Anchor Repayments

    Anchor is a savings protocol offering low-volatile yields on Terra stablecoin deposits. The Anchor protocol defines a money market between a lender, looking to earn stable yields on their stablecoins, and a borrower, looking to borrow stablecoins on stakeable assets. To borrow stablecoins, the borrower locks up Bonded Assets (bAssets) as collateral, and borrows stablecoins below the protocol-defined LTV ratio. The diversified stream of staking rewards accruing to the global pool of collateral then gets converted to stablecoin, and then conferred to the lender in the form of a stable yield.

    Outstanding Debt in UST

    Now we get to the final piece of the puzzle. As of the time of writing (7/14/21), we're looking at nearly $236 million UST borrowed.

    Looking at both sides of the market

    Now to get a sense of the both sides of the market, let's consider the borrowing transactions on the same day. Using these values, we can compute the net difference between the repaid amount and the borrowed amount.

    Using the formula Repaid Amount - Borrowed Amount = Net-Difference, we can get the net difference per day.

    Observation

    Most of the days we see the net difference in the negative i.e. more amount was borrowed on that day but around the crash of May 18th, we see a significant bump into the positive territory i.e. many users repaid their loads to avoid liquidation.

    Along with the transaction count, we can see ~100 million UST was repaid on May 18th. This is certainly the highest amount so far in the history of Anchor protocol.

    Avoiding Liquidations = Repayments

    Anchor protocol is built on a sophisticated borrowing & depositing mechanism which incentivizes users to borrow against yield bearing deposited collateral to fund a highly competitive stable interest rate of 20%. Users of Anchor currently need to keep a close eye over their LTV collateral value to ensure they do not become liquidated. When the price of LUNA drops and the LTV (Loan-To-Value) ratio reaches 50%, the user's collateral is liquidated. To avoid this liquidation, users should keep an eye on the price of LUNA and if necessary, repay the loan.

    Let's start off by looking at the amount of repayment transactions happening on Anchor protocol. I've overlaid the average daily price of LUNA on the chart to give a sense of how the market was behaving at the time.

    As we can see, most of the days the daily transaction volume is less than 1000 but when the price of LUNA crashed on May 18th, the transaction volume suddenly shot-up to ~5000.

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