% to 0.23%, so what?
First of all, many will look to APY.
So how much does the APY shift when the APR goes x2?
You might be surprised.
The APR will double from 42% to 84%, but what of the APY? Surely, the APY would double as well from 52% to 104%... but not quite. After doing the calculation myself the APY would be 131% after doubling from this spot.
(( 0.115 / 100 * 2 + 1 )^365 - 1 ) * 100 = 131%
Obviously 131% vs 52% is a pretty damn big difference, and we can expect that some percentage of the network will compete to earn a piece of that new, much higher, share.
The problem is that many users on the network are already speculating to this affect, pushing the price up 50%+ before the event has even triggered. If too many whales over-speculated the event in advance that would turn it into a sell-the-news-scenario. It's hard to say if the speculation matches the fundamental increase in yield.
I think the math of it can push the token price even higher as soon as yield doubles. There's bound to be users out there that trade based on yield doubling and APY going x2.5 to 131%. After all, if users hopped in at 52%, wouldn't a lot more obviously want to join at 131%? These things can snowball out of control if the sequence of events ends up being lucky.
The main thing to consider here is the change in APY from 52% to 131%. As more users compete to enter the new-yield pool (say pushing 131% APY down to 100%) the price of CUB is sure to skyrocket even more because all that liquidity comes directly from the LPs.
Counterbalance this with the speculation that's already been done, and there should be some resistance as these two forces collide. Will this geyser shoot up to the moon or will it get smothered by the speculators? Personally I know LEO to be a pretty diehard holder community so I'm thinking we got what it takes to make moves.
I'm not making many bets during all this madness, but I am saving my farm up in the Cub Kingdom like so many others. No more compound farming for me until the dust settles.
I believe books will be written about how to manipulate these yields in order to stabilize the economy in various ways. It's crazy that we have front row seats to this new tech and all that it can do. What will these rockets do next?
Oh yeah and Hive spiked from 30 to 42 cents earlier today.
Upbit sure loves Hive/KRW.
Posted Using LeoFinance Beta