Sperax
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Sperax

SPA Selloff Post-Mortem

This post-mortem aims to identify and clarify exactly what initiated yesterday’s SPA selloff. Please refer to this as a living document that will be updated as we proceed with our investigations.

The entire Sperax team is operating as transparently and efficiently as possible. We would like to assure the community that SperaxUSD is not in a death spiral and none of the team members have participated in any of the selling activities that have taken place. We are not intending to sell any SPA due to recent events. We also want to assure the community that we are committed to continue making DeFi accessible via USDs.

USDs has performed remarkably, further showcasing the strength of the protocol’s stability mechanisms. During the SPA selloff, there has been no significant decrease in protocol TVL. Sitting at $15.693m, USDs is fully collateralized and Auto-Yield has maintained 10%+ APYs.

TL;DR: Yesterday (June 16th, 2022) around 5:48 PM EST the largest staker from our previous farms sold a hefty amount of SPA (approximately 10 Million from our findings). The large sell order paired with thinned liquidity triggered a 55% selloff. This event has lead to loss of confidence in SPA, causing panic. This is not caused by any sort of protocol death spiral like UST, rather an unfortunate, yet natural contagion phenomenon.

Background

When we launched the protocol, we needed to seed initial liquidity to ensure seamless arbitrage of major protocol assets. So we launched a Uniswap v3 farm with a very generous fixed APR (250% with a 150 day lockup). Yesterday was the 150-day mark, meaning that users were able to unlock and sell their rewards and LP position. Due to the decrease in SPA price, these positions had very generous SPA rewards and were left holding mostly SPA instead of USDs due to the price decrease. Some of the largest depositors elected to sell their SPA on the open market.

What happened?

Updated Jun 16, 2022 (Jeremy Guzmán)

First and foremost it’s imperative that we address the current climate the larger crypto-market is experiencing at the moment. We are continuously monitoring how this might affect the SPA price going forward.

From our findings thus far, address 0xe1E2a52a21226ba37f28ba6Cdf59F20156798F94 (our largest SPA-USDs farmer at the time) sold 8 million SPA in one fell swoop. How? Yesterday marked the unlock date from one of our earliest SPA farms. Consequently, this triggered the ~55% panic-sale from retail & institutional holders. In the current market scenario, our market maker failed to meet their contractual obligations which further amplified the panic selling experienced in the market.

Unfortunately we cannot definitively identify the activities occurring on centralized exchanges (CEX), however, we can conclude that the activities taking place are due to the growing contagion in the crypto markets.

Below we have provided 6 of the transactions attributed to the selling:

  1. Transaction 1

https://arbiscan.io/tx/0x2cca8acc75c510a84bac96d098a565c2b85b7036182e710af67dbdcf1e8fe481

2. Transaction 2

https://arbiscan.io/tx/0x5c585c01587824ec51b2b99ef46fd892f65d55b9cf960f105f9c7fdc350f2d99

3. Transaction 3

https://arbiscan.io/tx/0xa9ed4374dc19aa3589c3a881f46a69dbf4c69bae8272687337cec3fc41b896a4

4. Transaction 4

https://arbiscan.io/tx/0x9b934a3b1b38dbe3b8c871e1b70e25c4386e7ffd04650db921a0c184790545aa

5. Transaction 5

https://arbiscan.io/tx/0xb6c69cd99a53446fb07c380aa2fc3c4071b0a09b71959ba8e834d5fb313c3b12

6. Transaction 6

https://arbiscan.io/tx/0x6e9c539774d4572d6bd166aba60020d512bd8a808711ee11c7e06c7f9c5e2683

We have also identified these two transactions (displayed below) as a recurring arbitrageur — applying further sell pressure to SPA which almost forced the token to dip below $0.01.

  1. 0x397af9d4d18e888e25ef7608b1ce632e4fbd7c36e63eaa56499a8d39514561e8
  2. 0xb9cd9ab5610c69ca36784606dfb256334fbc10e8a3a13f2bff817be4df5ed3b0

What’s Next?

Updated Jun 16, 2022 (Elliot Tapprich)

It is hard to say when the contagion in the markets will find its endpoint. These seem to be the moments when price is most disjointed from fundamentals, and we sometimes find ourselves at the mercy of other market participants. People who have been around crypto long enough understand the volatility and the uncertainty in the space. It is no different here at Sperax. We have a team of crypto OG’s who will continue to work towards fulfilling goals set on the roadmap and beyond. There are, as always, a few rays of sunlight shining through we can remind ourselves of during these times of higher volatility. Some might say these are just copium, but we do see real reasons to be optimistic.

  1. Focus on core products: USDs, the value driver of the protocol, kept its peg and showed extreme resilience during the SPA selloff. We love a great governance token price pump, but USDs remain the most important piece of the Sperax ecosystem. The fully collateralized model brings confidence to the arbitrageurs, knowing that there is always a 1:1 ratio no matter the price of USDs.
  2. Integrate USDs: The young protocol has already secured TradFi partnership with Streetbeat, DeFi protocols for liquidity, multiple fiat onramps, and CEX’s for accessibility. Looking forward, we can expect many more partnerships driving demand for USDs, increasing TVL, and driving value to SPA.
  3. Education on SPA value accrual: As the core team and community continues to integrate USDs into DeFi and tradfi partner applications, USDs TVL will increase and drive value to SPA. Before thorough educational content is published, familiarize yourself with the value accrual mechanisms here.
  4. Decentralize protocol governance: Although large selling pressure is difficult to stomach, it lends to an opportunity to transfer governing power from whales to long term community contributors. This opportunity will be realized with the launch of the DAO later this year. The more SPA in the hands of the community and the less in the hands of large investors the more decentralized the protocol becomes.
  5. Communicate the safety and reliability of USDs: The USDs/USDC pool has the deepest liquidity on Arbitrum Uniswap. This allows for USDs to consistently remain $1 and produce 11% auto-yield even during massive panic selling from SPA holders.

It is often said in crypto that we need to zoom out. As difficult as it may be sometimes, this is often the best advice.

Team Wallets

To further exhibit the team’s conviction in SPA, we’ve attached our major wallets below:

Updates will be posted as we resume investigations.

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