Let’s talk about Inverse Bonds

After reading this article you will know:

• What are inverse bonds
• The basic price mechanism
• Why inverse bonds are very useful

And how inverse bonds contribute to the well-being of Whale Loans

• Inverse bonds absorb HUMP sell pressure
• Increase the backing per HUMP at the same time.
• Inverse bonds will boost HUMP’s intrinsic value.

After the successful launch of v2 bonds in the Q1 of 2022, Whale Loans is about to introduce a new bonding innovation — inverse bonds.

What Are Inverse Bonds?

Inverse bonds will allow Whale Loans to create a means for bringing HUMP out of circulation, which in turn will increase the backing per HUMP on every inverse bond that is executed below the liquid backing amount. The basic mechanism is simple: you give the treasury your HUMP in return for some treasury assets. Inverse bonds will provide demand for excess supply, thus supporting the market price of tokens.

Note that this is not a static, direct redeeming type of mechanism. Inverse bonds remove sell pressure from the market and simultaneously increase the backing per HUMP, by reducing the amount of HUMP in circulation.

These inverse bonds will allow the protocol to bear volatility, including when the price rapidly turns to the downside. In that case, individuals, too, will be able to sell HUMP without directly affecting the market price. An additional benefit of inverse bonds is that it will contribute to the backing HUMP and boost intrinsic value.

Ultimately, our purpose for introducing inverse bonds is to:

• Absorb HUMP sell pressure
• Contribute to backing with HUMP

Basic Price Mechanism

The pricing mechanism for inverse bonds will be the same as for regular bonds. The price and payout value of an inverse bond start at the HUMP’s market price of the moment. The payout amount (premium) of the inverse bond will slowly increase until someone buys a bond. It will then be reduced and slowly increase again. Users will effectively sell HUMP at a premium — slightly above market price. Thus, you’ll get more value for your HUMP compared to selling it directly to the market. It’s important to realize that HUMP is backed by Whale Loans' treasury supply (several tokens), not pegged to it.

And why are we talking about Inverse Bonds?

Well, we will release this bonding innovation as soon as it’s ready — it is one of our top priorities. When it happens, you’ll be able to buy them on the Whale Loans website. However, be sure that we are also working on other groundbreaking and unique projects like Flash Minting in parallel with inverse bonds.

We have an ambitious aim plus a willingness to do whatever it takes to make this feature a reality. It’s easy when the green seas of ‘Up Only’ are smooth. However, in the rough waters of adverse market conditions, we have to ensure that our value is appropriately established and preserved.

In Summary

The Whale Loans treasury is a basket of diversified assets. Inverse bonds will have direct access to treasury assets as they swap HUMP for treasury assets. When valuing the token, it is not only important to consider the value in the market but also in liquid treasury assets.

Whale Loans treasury will ensure the health of our protocol through inverse bonds. In the meantime, we will continue to do whatever it takes to ensure the long-term success of our protocol and investors.

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