Alright then!

Unsurprisingly I got a little wrecked by this dip after going all-in on the CUB DEN yesterday. Again, I'm pretty annoyed that a potentially bullish event like an AMA with another community was scheduled at the worst time possible: the day all yields drop 33% and people are panicking. This needless uncertainty of speculatory chop pulling in both directions was largely unnecessary and easily avoidable.

At this point, I'm not annoyed that I lost money on the gamble, I'm just annoyed that I feel locked into the den while the LP farm yield is still massive. At 3.5% a day I could simply farm back my losses in a couple days. That's the magic of the LP farm really: super safe high yield hedged in both directions.

Again, had I just been in the LP farm the entire time: I would have only lost half as much money, and my farm would have recaptured those losses after just 2 days at these levels. The LP pool is a Super safe place to be: which is kinda why I assumed CUB should spike. How are people not taking advantage of this crazy deal especially after doing an AMA & even giving them a deposit of 50 BNB... lol whatever.

We learned a lot of important information yesterday. CUB is indeed crypto crack, and when the yields get reduced people are pretty much going to dump no matter what. In fact it looks like the dumping starts a full day before inflation reduction. Come Sunday, I'll likely need to be all-in back to the LP farm to hedge against the imminent losses when yield gets reduced a full 50%. It's quite possible that next Monday/Tuesday will be the best time to buy into CUB: ever due to the massive panic I expect to see.

Again, I'm here for the long haul.

I'm not looking to make quick gains and exit the ecosystem. My goal is to acquire as much Hive, LEO, and CUB as I can. Seeing as CUB is a literal farm that was just born a week ago: seems like the place to be at the moment.

When it really comes down to it the Yields after the next inflation reduction are still going to be amazing. 1% APR a day (365% a year) is obviously a legendary return. Especially on an asset that can moon. This is especially relevant during the mega bubble year.

We would do well to stop fretting over the day to day price action. I'm going to be farming Hive, LEO, CUB hard all the way into Q4. It's during that time that I'll have to refactor my position.

We also need to consider if the overall Bitcoin/Market crash had anything to do with the CUB crash. Certainly, when users see red in every direction, they have a tendency to panic; especially when CUB is just "free money" at this point.

Revisiting impermanent losses

Some of the things I've said about impermanent loss are not entirely accurate. I say things like: a stable-coin pairing reduces volatility by 50% because half of the stake is stored as the stable coin. But is that really true? Is it really 50% exactly?

No...

So the example I give to do the math in my head is:

• If a whale pumps one side double, the other is extracted by half.
• Say one CUB is $5, and the LP pool has $1M BUSD and 200k CUB.
• Now a whale comes along and dumps 200k CUB into the pool.
• This whale will then extract $500k in BUSD.
• The price will crash x4 to $1.25; ratio 400k CUB : 500k BUSD

In this scenario, if you were holding in the den, you just lost 75% of your money (x4). However, if you were holding LP tokens instead, you'd only lose 50%.

Example

You've got $20000 in the LP before it dumps. That's 1% of the total. After the dump, you still control 1% of the LP, the ratio has just been modified. Unfortunately, the pool is no longer worth $2M. It's got 500k BUSD and 400k CUB. Doing the math, you don't even have to know the price of CUB, you just have to double the USD side because both are equal. So the LP pool lost half its value ($2M to $1M), and so did everyone in it. Way better than the x4 loss obviously.

Example 2

But here's a weird example I was looking at today. What happens if Price doubles, and then doubles again, and again, and again?

• Imagine the LP pool worth $2M ($1 on each side).
• Whale pumps BUSD x2, pushing the price up x4.
• Another whale pumps BUSD x2 again, pushing the price up x4.
• What are we left with?

Well, the CUB in the pool was cut in half and then cut in half again, and the BUSD in the pool was doubled and doubled again. Imagine having 1000 CUB and 5000 BUSD in the pool at the start. That's an initial stake of $10k total and a cub price ratio of $5.

At the end of it all, the price has gone x16 because the new ratio is 250 CUB : 20,000 BUSD. That's $80 CUB. Price went x16 but your stack is only worth x4 (from $10k to $40k). So clearly, volatility was reduced even more than 50% as these numbers go exponential. The same would apply to the downside.

Also, the impermanent loss calculation is odd. If you simply held the 1000 CUB / 5000 BUSD outside the LP pool you'd end up with $85k after the price went x16. Truly, the math on these automated markets is a little more complex than it seems at first glance.

Rock: meet hard place.

So now I find myself in a SUPER awkward position. Apologies to anyone that followed me down this canyon when the safe option was such a good deal. To be fair: I've been very clear. Every time I make one of these grandiose plays it tends to blow up in my face and you should do the opposite. I have an amazing track record on that front. If I'm gonna lose money, my readers might as well bet against me and get rich, amirite?

I did it for you, fam :D

I recently wrote a post about learning to take losses: perhaps this will be the first time I actually take my own advice. After all, I can still make back the $5000 I just lost simply by farming the LP pool for another 5 days... lol. I'm still up a lot of money even though I played it fast and loose and got wrecked on this one.

Conclusion

When it really comes down to it: longing the cub DEN is EXTREMELY risky. If the price goes down or trades sideways the higher yield on the LP (and the stable coin hedge to the downside) will ALWAYS outperform the DEN.

In fact, even if the price goes up (slowly) the farm on the LP will still outperform the slippage losses. The only way for the CUB DEN to outperform the LP pool is if the price goes up significantly. At the end of the day: is that just pure greed? Or is it diamond hands? It's up for debate, to be sure.

Now more than ever: it's important to remind everyone that I could lose everything I put into this CUB farm and be just fine. Legit I wouldn't be mad: I wouldn't cry about it. $40k down the toilet: no big deal. That's the kind of attitude one needs to have when they are investing. Light the money on fire. If you cried you were risking too much.

It's all about that long game. Soon the 50% yield reduction will come. APRs will finally stabilize a week or two later. Khal will have a chance to launch products like the ERC20 >> BEP20 bridge + the lending/leasing dapp and whatever else. As we add functionality to CUB more BSC communities will realize that this isn't a cash grab: this is value generation out of thin air. I'm here for the long haul. I hope my dear readers are as well.