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The feelz are high!
Last night I, @khaleelkazi, and @scaredycatguide watched in HORROR as RUNE collapsed in record time, flash-crashing from a $3 support down to $2 in a massive leverage flush. This was due to the network freezing accounts and losing a lot of credibility.
Some of my readers may recall that I wrote two or three posts a while back on this topic of "risk free" lending on Thorchain. Less than a year later the entire system has blown up... in the middle of a perceived bull market no less. I personally have 0.25 Bitcoin locked in the quagmire that I may or may not get back (fully dependent on RUNE price going up).
So what happened here?
The Thorchain community acted like they could short Bitcoin and Ethereum and use all that money to pump their own token on leverage. Then they all high-fived each-other a year ago and called it risk-free. I knew the risks. I knew what I signed up for, but a lot of other people did not and have been completely blindsided by this bail-in. Disappointing to say the least. Maybe there was some light crime involved here with the false advertising. After all they did make the claim that the only threat was the circuit breaker... which was never actually triggered; they just decided to do a manual freeze before that happened and in doing so caused a lot of this bank-run panic.
What is a bail-in?
Well a bailout is when money gets printed out of thin air to stop an institution from systemically collapsing. A bail-in locks all current debtors inside the system and doesn't allow them to escape with their money. That's exactly what's happening right now with my quarter Bitcoin on Thorchain. Their community is holding it hostage, and an alarming number of community members are trying to spin it like it's not really that big of a deal. It's a big deal. Pretending bank insolvency is fine is delusional.
Permanent loss of reputation
Even if everyone gets paid back, this is a permanent stain on their record. It's true that now could be the best time to buy Rune that we're ever going to get because the market could have easily over-exaggerated the price action to the downside... but also this is such a bad situation it would be very hard to justify entering a position within this toxic sludge landscape where the network is now saddled with debt it's already admitted it can't pay back. In fact they might be so saddled with debt that there's no telling if number will go up with the rest of the market due to all this downward pressure. That's probably just the FUD talking but you never know.
Silver lining?
I saw this video from Ross Ulbricht saying he's taking some time to reconnect with his family and whatnot, but he still has the vibe of a highly political revolutionary at heart. Love to see it. Curious as to how this situation evolves now that he's one of the biggest libertarian celebrities out there now, and a pretty big crypto celebrity as well. Kraken exchange alone has already donated over a hundred thousand dollars to him, which I find to be a pretty crazy outcome.
Conclusion
If Hive has done one thing right it has been the issuance of debt without getting buried by it. Take a moment to reflect on how awesome HBD has performed over the last cycle. We made it a full cycle, and more importantly through a bear market. The geniuses over on Thorchain didn't make it a single year. Pathetic really.
I'm shocked that this boondoggle of a lending system didn't even make it into the beginning of a bear market. That's honestly mindblowing; that's how bad of an idea it was from a technical perspective, and none of these degenerates listened to reason when it launched. Just remember that in crypto if someone tells you a thing is "risk free" they are completely full of shit.
Normally, I would just be like whatever, another crypto blow-up, but in this case I'm really bummed because I absolutely love Thorchain's core product. Decentralized cross-chain swaps are so important and no one does it as well as TC.
The fact that it has such a strong core product, that generates a ton of real revenue, and is really separate and unrelated from the lending portion that fell apart is what sets this apart from other similar blow-ups, and it's why I actually feel like this could be a really good buying opportunity.
I know you said this would be a permanent loss of credibility, but I've found that this space actually has relatively short memories. I expect - like most of us - that the overall bull run hasn't even really started yet, and when prices start really getting crazy some portion of that is going to be swapped through Thorchain and lead to significantly higher revenue generation than they are seeing now.
They use that to pay back the debt - get some good PR - and boom goes the dynamite!
100% agree with everything here.
I did not mean to imply that they can't get their overall reputation back but this stain will not go away just like our hostile takeover. Interesting thing about our hostile takeover though is that we sort of view it as a badge of honor and a difficult battle won that eventually leads down a better path.
At the end of the day TC was making way too many derivatives and printing way too much money out of thin air. Then the lending system added even more leverage. They should have just stuck to the basics... and maybe that's what they will fall back on going forward.
I still don't know if I want to buy some at this $2 price or not.
It's still a bit disillusioning and my 0.25 BTC is still freshly frozen in their vault.
Yep, that's what makes these decisions difficult. If it wasn't disillusioning then the price wouldn't have crashed 50%. Surprisingly I actually listened to myself and bought a nice chunk at ~$2.08 which is working out real well so far. A very rare trading win for me - let's hope it holds.
nice yeah I'm regretting it at this point because the huge price gab between $2-$3 definitely implied there'd a lot of buying power. The systemic threat is gone in exchange for the reputation. I did buy a chunk at $2.60 and $3.11 though so my bag is bigger than ever.
I've been telling everyone for almost 2 years that this is a scam - I told them how they deceived people when switching from old coins to new ones. If you have this crap called RUNE, sell it and buy Hive - and you will be happy!!!
The threat of a bank run is all it takes to create one
I learned this lesson in the hardest way possible with bHBD, bHIVE, etc. where the same thing happened to those protocols
My way of digging us out of the DeFi hole was to do exactly what I proposed Thorchain do a few months back:
Dude... I can't say this is a complete surprise... Glad I sold months ago (did cuz i needed moola)
all you need is fear, and then it all goes out the window
I remember you posting about this several times and I also remember me saying I didn't get how it could all work because there is no such thing as a free lunch. I am sorry that people lost their funds though. That's never a good thing especially in the middle of a bull like this. We don't need this kind of FUD holding things back.
Technically no one has lost anything yet.
The debt they owe is simply frozen.
Will be interesting to see what they do to restructure this clusterfuck.
Okay, well that is a good distinction.
I'm not going to lie, I got the notification that it fell like 30% in an hour and there was a good ten minutes where I though about picking some up at $2. I didn't in the end, but it was seriously tempting!
Just like algorithmic stable coins were completely safe paying 20% on UST...
This is a false equivalence that has been proven wrong a dozen different times in a dozen different ways. The 20% that Luna offered is not comparable to the 20% we offered in any way. At this point in time there's little excuse to continue spreading these provably false implications.
Please stop comparing these two thing until you know how they work.
Thank you for the explanation, I have not followed the discussions you have referenced. Based just on the surface observations of similarities of the two token mechanics in general and yield on HBD the worry was in my mind. Thought that yield is now 15%
Sorry you just triggered me really bad because I've written about this like a dozen times.
Think about it this way:
The most basic way I can explain it is that the yield that HBD offers is only a threat when the debt ratio is high.
There are two websites that track the ratio:
https://hive.ausbit.dev/hbd https://www.hbdstats.com/
So right now we are at 5%.
This means that even though we are offering 15% on HBD... that's not a lot of Hive.
In fact it's 5% of 15%, which is 0.05 x 0.15 = 0.75%
So HBD yield is creating less than 1% inflation on Hive main chain at the moment.
This assumes that 100% of this inflation is being converted directly into Hive and sold on the open market, which it isn't... we have to account for some kind of growth over time for HBD which further counterbalances this number... in fact it's likely that HBD can grow larger than 15% a year which would actually burn Hive and make it deflationary... meaning we can offer 15% and it more than pays for itself.
Then we have to consider how much USD is losing in purchasing power every year on average.
This also makes the yield we are providing worth not as much.
If the value of USD is going down something like 5% every year then all of our HBD debt is also decreasing by 5% a year... not just the HBD we are printing but all of it in circulation.
I could go on to explain why LUNA is nothing like any of this but I'll spare you the details.
Fortunately I had pulled out of the ETH and BTC pools a while ago. Good instinct.
I was so close to put some of my money into TC... now I'm glad I never did it 😅 being slow like a sloth sometime is a good thing ahahah
I hope you will be able to get back your money as soon as possible!
If I do get it back it will probably be a blessing in disguise where I was forced to hold BTC instead of messing around with it.
I think the constantly chattering community helps lend some stability also, every peak and valley is talked about and discussed and the goings-ons of HBD is scrutinized constantly. This has led to much more cautious strategies that are paying off.
Yeah it is interesting to consider that our communication as a community is just better on a fundamental level... and can never be censored by WEB2 social media BS.
Ffs, I have a similar amount in TC saver vault which appears to have also been frozen.
Trying to be risk adverse, I decided earning a little from savers was a no-brainer then this happened. Also, I wasn't that impressed with the ROI with the vaults, making just over 1.15% and at times below 1%! (Genius!)
Heard some Thorchads say that it may take 5-10 yrs to repay, idk if that's true or not but by that time maybe 0.2 btc could be worth 100k-250k?!
Still love Thorchain though, hope they turn this around stat.
They may have to pull that bankruptcy tactic where they only pay back the dollar value at the time of insolvency.
So Bitcoin and ETH keep going up but I get back $25k no matter how high it goes.
Saying it could take 5-10 years to payback is probably based on revenue coming in from trading volume.
There's still a good chance everything moons this year and we can all make a clean escape.
if someone promises me a TONNE OF MANEY I just give it to him...what could possibly go wrong?!....
It is a good thing that I hesitate to put money on this before
I saw it goes down a little bit but I was holding back to buy some