Inverse Crypto Tokens - Powerful New Primitive?

Any interest from the community in tokens that appreciate in value when crypto drops? Yes, it is possible to mint and sell tokens now, but I think also having tokens that appreciate in value during drops would be a useful new primitive because it could be a source of collateral to borrow against in lending protocols. This can’t be done currently with the mint and sell strategy. The token would attempt to track (1 / asset price).

Examples…

LUNA:
What if we had a mAsset where the value was determined by (1 / LUNA price). This would allow stakers to temporarily adjust their LUNA price exposure without dealing with lock ups nor the risk of managing a futures position on CEXes. There has been talk of including mAssets as collateral on Anchor, so what if you could hodl some of the inverse LUNA token to help offset your price risk on Anchor borrows. It would also be helpful once Mars launches because investors could use LUNA as their main collateral source, and also keep some of the inverse token as well to help mitigate risk of borrowing against it.

ETH:
An inverse ETH token that really catches on will attract all kinds of downstream interest if wrapped in ERC-20 and put on Uniswap. Other DeFi protocols could leverage this to help manage their risk.

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Agreed. We need both inverse and leveraged mAssets. I would love that.

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I think that the inverse price idea is super interesting. I would vote for it because I agree it could be a very helpful risk management tool.

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Great point. This feature could be a critical technical tool in the lr.

Where is it possible to borrow against mAssets?

Thinking about this more… from an ecosystem perspective if we have an inverse coin for a major asset such as ETH that catches on it will create demand for UST in bear markets. This will help stabilize and diversify the Terra ecosystem further.

Despite my name I am more of a liquidity_peasant when it comes to MIR holdings… Might need someone else to put it up for vote…

Are there any whales of like mind that would mind sponsoring an inverse ETH? I think we should start with that because it has the largest market opportunity and can shoot it over the bridge as ERC-20 and potentially give it MIR rewards on a polygon exchange or something.

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I haven’t put anything up for a vote yet but I would be potentially interested in funding this idea. It’s 100 MIR right? I would need to better understand all of the parameters to make sure that we define it correctly. I would also like to hear some folks opine on reasons why they wouldn’t support such a proposal. From my perspective, I’m not sure what the cons are. I like the 1/ETH mechanism. I can’t imagine it’s too hard to implement since we already have the oracle for ETH. Maybe there are issues if ETH goes to .000001 but seems unlikely, and I do think this idea would drive demand for the ecosystem. I can’t recall but do I get some kind of bonus if this thing passes? I also really like the idea of eventually being able to use something like 1/LUNA as collateral. How would you like to proceed?

Thank you for your interest snuffles. To avoid having it start out as a penny we could have the oracle be (1 / ETH Price ) *1000 or some other constant. The only affect this has is making it not start out with many trailing zeros. If ETH keeps going up long term it will of course reach penny status eventually but that seems okay :slight_smile:

Is anyone from TFL able to comment if doing a (1 / oracle price) asset is feasible from technical perspective? To my layman eyes it seems easy enough but I am not in the trenches like you all are.

My other concern is around the branding of this kind of asset. If we are multiplying by random constants, then I wonder if that will confuse people. Also what would the ticket be? mIETH (I for inverse?). I think ideally there would be an easy way to distinguish.

Yeah. Maybe just sticking with 1 / ETH is fine. The constants would make explaining it harder. Just being able to say the asset tracks 1 / ETH price will make it super easy to explain and for people to incorporate in their portfolio math when putting together their hedges.

Should we wait for v2? I thought that was supposed to be out soon.

Yes probably makes sense to wait for v2 before putting it up for vote.

This is a must. Good idea.

So what would the pros of this be over the standard short that the platform already offers through minting? I kind of see this is building something that’s not quite necessary because minting is a synthetic short which would be also analogous to what you’re calling a inverse token. Maybe the focus could be listing the crypto assets here and getting those approved and once approved you’d be able to Mint short them.

Also, option functionality coming in the future I see it’s more of a priority because that would also allow you to create a synthetic short.

Main advantage is that these coins could be wrapped and put onto other blockchains. We could wrap the Short ETH token in an ERC-20 and put it on a Polygon dex. People buying it on other chains won’t really need to know nor care about Terra ecosystem nor the nuances of minting. In bear markets the product would be more popular and drive demand for UST, diversifying the Terra economy.

Both minting and an inverse token offer the ability to gain profit through downwards price movement. However, it is more difficult for me to conceptualize how a minted position can be used as collateral in the same way like inverse luna. Such an asset wouldn’t require collateral vs minting as well. I actually found another similar thread on this subject: [Proposal] Introduce inverse mAssets to replicate short positions

Okay that makes sense, so really the main value here is cross chain liquidity and less capital intensive. Good thinking here.

I wonder if we will get to a point where options can act similar.

Easier solution. There is an inverse bitcoin ETF already trading on Canadian exchange:
https://www.horizonsetfs.com/ETF/BITI-U

On the one hand, I understand why tracking BITI.U is more in line with the existing implementation for mAssets. However, I’m also wondering about the risk of tracking this very new product and being exposed to all the idiosyncrasies that come with it. For example, what happens to the mAsset if this ETF blows up the same way that some of the levered inverse VIX etfs did a few years ago?

Yeah, if we can just do the 1 / oracle price i would prefer that because it would involve less intermediaries! Was only bringing this up in case the reality is more complicated.

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