Back to Basics I: Deposits and Borrows

    Select a time period (minimum 1 month). Using visuals, compare borrow volume and deposit volume over that time period. BONUS: What relationship can you identify between borrows and deposits? What might be driving this relationship?

    Anchor Protocol's Offerings

    Anchor protocol is one of the main building blocks of the Terra ecosystem. Anchor provides lending and borrowing with high returns and low risk. Thus, Anchor's value proposition is deposits with high yield, and borrows backed by bonded LUNA and ETH assets. The objective behind this data analysis exploration is to compare Anchor deposits and borrows over the last 6 months and deduce if there are any relationships or not.

    Deposits and Borrow Metrics - 6 Months

    We will look at Anchor metrics from a high level and dig deeper as the investigation progresses. Starting with the less granular average monthly borrows (orange) and deposits (blue), there was a uniform steep rise in both variables from 10k+ to 40k+. After September 2021, the borrow and deposit monthly averages seem to have divulged, with borrows increasing relative to deposits.

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    Relationship Between Deposits and Borrows

    In the chart below, we plot a scatter diagram to investigate the relationship between average daily deposits and borrows on Anchor. As you can see, there is a strong positive linear correlation for deposits and borrows less than $40k, but as the amounts increase, the correlation becomes weaker and weaker.

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    To get a bit more granular, let us look at the average borrows and deposits. We can see that the averages keep flipping each other every week, however, borrows seems to be getting the up hand since October 2021.

    Takeaways

    In this writeup, we used monthly and weekly averages to compare Anchor deposits and borrows over a period of 6 months. Here are some takeaway points:

    • Borrows flipped deposits during the latter part of 2021. This is likely responsible for Anchor's net APR for borrowers.
    • There is a strong positive linear correlation between borrow and deposit amounts less than $40k.
    • There is weak positive and sometimes negative correlation between borrows and deposits as amounts get larger than $80k.