I recently ran a test depositing
$100,000 onto the Anchor protocol.
This earned me one $1700 in 30
days, a near 20% return doing nothing.
And who am I, the Oracle of Omaha?
Needless to say, I was hooked.
This is one of the greatest things
to ever happen to the average investor.
Finally, we can get returns
typically reserved for the big guys.
That is, until my dreams of turning
$100K into $3.5 million were completely crushed.
See, the strategy is falling apart.
The Anchor protocol is burning
an insane amount of cash.
$3.8 million a day, to be exact.
Here's my math.
At this rate, they'll completely run
dry in about 50 days.
Here's how much money they have left.
Every few seconds this stockpile drops, taking us
farther and farther away from easy, passive income.
Maybe this experiment is just unsustainable a
pipe dream in the world of crypto.
Or is there a silver lining?
I've done some research and there just might be.
But we need a solution fast because
time is literally running out here.
See, the Anchor protocol is backed by a
crypto project called Terra with their coin Luna.
Luna has increased by more than 100X
in just over a year.
This is thanks to the excitement around
their lending program, which is no surprise,
but other projects have taken notice.
I mean, who doesn't wanna 100 X the price?
That's the fast track to becoming a billionaire.
Because of this, we have a few new
kids on the block attempting to offer these
extremely high returns and make it sustainable.
Attempting to solve this very problem.
Just maybe one of them will figure it out and create
the investment opportunity of a lifetime for all of us.
By the way, making money is just one
side of the coin, no pun intended.
You can save it as well.
So check out today's sponsor iTrustCapital.
With iTrust, you can pace your
crypto in a Roth retirement account,
allowing you to invest and trade crypto, all
without having to worry about capital gains taxes.
If you use the link in the description,
you'll find additional information as well as receive
$100 in Bitcoin free for joining.
Now let's get into the juicy details because there's
a new player entering the space, taking an interesting
spin on the sustainability of this entire model.
This is the Near protocol with
their newly launched $USN stablecoin token.
This token, like Anchor protocol's UST is
what's called an algorithmic stablecoin.
Some people love these things.
Other people hate them.
A stablecoin is simply a coin that
is pegged to the US dollar.
Traditionally, these are backed one to one with
a dollar in a bank account somewhere,
at least they're supposed to be.
An algorithmic stablecoin uses crypto assets to back
the token, ensuring that it's worth a dollar.
Then individuals are allowed to profit off of
small fluctuations in price by buying and selling
the token, keeping it right at $1.
This works, except if there's
some kind of doomsday event.
If the crypto backing a stablecoin collapses in price, that
algorithmic stablecoin can fall off the $1 pay.
This is bad if it doesn't recover, but
these types of stablecoins are gaining popularity
after the massive success of UST,
that token that I used on the Anchor protocol.
So for this new option, you would buy $NEAR
tokens and then swap them for $USN stablecoins, essentially
locking away your $NEAR for the $USN digital dollar.
This is where $NEAR is doing things a bit differently.
See, the $NEAR token is stakable.
You can lock it up for an 11% return.
So the $USN stablecoin token will use
$USN staking to help generate a return of
a minimum of 11% according to their documentation.
But there's more, due to additional incentives.
The first people to lend out the token will
receive 20% plus APY, beating out even Anchor protocol.
This is amazing, but I do have concerns seem a bit
of a stickler and two things stand out to me.
Let's go back and look more closely
at the line talking about $USN rates.
"at its lowest, it will be equal
to $NEAR's staking APY, currently about 11%."
Everywhere you look, you see that 11% minimum figure.
But this isn't taking into account how staking works.
The cash you receive from staking
is based on token price.
So let's say a token is worth $100.
You have one token, you stick it at 11%.
After a year, you get $11.
If that token cuts in half to $50, so
does your return from $11 to $5.50,
even though the APY is still 11%.
So if the base return is determined by
staking rates of Near and the Near coin
dramatically decreases in price, so would the return.
This, of course, isn't counting any of the additional
incentives that they plan to layer on top.
But we don't have all that information yet.
But I saw no one talking about this,
so I went into their discord to ask.
And after some back and forth, yes, it's possible
that the rates could be less than 11%.
Now this is totally fine, because thanks to other
incentives, it will likely be higher than that.
But the key is we shouldn't think of
the rate as a guaranteed 11% minimum.
And this is where I ran into another problem.
This line, "The stability of the design of $USN
means worst case scenario, Decentral bank could buy
back the entire amount of $$USN ever issued."
This doesn't make sense to me, and the fact that
I'm running into concerns at all is a bit stressful.
Anchor is running out and we need an alternative fast.
For context, they have a reserve that will
act as the bank account backing their stablecoin.
This will be front loaded with about
a billion dollars and double collateralized initially.
Future stablecoins are then
minted by depositing $NEAR tokens.
But remember, the $NEAR token can change in price.
So what's the problem here?
It's the fact that it says worst case scenario, they
can buy back all stablecoins with the reserve.
That just doesn't seem accurate to me.
It seems to me worst case scenario would be
their initial seed funding is removed, which they can
definitely do because they don't say it's going to
be there forever, and then the $NEAR token drops
in price by something like 80%.
If that happened, as far as I can tell,
there wouldn't be money to buy back every token
like they say in the worst case scenario.
Now, this isn't really an issue because we
have that risk with all algorithmic stablecoins.
And I'm not saying that this kind of
thing would even be likely to happen.
It's not likely at all.
But what bugs me is saying worst case
scenario, but then explaining something that doesn't appear
to actually be the worst case scenario.
- So that's an adorable worst case scenario.
Just give the facts and then let people
decide if the risk makes sense for them.
That's all I'm asking for.
Again, I messaged them on Discord and it
appears more documentation will be coming out on
this, hopefully to clarify these issues.
But maybe you're thinking, okay, I'll just hold
off for a while on this one and
see how it goes before aping in.
The good news is we have a
secondary option, another competitor to Anchor protocol,
and this one promises even higher returns.
This is through the launch of $USDD, or I'm going to
start calling it US double D because why not.
$USDD a new algorithmic stablecoin built on the Tron network.
Now, believe it or not, Tron
has some experience with stablecoins.
The majority of the world's largest stablecoin,
$USDT is hosted on the Tron network,
$41 billion in value to be exact.
Tron is also the 6th largest cryptocurrency
by total value locked on the platform.
So this move makes a lot of sense for them.
Much of how the $USDD stablecoin
works is similar to $UST and $USN.
The same methods to keep the price right at
$1 and a similar mint and burn process.
What's interesting is the rates they plan to offer
30% APY, more than 50% higher than anyone else.
This is directly from the Tron founder, Justin Sun.
Let me just show you how insane that is.
Remember how I said $100K would have turned
into $3.5 million with Anchor's old rates?
Well, at 30% APY, that same 100K
would result in over $18 million.
You just got to love compound interest, but let's get
back to reality, because the odds of those rates staying
at 30% for 20 years are pretty slim.
Nowhere does it say the rates will be 30% forever.
According to the white paper, rates
will be 30% in the outset.
So realistically, we can't bank on
that for the end of time.
What's interesting is Tron's goals seem to
be even larger than offering a stable
coin with exceptionally high returns.
According to a Medium post, they're aiming to
create this kind of decentralized central reserve.
That name is a bit of an oxymoron, but basically
they want to create a $10 billion fund that will
not only act as a reserve for the $USDD token,
but also help with crypto market panics.
Now this does leave us with
two questions and a concern.
First, in order to build the $10 billion
fund, the Tron team will need to get
the crypto world to buy into their idea.
That's a lot of money to
raise, and it hasn't happened yet.
Second, this 30% interest rate is extremely exciting.
However, nowhere in the documentation doesn't outline where this
money will actually come from, at least yet.
So I can't really judge the mechanics on how
this works or just how sustainable it might be.
Now for the concern, Justin son.
He's no doubt a force in the crypto world.
However, many people aren't big fans of him due
to some questionable business decisions in the past, like
the fact that the Tron ICO happened in China
a few days after ICOs were completely banned.
Or how an employee of his said
"He was doing so called market making insider trading all
the time", referring to the Tron coin $TRX.
Or maybe the time he purchased the crypto
exchange Poloniex and enacted operation Couch Cushions.
This one is crazy.
It turned out the exchange had this odd
architecture and occasionally customers crypto would get lost
within the software, this built up over time.
Justin had engineers dig around and collect
the missing crypto, about $20 million worth.
That crypto was then sent to an anonymous
wallet and then back into the exchange's communal
wallet, never to be traced or found again.
And this is really just the tip of the iceberg.
Let me know if you think I should
make a mini doc on this guy.
It's a crazy story, so it's a sticky
situation, but realistically, if you get some $USDD
tokens and start earning 30% on it, what
power does he have over those tokens?
Not much, but it is good to know what
the founder has been into in the past before
you go ahead and ape into something like this.
Meanwhile, Anchor is still losing
its reserves minute by minute. So what do we do?
What happens if Anchor runs dry?
Will we be left with nothing?
No solid opportunity.
Since the start of this video,
Anchor's reserves have lost $29,970.
This won't last long.
Well, the good news is we'll be fine.
Anchor will continue to lower their rates until either the
market picks up or they stop burning so much cash.
At minimum, this would be in the 7%
to 12% range, which is still a great
return, especially compared to like, a bank account.
For now, I'll be sticking with Anchor and just seeing how
things pan out with these new kids on the block.
People are taking notice of Terra's
success and replicating the strategy.
This competition will only be good for you
and I the competition only means products, safety
and rates will get better over time.
We might just have to be
a little patient with the technology.
This is still the most exciting time
in history to be an individual investor.
The opportunities are literally endless.
If you'd like to better understand this wild world
that we're in I would highly recommend checking out
my Patreon community where we do free coaching every
single day on crypto, stocks and NFTs and a
whole lot more as well as daily trade signals
and the best investor community on the freaking planet.
Just make sure you grab a spot in the description.
I'd like to thank you so much for watching.
I'm Max Maher and I hope you're profitable day!