Understanding GRAI Redemptions
Redemptions with a 0.99 parameter are going live in just over 2 days.
This update regarding GRAI is of crucial importance. This topic is especially pertinent if you’re a liquidity provider or borrower on Gravita.
Let’s dive in.
Upcoming Redemptions for GRAI
Redemptions for GRAI, set at a 0.99 parameter, are scheduled to commence this coming Friday, the 18th of August 2023. This is a significant event that could potentially impact your positions.
A Brief Overview of Redemptions
For those unfamiliar with the term, redemptions are a mechanism designed to ensure a hard floor for GRAI’s price. This system guarantees stability by allowing users to redeem 1 GRAI for collateral worth $0.99 USD. It’s worth noting that Gravita imposes a 0.5% fee on these redemptions.
Redemptions vs. Debt Repayment
It’s essential to differentiate between redemptions and repaying debt. They are distinct mechanisms. As a borrower, while you won’t experience a net loss during redemptions, you will see a reduction in your collateral exposure. On the bright side, your Vessel’s Loan-to-Value (LTV) ratio will improve after a redemption.
The Current Scenario
Given that GRAI’s price is currently hovering around 0.982/0.983, it’s reasonable to anticipate redemptions to be triggered as soon as they’re activated. If you’re exposed to ETH or LST, this could affect you, and you might need to strategize to mitigate potential impacts.
How to Navigate Redemptions
Redemptions primarily target the riskiest Vessels. Thus, maintaining a low LTV can shield you from redemptions. The riskiest Vessels, i.e., those with the lowest collateralization, are the primary targets during redemptions. I recommend checking your position on Gravita and assessing the “Debt Ahead” to gauge your standing.
For a more detailed perspective, you can refer to this dashboard to ascertain which Vessels are the most vulnerable and where you rank among other borrowers.
If you suspect you’re at risk of being redeemed against, consider reducing your LTV. One strategy is to purchase “cheap” GRAI in the market and repay a portion of your debt. This move allows you to borrow again in the future. GRAI can be procured here.
A Note to Liquidity Providers
The GRAI price is poised for volatility once Redemptions are activated. I advise liquidity providers to consider purchasing GRAI and recalibrating their range or adjusting their position. Such measures can help counteract potential impermanent loss, especially if you’re forecasting a GRAI price at or above 0.985.
Further Reading
For those keen on a deep dive into redemptions, I recommend this comprehensive guide.
Special Note: bLUSD Vessels are immune to both liquidations and redemptions. Within Gravita, bLUSD remains exempt from liquidations, redemptions, and recovery mode.
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Stay informed and navigate the DeFi space wisely!
