The main reasons to sell VAI at a discount

General Discussion Venus Discussion
#1

Here are a few reasons I can think of why people sell VAI at a discount.

  1. The yield on VAI is very low 2% when you can get 10-15% on other stable coins, which makes selling VAI at a discount a reasonable proposition, particularly considering it usually trades at a discount making it easy to cover your sale at the same price.

  2. The buy the dip crowd, if you have a good amount of expected income it can make sense to sell VAI for the crypto of your choosing, and then deposit that crypto on Venus to get a yield making your collateral level higher.

  3. As covered in my post A disorderly deleveraging of debt you may think there is not enough VAI available on the market for you to be liquidated. 120m mint only enough liquidity to liquidate about 2-3% of that at any given time.

  4. An attack on the protocol, you may be a competitor or just not like what Venus is doing and want to dump on VAI to make the project look bad, with low liquidity this is fairly easy to do, about 40k on Binance is being used to strangle the price.

Any other reasons people can think please leave a comment below.

  • 1 ) Better stable coin yield.
  • 2 ) Buy the dip.
  • 3 ) Not going to have to pay it back.
  • 4 ) An attack against Venus.
  • 5 ) Other leave comment.

0 voters

If it is not an attack, what I don’t get is why it pumps back almost straight away after mass liquidations :thinking:

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#2

Technically, even if we observed so far only full liquidations going up to 110% for VAI repayment (liquidators pay up to $1.10 for one VAI) that’s because their liqui-bots are suboptimal. They may improve them by:

  1. Supporting partial liquidations not to have too much market impact and wait for arbitrage to send VAI back to 1:1
  2. Implement a Paraswap/1inch heuristic to split the VAI purchase over several places, that’s what arbi-bots do.

For Point 1, many liquidations of VAI led to a negligible gain for a 100K volume, while limited to 30K they would have earned their 3K. Because 100K of VAI had to much impact.
For Point 2, they used only PancakeV2 so far, while Biswap and Dino also have a decent LP volume.

Voted “Buy the dip” because the naive logic should get VAI counter-cyclic, since it’s a collateralized debt claming right of some sort. But it’s currently cyclic, so I assume people sell at any price to buy the next Turn-billionaire-intraday shitcoin.

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#3

Buy the dip is a good shout, if your debt is big enough you can’t rationally be liquidated which is a big problem for the protocol.

I really don’t get the sudden pumps after the dump, sure it is a market function once the price gets oversold to snap back like a rubber band, but to round trip back to a 10 or 15% discount on VAI is very strange.

#4

You two are absolutely OBSESSED with VAI!

#5

It’s not too late to be on the right side of this, you still have a 20% op.

#6

Sure we are.
Sometimes you can find a crowdfunding project for a niche market, like a mini arcade cabinet or something, with 1000 active followers discussing for a budget of $100K
Here we are two guys discussing a token with $100M TLV, that may worth it, no?

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#7

I found this explanation super smart and probably wrong.
There are currently quite few VAI on the free market, in LP and on Binance. A few millions. But there are also many non-debt holders (I am) and minters with non-liquidable positions because the collateral is made of stablecoins. Those are free to use their already available VAI to liquidate at 10% premium. Holders can then stop here, and minters will simply have to wait for the peg to go back to 1:1.
Considering how low the VAI yield is, I don’t see many minters ignore an instant 10% gain, even if I admit we previously saw VAI at 1.12 with no rush to sell.

#8

You are probably right eventually the supply would come to market, but for the minter chasing a 15%-20% yield on another stable coin or a 6x on a shitcoin, it might be worth the risk, as they probably correctly perceive that they have time to either post more collateral or cover the position before they can be taken out.

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#9

On a more positive note, it looks like the prediction market is starting to gain some traction.

The monthly volume and prize pool are at good levels.

#10

Its a worthwhile discussion to have. Free 15% return.

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#11

Thanks!
To be mathematically consistent, I still need to deduce the standard yield I could get from a normal stablecoin, in the 15% currently.
So if VAI goes back to 1:1 soon that’s an instant +15%, if it takes one year, I’d have earned nothing more compared to a normal USDC staking. That’s because the yield of VAI staking is almost negligible.

#12

That is: If they are still able to liquidate someone, after https://venus.finance is no longer available for newbies like me?
Or is there another (halfway) easy way?

#13

Liquidators use what I call liqui-bots: off-chain programs scanning every block, everytime for a liquidation opportunity, and when found, they trigger it through a custom on-chain smart contract instantly (means: the very next block). No one could liquidate manually from Venus.finance, except the negligible ones like 3 VAI were the gas would have cost more than the gain.

I investigated their techniques and what they do is to send dozens of liquidation orders at the same time from different wallets to flood the block and ensure they get the liquidation first, sacrificing the gas if needed. That’s very smart of them. I expected them to use high gas price, but no, they use 5 Gwei.

Venus.finance added nothing to Venus baring from a nice GUI. Thus, the clear presentation of liquidations were very helpful and should be backported to Venus.

Not that easy, you’d need to do various requests from the smart contracts to get all Venus users wallets, and for each, what’s their liquidable positions. I never took time to deeply read the Venus doc, maybe there’s an easier way.

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