Ethereum co-founder Vitalik Buterin held a short position in the “low-volatility token” RAI for seven months. He then closed it, earning $92,000 in profit. The observations were shared by on-chain researcher kyoronut.
Vitalik closed his short RAI position https://t.co/jeatjS1JT0 .
Position summary:
— Age: ~230 days
— Borrowed: 400k RAI (sold for 1.221m DAI)
— Opening price: 3.053 RAI/DAI
— Closing price: 2.786 DAI/RAI (-8.7%)
— Profit: ~$92k https://t.co/IRmGgIFznI— kyoronut | きょろナッツ (@kyoronut) January 22, 2023
Buterin began the operations in May. First he borrowed 400,000 RAI, then sold them for the stablecoins DAI worth $1.2 million. Thus, it turned into something like a short position on RAI.
The Ethereum co-founder closed the short on January 22 of this year, selling DAI and ETH for $1.13 million for RAI. His profit was $92,000.
According to kyoronut, the opening price was 3.053 RAI/DAI, and the closing price 2.786 DAI/RAI (-8.7%). The researcher added that since mid-May the price of the “low-volatility token” had fallen by 7.6%. At the same time, Buterin was selling the coin at local price highs.
Since the position opening (2022-05-15), RAI’s redemption price decreased by 7.6% (dune: https://t.co/wnC6higSYO ).
He sold RAI at some spikes of the market price ( https://t.co/AvYdywXU51) . pic.twitter.com/Z0VQ0CAz5H
— kyoronut | きょろナッツ (@kyoronut) January 22, 2023
RAI from Reflexer Labs is an Ethereum-backed experimental “stablecoin” not pegged to any token or fiat currency. To mint it, you must lock a certain amount of ETH and pay a 2% fee.
Because of its design features, RAI’s market value is subject to fluctuations. Over the past year the coin’s price fell from $3.07 to $2.79. Nevertheless, the token has shown far lower volatility in comparison with Ethereum used as collateral.
Vitalik Soleimani, co-founder of Reflexer Labs, now leading the SpankChain project, used Buterin’s trades to support the thesis that the design of the “low-volatility token” is flawed.
ETH-only RAI was a mistake
the ETH staking yield means that borrowing RAI against pure ETH will always have some % opportunity cost
the RAI redemption rate should almost always be negative to reflect this opportunity cost
decentralization is expensive, people don’t want to pay pic.twitter.com/rMCs1tCFlN
— ameen.eth (@ameensol) January 23, 2023
“RAI, based on ETH alone, was a mistake,” he emphasised.
The main drawback of the asset is that users do not receive Ethereum staking rewards in collateral. Thus, the issuance of RAI is associated with Vitalik Buterin earned more than $4 million on investments in Dogecoin.
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