of the US T-Bill, they become increasingly dependent on that yield being >5%. But the yield will not stay this good forever, as it is currently at near ATH, as seen before the 2008 crisis before it quickly plunged to near 0.
What happens to these protocols then? We shall know more or less shortly”
This is pretty messed up take… all dollar liabilities effect other dollar liabilities… high yields were always going to put pressure on liquity and every other stable that can’t access them directly. Redemptions are the market forcing higher borrowing costs onto people that thought they had locked in a free long term borrow.
It's just an impulsive and unfortunately very smooth brain take on a project that builds and adapts and constantly pushes forward. When the bull is back and iorb rate drops, there will be other avenues being utilized. This fluid adaptation to all market states is what makes a protocol like frax top tier.
Cope
Simple, long term investment in 2y treasury futures against the crypto book, when fed eventually starts cut rates the curve will / should bull steepen, providing alpha back to the front end where much of gain come from rolling down the yield curve.
The better question is when will frax offer a similar vehicle to cbot futures, ie. leverage to FXBs which is as competitive to listed derivatives. Current maintenance margin on 1 2y futures contract is $1150, that’s 175x leverage
That’s roughly $600k maintenance margin to finance a $100mm notional exposure to 2y treasury futures. That will be hard to beat
Kek, calling Noah seidman smoothbrained
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