So I woke up today and checked the markets and noticed something a bit weird. Even though CUB price went down the APR on the main pool went up. Combined with these unsustainable yields and compounding competition this was very strange. The only possible way this could of happened was less competition in the main CUB/BUSD pool.
Lo and Behold, when I checked the market cap of the LP pool $200k had been removed and added to the DEN. Someone is going long at the $3 mark. Not a terrible play if you ask me, but extremely risky considering we are about to get slapped with a 50% yield reduction on Monday.
Obviously a 50% yield reduction should be bullish on the price: that's 50% less coins being minted and 50% less coins being dumped on the market. The problem with this idea is it assumes that a lot of outside capital is being dumped into the network. It isn't. Our market cap is surprisingly stable in the $3M area.
The vast majority of dumping that occurs is when users roll the CUB they've farmed back into the LP pools for maximum compound gains so they can farm more. They need to sell half of their farmed tokens to match the other side of the LP pool.
The whole purpose of the dumping is to farm more CUB, and that yield is going to be reduced by 50% on Monday: making farmers very sad Pandas who are likely to panic sell their stacks just like they did last time.
With big money promising they'll defend the $3 level there's certainly reason to go long here. But again, the only way the DEN is more profitable than the LP pool is if the price of CUB goes up faster than the difference in yield between the two options.
At this point, that's 2.79% ROI a day vs 1.00%. So a bet on the CUB DEN at this point is a bet that CUB will rise in price faster than say 1.79% a day. We might even have to double that number to 3.58% because a rising price of CUB still increases the value of the LP pool by half as much as it goes up.
That's the question you have to ask yourself in order to go long right now: will the price of CUB go up faster than 3.58% a day? In a lot of respects this could be a needlessly risky bet considering the circumstances. Then again when CUB is trading for $20 in a few months we'll all just laugh about how much we were doing all this game-theory on such trifles for no reason. Everyone wins in the end.
The CUB DEN is pretty bloated now with a whopping $1.25M in it. That's 412k CUB, making it by far the biggest farm out of the three CUB farms. Even though the market caps of the LP pools are larger, only half of the LP pool is actually CUB.
- The CUB/BUSD LP has 295,335 CUB in it.
- The CUB/BNB LP has 198,881 CUB in it.
- The CUB DEN has 412,335 CUB in it.
What is the market telling us?
That LEO HODLers are diamond hands and they are HODLing that CUB for dear life. These numbers are epic. The only problem is that if the panic sets in and some of these holders get cold feet they'll likely reenter the LP pool which again requires them to sell half of their stack: pushing the price down even farther.
Considering that's the position I was just in I'm not quite ready to go long yet. I've set up a hedge position in the bLEO/BNB pool and I'm waiting for the 50% yield reduction before I pull anymore triggers.
At this point I'm actually hoping for a crash down to around $2 so I can justify going long again. If it doesn't get that low I'm hedged for every direction so I'm good.
I've been getting major Uniswap vibes on CUB. The price spikes have been largely the same. Lots of hype right at the beginning with an eventual crash to the $2 level. I'm still very salty because when I saw Uniswap crash to $2 I knew for a fact that was the bottom and that I should buy more. I didn't. Now the price is trading above $30 months later. I think that CUB can easily make the same moves.
Obviously if CUB hits $30 in June no one who's in today is going to care how it went down in the short term. Just hodl on for dear life unless you want to "have fun being poor". DEN or LP pool, doesn't really matter. They are all winners in the end.
Posted Using LeoFinance Beta