Currently we have a 2x LUNA-UST leveraged Bull farm borrowing UST. We also don’t have any use case for deposited LUNA.
If we add a 2x LUNA-UST leveraged Bear farm, borrowing LUNA instead of UST, we add a product that complements our existing product.
Properties of the 2x LUNA-UST leveraged Bear farm are potentially useful to clients:
- the LUNA price delta from the Bear farm is much smaller than from the Bull farm. For a given amount of money in the initial contract, the delta of the whole position is (2x the delta from the LUNA-UST LP) - (delta from the borrowed LUNA). With small price changes, the position remains very close to delta neutral.
- The position risks liquidation if LUNA price goes up, instead of down.
Importantly, implementation of this proposal would add a borrowing use case for Red Bank LUNA deposits, and would improve the capital efficiency of the protocol.