Logical explanation on why it is almost impossible to lose money participating Cow Stake pre-sale
Given the increasing enthusiasm in the community recently, we have announced the pre-sale of COW on January 20th. The model we designed has a good mechanism to avoid the problem of indiscriminate issuance of tokens in the defi 1.0 project, so I can say responsibly that it is logically very difficult for the early birds who join our project during the pre-sale to lose money. Below we have listed some reasons on why it is almost impossible to lose money joining the project during pre-sale.
Reason 1: Receive 1.6 times income immediately after the subscription ends
When the pre-sale is over, we will add LP, in which the price of COW is $16, this way all users on the subscription whitelist would receive 1.6 times income immediately.
Reason 2: No selling pressure in the market on the day of launch
All users who participate in the pre-sale will get their own COW on the second day after the project is launched. No one would have COW when the project is launched, so for anyone who wants to stake or buy bonds, the only thing they will do is to buy from existing LP, hence driving up the price of COW.
Reason 3: Worst case scenario, you still won’t lose money.
The first worst case, assume no one buys bonds or stakes on the first day, because there is no trade of COW, then the price of COW is still $16 on the second day.
The second worst case, assuming all users start selling the next day, no one stakes or buys bonds, BUSD in LP continues to be exchanged for COW. Then LP becomes 31466BUSD and 3178COW (For more information about how LP works, please check here https://www.youtube.com/watch?v=8XJ1MSTEuU0), making the price of COW drop to $9.9. Then there would be 8534BUSD less in the treasury. At this point most users will probably not sell any more, because then he would not be able to make profits.
The third worst case is that everyone panics and continues to sell regardless of the cost. When the price falls below $9.9, users would have two options: sell or continue to hold and stake. If they choose to sell at this time, they will lose money. However, if you choose to continue staking, you will continue to receive benefits from staking and eventually make profits. Let us show you how this would happen.
The fourth worst-case scenario, let’s assume that you buy a quota of 500 COW in the subscription, all the others panic and continue to sell, LP would eventually become 10,000 BUSD and 10,000 COW, making the price of COW drop to $1, then The treasury will incur a loss of 30,000 BUSD. At the same time, the treasury will activate the repurchase and burning mechanism to recover and burn all COW at $1. At this time, there are 500 COW of yours 2000 COW of others on the market, because 7500 of them have been sold to LP.
The fifth worst case, others continue the selling and sell 2000 COW to the treasury at $1, only you still hold and continue staking. At this time, the treasury will have 10000BUSD and 10000COW in the LP and the (59000–2000) = 57000BUSD put into the treasury initially. The 2000BUSD would be lost from the treasury due to the repurchase and burning of the COW sold at $1. Then except for yourself, everyone else’s COW would have been sold; Since the price of COW is $1 and you chose to continue to stake, then the Stake contract will continue to mint COW for you based on the reserves of the treasury；after a long period of time (within one year), you will get all the COW minted based on the treasury assets. Based on 57000BUSD you will get 57000COW, based on 10000BUSD and 10000COW LP, you will receive (10000–500) COW, a total of 66500COW. At this time you have a total of 67000COW , which can be sold for $1 each. In this way, you would receive $67000.
Your initial cost $9.9*500=$4950
Your final asset $67000
You can arbitrarily use a number as the initial amount of COW for the calculation, The vast majority of the time the results will always be the same — you making profits. In some extreme scenarios, you might lose a little bit, and if you think about that scenario, it’s very difficult to happen. If your calculation gives us a different result, please contact the administrator of the community for further discussions.
What a fantastic model! Hurry up and participate in the pre-sale, what are you waiting for?