First of all, English is not my first language. I’ll do my best below but please excuse me if some sentences are not 100% clear/well structured.
I’ve been farming on Mirror pretty much since the launch of the protocol. At first I was farming using the delta neutral strategy but I had to change my farming strategy when premiums started getting out of control (I am currently “long farming” only).
An important % of net worth is currently part of Mirror’s TVL and lately I’ve been spending most of my time trying to understand the behaviour of certain Mirror’s users to see if the protocol is under some kind of attack that could ultimately result in protocol’s insolvency.
As no one around me uses the protocol with a deep knowledge of how it works, I am posting here today to see if other people are looking/have been looking at the situation and to see if we can join force in trying to assess the (potential) risks Mirror currently faces. Farming is my “main occupation” if I may say and I’d be totally down to join any group of people working/meeting on the subject.
The main behaviour I do not understand is users buying mAssets at high premiums and holdling them spot in their wallets. The most known example is (afaik) : Terrascope
It seems to me that, currently, YW9A is systematically buying mAssets up until a premium of about 30%. Given the amounts involved, there must be a end goal here but I can’t put my finger on it.
The only advantage I see is that if the oracle price of a mAsset is constant, if you borrow using aUST + sell with a premium of >25%, then you can loop and will never be liquidated (or if you are you will break even) but in the meantime you earn a big yield on your initial capital through aUST looping. That being said, the oracle price of a mAsset is never constant in time and I have no guarantee that my looped collateral will grow faster than my borrowed amount. Hence, there is no guarantee that this strategy will work. Also, even with an hypothetically constant price oracle, this strategy is good if the premium is already >25%, not if I am the one pushing the price and then shorting (to loop) my own push.
All in all, I do not understand the behaviour of users like YW9A and it worries me a lot.
Does someone has any thought on the matter?
What wallet YW9A is doing does make me concerned.
I find the automated behavior of some whales to be genuinely absurd. But I think these are more misguided strats by funds or other bizarre errors being made than a genuine attack. I can’t actually see what the attack could be.
I have been watching that adress closely for the last weeks aswell, and there actually seems to be someone changing the parameters of it’s buying behavior.
For example, TWTR and ETH were bought up to 20%, if reached, it stopped. Yesterday, the buying suddenly stopped and both MAssets are now trading below.
mBTC was not part of the strategy before, but yesterday it was added and is now bought up to 30%.
mBABA, mCOIN, mTSLA etc. were bought up to 20%, since yesterday they are aswell beeing bought up to 30%.
I mean on paper that guy made a lot of $$, because his Assets are now worth 30% Premium and he bought since well below that point. But there is no way he will ever be able to sell all his assets for that premium…
Everyone short is suffering from that, who has to buy back at some point to get their Collateral back. This can’t go on forever though because at 50% Premium you could just withdraw all collateral to 150% MCR. Liquidations only occur when the Premium is below that point though, so there will be absolutely no buying pressure anymore.
That seems like nonsense aswell, especially because YW9A drops off some mAssets from it’s buying strategy from time to time, what gives all shorts the possibility to cover cheaply.
What i noticed aswell is, that YW9A is doing that since pretty much since the beginning of 2021, just at lower premiums. Don’t know what he did with all the bought mAssets though.
All in all i have no clue how YW9A plans to profit from that in the long run, and i don’t yet see a way this could end Mirror other than making liquidations impossible for a while
Yeah, interesting one why would the wallet buy so much MAssets and do nothing how can he/she profit
The wallet you mentioned just sell many of the mAsset. If he bought them at 20%prem and now he is selling at 30% we knew with certanity that he or the protocol itself would increase premium. Hef had massive proffit for that. What is weird is that premium didnt decrease. So whales just fucked us.
Is the current premium issue caused by the wallet?
For my understanding at the moment there are people or rather bots with big capitals trying to raise the premium till 50% in order to cause a massive sort liquidations. I assume that the wallet YW9A we are talking about is paired with another wallet / bot ready to liquidate the short position and take advantage of the liquidation discount. It not clear to me what will happen after the liquidation to all the mAsset this wallet is holding. In theory during a massive liquidation event a lot of buying pressure is generated so propably another bot would be able to buy instantly the mAssets from this wallet YW9A and liquidate all the short obtaining both aUST at a discounted price and dumping the mAsset on the wallet that are shorting the asset at the highter premium possible. ( the worst possible deal of your life and the best one for the Bot.).
If I’m right the only two tings that we can do in raising thecollateral ratio in order to be as far as possible from the 150 % and put as many proposals as possible to lower the collateral value of the asset to 130%. The second one would imensely help the short position and cap the profit of the Whale Bot.
I would like to know if you think I’m right.
You know only changes in oracle price can make a short position open for liquidation, right?
Holy cow, I made a check and you could be right It seems that the collateral ratio is calculated with the oracle price. If it’s confirmed my previous post is not completely correct.
The bot can still dump the stocks in the liquidation event at high premium but it cant trigger the liquidation event itself.
But if the protocol calculate the liquidation event based only on the oracle price with premium higher than 150 % it risks to be inslovent.
Few days ago I’ve read that if the premium is higher than 150% the liquidation event doesnt happen because none of the liquidator will buy Assets at such high premium for receiving a lowe discount.
This is incorrect. Liquidations are based on oracle price not amm price.
I’m currently attempting a similar strategy with stablecoins. When they hit $2, I’m rich.
So what is that wallet doing ?
He just sold $3.3M worth of MAAPL but price still going up and barely moved
Do you have a tx link? As far as I know, he is buying up to 30% premium, not selling.
He transferred here and sold terra1xvmdjsdp58sanlzvnx6g79nyf2zk7cr5l78mxs
And terra1xvmdjsdp58sanlzvnx6g79nyf2zk7cr5l78mxs used the mAssets to close the short positions
So it looks to me that he used the mAAPL to close a borrow position having just above 200% of c-ratio. Tx here: Terrascope
Ultimately, seems that the funds (partially at least) ended up in a wallet having 51M UST here: Terrascope
You’ve answered faster than me. It was a borrow position tho as far as I understand it.
Now the question remains… is it malicious activity? Or just a whale having underwater borrow position and wanting to close?
I mean ultimately they can’t control the oracle price. What they would do is keep up the buying pressure to keep the premiums high until we enter a bull market. Then when oracle prices go up, mass liquidations will generate buying pressure to increase the market price further and the whales may dump into these forced liquidations at high premiums. The problem is that it is not profitable to take the collateral at 150% and buy at such significant premiums higher than the collateral is worth. I don’t know… the whole thing is very confusing.