Zhongkuang: 56% APR Stablecoin Strategy!

The exchange rate of iBGT and BERA has dropped to 1.066, can it surge?

A couple of days ago, the exchange rate was around 1.16, and it has fallen by 10% in the past two days, getting very close to 1. It is now at a critical point between surging or not.

Let’s clarify the relationship between iBGT and BERA. According to Berachain's design, BGT can be redeemed for BERA at a 1:1 ratio, while iBGT is the LST version of BGT. However, everyone’s BGT is currently held by Infrared, so theoretically, iBGT can open a 1:1 redemption channel.

📖 But there are two points to note:

1️⃣ Currently, the channels to acquire iBGT are through liquidity exchange and receiving rewards through mining, where the reward portion requires a 10% yield as protocol income, which means effectively paying 1.1 BGT for 1 iBGT;

2️⃣ According to common industry practices for LST token redemption, a tax of less than 0.1% may apply;

Based on the above two points, the strong peg price for iBGT is at 0.999, while the weak peg is around 1.1;

According to the current exchange rate of iBGT, the cost for everyone’s iBGT is greater than 1, even today, the cost of iBGT is around 1.066.

Now, some early advanced group friends have basically laid flat, but there are still quite a few partners planning to surge.

🤔 Let’s review both sides’ logic:

1️⃣ Pro side: It’s already close to 1, with only a 5% premium. As long as the APR increases, the exchange rate will definitely rise! Moreover, the base APR is currently over 100%. Even if the exchange rate doesn’t rise, using cyclical or leverage strategies will break even in about a week!

2️⃣ Con side: Seeing that it's about to reach 1, why rush in to chop off the interest? The new proposal (cutting 33% of BGT’s yield) will be executed on the 21st, and the APR will definitely drop, at which point both the exchange rate and APR will fall!

Note: The above is for information sharing only, not investment advice. Please do your own research!

DeFi Enthusiast: BitHappy