In this follow-up to our previous article, encouraging investors to, ‘Beware (9, 9)’ we will be performing a brief post-mortem of the intense OHM crash (January 16th, 2022) that just shook-up the DAO community.
For reference, I have posted the OHM chart which shows both the local bottom that OHM tested on January 10th, along with the retest that occurred just a few hours ago. As this retest was happening, I was discussing the situation with one of our dear team members, Ameer. The observation was made that these types of downward price action often follow announcements of changes to protocol APY rates. In this case, Olympus had recently announced a significant reduction in rewards, based on policy decisions made by the DAO. The expectation was that we would see a similar retest-and-bounce as was experienced earlier this month, however, what happened next was intense and chaotic to say the least.
As OHM retested, a single, massive sale caused the price to dip from $160.00 to $130.00 in the blink of an eye.
At precisely the moment that OHM revisited its prior local bottom, a significant amount of OHM was sold into the open market. This transaction, totalling over $11,000,000 USD began a series of cascading liquidations which devastated the OHM chart along with countless accounts in leveraged positions. For reference, please see the attached image and this link to the transaction hash.
We could spend a lot of time theorizing as to the intentions of the owner of this account. We could also discuss certain theories surrounding manipulation of markets and various other games that are played by the heavy-hitters. Today, however, I think the message needs to be abundantly clear; leveraged positions, no matter how calculated, are dangerous and can be quickly liquidated.
No one could have predicted a crash of this speed and magnitude, and I was deeply saddened to read comments within various servers; people literally in shock and dismay at having been liquidated so suddenly.
To review our prior warning, and to reiterate and expand upon a couple of points, I have made a short (non-comprehensive) list of potential repercussions that must be considered before deciding to take on a leveraged/collateralized position:
- When you are liquidated you are forced to sell-off your collateral assets at a loss.
- To avoid being liquidated, you may need to sell-off other assets at a loss to allow you the liquidity to move funds in order to give relief to your over-leveraged position.
- After liquidation, you will have less buying power available to rebuild your position. In addition, there are often large bounces that follow such severe crashes, meaning that you will likely be forced to re-enter your position at higher prices.
- You can never assume that your position is safe from liquidation, because at any moment, price can fluctuate in ways that cannot be predicted and in metrics that cannot be imagined.
- These markets are as unforgiving as those who look to profit from them. Many large accounts stand to make massive gains from scenarios such as this. They do not seem to care about the well-being of smaller investors, and so, you must do what you can to protect yourself. Have multiple plans, and anticipate how you will need to act if something like this happens in the future.
Yesterday was a very sad day for many people, but in many ways, it can also be seen as an opportunity. The APY decision seems to have caused a lot of fuss within the Olympus community, and I am certain that our Abachi policy team is learning from the fallout. The fear that this ‘black-swan’ has generated only increases my Abachi conviction, for we have always sought to keep our APY low, focusing instead on being a project with immense utility, backed by a treasury. We hope to encourage our investors to carefully plan and balance their own portfolio decisions. We all stand to gain a lot, simply from being involved in a project like Abachi, and to squander our chances due to greed and temptation is simply unfortunate.
It is a dangerous galaxy, this crypto verse of ours, so please, take care of yourself. In addition, if you have been impacted by the events of yesterday, never hesitate to join our discord channels and talk to someone. We are all in this together, despite what some Whales might have to say about it. One Abachi, One Community.
Take care out there,
Professor Crow
