There Are NO REDEMPTIONS in the First Two Weeks (Here’s What That Means)
Redemptions are turned OFF for the 14 days after the launch of Liquid Loans.
Although the ability to redeem 1 USDL for 1 USD worth of PLS is essential to the Liquid Loans ecosystem, this functionality is deactivated at the start.
Read more to learn exactly why this is, and what it means for YOU.
Why USDL Redemptions are Turned Off
USDL redemptions are inactive for the first 14 days in order to:
- Give new vaults a chance to mint USDL without fears of being redeemed against. For example, say you are one of the first vaults to mint USDL, and you go and sell it on the market. You have an outsized probability of somebody redeeming USDL using your vault in this scenario.
- Discourage redemptions and encourage liquidity providing. No redemptions allows more USDL to be on the market and added to liquidity pools to help the health of both USDL and PLS.
What No Redemptions Means For You
Since there are no redemptions in the first 14 days, that means there is no immediate way to arbitrage USDL for profit.
This means that if you see cheap USDL (i.e. under $99.5), then you either have to wait for the Schelling Point and market pressure to repeg USDL to 1 USD, or wait for redemptions to active.
Either way (this is in no way financial advice, just a suggestion) USDL under $1 is likely a sure fire way to gain a relatively quick profit.
The Bottom Line
Two weeks will go by in the blink of an eye, however, it is important to understand that redemptions are inactive for the first 14 days.
They are inactive in order to foster more liquidity and a safe environment for new vault creation.
This means that arbitrageurs will not be able to instantly turn a profit on USDL by buying under $1 and redeeming.
However, this could give users an opportunity to buy USDL lower than it may ever go in the future.
