Prefacing this article, I'd like to remind everyone that this is not financial advice, nor am I a financial advisor. This is for entertainment and educational purposes only. Please as always, do your own research and find out for yourself what investments are best for you.
So if you were following any of the major players or news lines from Frog Nation a couple weeks (even though it feels like centuries) ago, you definitely heard of the 0xSifu scandal that had FUDDers screaming that the sky was falling and that everything Frog Nation leader Daniele Sesta touched was going to collapse. In a nutshell, the treasurer of Time Wonderland, a ponzi-nomics-based ohm fork was revealed to have been a convicted felon, a known fact by Daniele Sesta, one of the trusted architects of Time Wonderland and Abracadabra money. And because Daniele Sesta knew about this for almost an entire month before the news was publicly revealed, this loss of faith in Sesta's works sent a public shockwave scaring investors and causing many to pull their money out of all Sesta-related projects, especially in Abracabra Money. I should also mention before going further too that there was another story that just days before this big reveal Sesta got liquidated on purpose to get cashed out, to the tune of 20 million dollars.
MIM in the crosshairs
Because of Sesta's involvement with Abracadabra, as well as the prospective merger between that and Time Wonderland, many people were convinced that Abracadabra was going to collapse, but more specifically that MIMS, abracadabra's stablecoin was going to depeg. Now if you followed my previous post on Abracadbra, you'll know that Abracadabra is really huge on collateralized leveraging. In a nutshell, users can put their crypto up for collateral (in my case UST) to get MIMS, and leveraging that for more collateral, and so on, and so on. The big risk factor in these strategies, especially with stablecoins, is if the stablecoin itself depegs, making essentially the whole system collapse and getting the person liquidated.
With the depegging scare of MIMS, I was meticulously tracking what the mods in abracadabra's discord were saying about the situation, and although many others were reporting that they were repaying their loans and getting out of their leveraged positions, for better or worse, I chose not to devlerage because the mods were quickly, consistently, and adamantly saying the same thing over and over again: MIMS was super over collateralized and was not going to depeg.
What were they talking about? If you look at their analytics page, they give a pretty good breakdown of how the value of MIMS is collateralized, and what they show is on target--MIMS is super over collateralized.
If you notice the big chunk in green, you'll notice the biggest position is with UST, totaling to date around 724.4 million UST. Now this is where the FUD rabbit hole got even deeper--because UST was tied in with Abracabra, there was also fear that UST might depeg as well too. And that was just the tip of the iceberg for all the ripple effects the FUD lead to. For hours, I was reading updates on how the MIM pool on Curve pools were getting drained. Even on Platypus, a Curve-like project on Avalanche, the MIM staking pool was taken down because people were essentially making a run and trying to cash out their MIMS for other stables.
I mean honestly, as crazy as it might sound, there was a lot of talk about how this had the opportunity to break DeFi altogether.
After the dust settled...
So after all was said and done, I ultimately decided to hold my leverage position. There was a couple of factors that led me to this decision. The first, I mentioned already--the consistent message I heard from Abracabra about MIM's tokenomics and how it wouldn't depeg unless essentially UST depegged. And honestly, I didn't think UST would depeg because ultimately I think in that scenario the entire Terra ecosystem would get screwed, which means there would be a lot bigger problem than losing my one leveraged position.
The second factor was that I felt lucky to have the leveraged position in the first place, and I've actually been doing quite well with it, and I didn't want to give it up. Once again, going back to my previous post, I was in the right place and the right time when the MIM replenishments occurred which allowed me to open my UST/MIM position up. Since then, I've even considered adding to my position, but in the last month and a half, I've never been able to get access to another MIM replenishment, so I was worried that I wouldn't get that opportunity again. And as a follow-up from that last post, I've been averaging around close to 50-60% APY on my stables, which I have been more than pleased with.
And obviously, no story is ever finished with crypto but I'm pretty happy with my decision. MIM only had a 1-2% blip in its peg, and as far as stress tests go, I think it really flexed it's strength and stability showing that Abracadabra had some pretty solid tokenomics. I'm not going to lie though, even though I had a .7 liquidation rate I was prepared to lose my entire position, and for nearly the entire day I was sweating bullets.
What about you? If you had any positions in Abracabra, did you end up pulling out? OR with MIM becoming so readily available, did you have the guts to put more in?