This is part 3 in a 4 part series, for full context: start here.
Statera - Encouraging Trading and Liquidity in Index Funds
Remember Statera (STA) is in a pool (index fund) with five tokens: WBTC (Bitcoin), Ether, Link, SNX, STA. Having that fifth token (STA) in your pool that is deflationary has another incentive, which is essential to your Balancer Pool (your index fund), liquidity. The number one thing you need for your index fund is liquidity, you need Ether to sell to buy STA, you need STA to sell to buy WBTC, you need Link to buy so you can sell your SNX to rebalance. By adding in Statera you incentivize adding liquidity and trading. Why is this?
Every time Statera burns itself you have to trade more to balance the pool, so it ups the amount of trades that need to happen to constantly rebalance, this pays out more fees and more BAL to the liquidity providers incentivizing them to provide more liquidity.
Also putting Statera into the Balancer Pool locks in your gains (it also reduces your upside but if you want to hedge you can, it will still go up if the underlying tokens go up). When you put Statera into the pool, if Statera goes down in value, the pool sells Link, Wbtc, Ether, and SNX (any one of the four other tokens whatever isn’t going down the same percentage) to buy more Statera (cushioning the price fall and making it so you own more Statera in the pool, selling one of the other four tokens high and buying Statera low). Then when it goes back up you recover your loss (you have more Statera now so an increase in price is even better for you) all the while you benefit from fees and BAL token payouts. You are also increasing the ability of the pool to trade and balance the pool, which burns more Statera.
More liquidity also means your pool will see more trades from people coming to the balancer exchange to swap their coins, if your pool has a ton of liquidity and is constantly balancing with this dynamic trading deflationary coin with a small market cap (STA), it is going to be picked often wne someone wants to trade Link for WBTC, or SNX for ETH. This added trade activity adds to the fees you make and the burn of STA.
So Statera increases the amount of trades by being small cap, tied to four large cap Cryptos, and being made to trade (deflationary). It constantly is reducing in supply, increasing price, and increasing the need for rebalancing trades. It incentivizes adding more liquidity to the pool (because more trades means more fees) which incentivizes more trades to happen. It is a self feeding cycle that catalyzes towards more gains.
Without Statera you just have Eth, WBTC, SNX, and Link, there is no arbitrage incentive, no dwindling supply, no small cap dynamic trading token, no one token access to the pool that is tradable on DEXes and a trading opportunity in itself, and I'm sure more benefits I don’t even see (remember this is a very new concept).
The Economic Case for Statera - A Fund Companion
Why is Statera worth anything? Well you apparently didn’t read my last sections (go read them). But if you are still thinking, “but it’s just another random coin thrown in with these ‘actual legitimate coins.’” let's dig deeper into the economics here.
Bitcoin is currently at a 173 billion dollar market cap, it takes over a billion dollars to move it 2%. Plenty of people trade Bitcoin but the bigger something gets the less "tradable" it is (it becomes harder to play volatility and ups and downs). Statera is currently under 5 million dollars in marketcap, the amount Statera can move and how quickly it can move is astronomically more dynamic than Bitcoin, which incentivizes traders to trade it. What happens every time it get's traded? Part of it gets destroyed reducing supply and causing another trade to balance the pool.
The fifth coin that is deflationary also adds to the dynamics of having those other four coins. If any of those 4 coins move (SNX, LINK, BTC, ETH) a trade has to happen, likely involving STA, and when that happens STA is burned and the entire fund has a lower supply as a whole. Link, BTC, ETH, and SNX will never go down in supply but with STA in it does go down in supply as an entire fund with every trade! Think how often the fund is rebalancing, that’s why there have already been over 7,000,000 STA’s burned, supply is dwindling at an astonishing rate, and to stop that dwindling, price will have to go up.
But it’s one index fund! Oh….but is it? What if you add STA to a manufacturing shitcoin pool (Trac, VET, MFG AND STA). It’s the same STA from the wBTC/Ether/SNX/Link pool, and each time each of the pools balance STA is burned, it is now the catalyst for two different pools. The amounts of trades are increased (there are now two pools) and the supply dwindles faster, upping price quicker, creating more rebalances, creating more burn, and the cycle continues. STA can be a way to add instant liquidity, attention, and arbitrage to any pool, any index fund.
This idea of STA as a “Fund Companion” is possibly it’s most bullish case, look past this one pool and imagine a Defi pool, video streaming pool, lending pool: each pool with a unique value proposition which has STA in it to jumpstart liquidity and arbitrage. It can become the standard for jumpstarting your index fund and making it function more bullish. It is an altruistic whale that comes into your index fund and gently nudges the price, volume, trade, and liquidity upwards.
Summary of the Whole Series
STA is a deflationary index fund. It, currently, gives you exposure to five other tokens: Link, ETH, BTC, and SNX. If they go up STA goes up, if they go down STA goes down. But with every trade to balance the five tokens 1% of STA is destroyed, the lower supply means it goes up MORE than those other four AND goes down LESS than those other four (the supply is reduced on the way down).
STA also incentivizes trading, every trade supports the ecosystem by lowering supply and creating a need for arbitrage in the pool. It is a dynamic, small cap, one token accessible unit for accessing the alpha (the percentage gain) in the other four assets. It’s a one click access to increased gains in the other 4 coins. You own STA you instantly benefit from the upside of Link, ETH, BTC, and SNX.
That is all incredible in and of itself, but the future may be the brightest part. Statera could become a default inclusion in every balancer pool, being that “altruistic whale” ferrying the index fund to bullish pastures. When you buy that fund you get access to the "gains increasing" and "losses reducing" power of a deflationary token.
Here we have created the “deflationary index fund,” this asset has never existed and possibly could never exist without the distributed ledger, Ethereum, smart contracts, defi, balancer pools, and Statera. It is bringing together so many cutting edge technologies and creating a brand new financial instrument. We can’t tell where this will lead, but I can guarantee you it has unequivocally changed how you look at investing in Crypto, index funds, and trading in general. It is an A.I. trading bot that forces the market to work, forces the trades to happen, and forces the price to go up. Where that leads? What this spawns? Only time will tell. But don't take my word for it, what are the whales (large investors) doing with STA? Read on to find out.