Some liquidation days above 10M were part of a larger downtrend. For example, May 23 2021, and days at the end of January 2022. These liquidation dates will not be considered separate drawdowns.

Introduction

The price of LUNA has seen quite a lot of volatility over the last year. In May 2021, the price came down from around $18 all the way to $5. Also in December 2021 when the price of LUNA dropped from $100 to $50. These large drawdowns cause liquidations. Liquidations happen when the value of the collateral of users drops significantly. At a certain point, usually, when the value of the borrowed money is at 80% of the value of the collateral, the users get liquidated. This essentially means that the users are forced to pay back their loans and lose a percentage of their collateral.

In this dashboard, we will look at the drawdowns of LUNA that caused a lot of liquidations on the Anchor protocol. Here, users are able to borrow against their LUNA using an asset called bLUNA. Once we have determined the drawdowns that caused a lot of liquidations, we will analyse how many days it took for LUNA to regain the price level before the drawdown.

Methodology

1. In order to plot the price chart of LUNA in combination with the total amount liquidated per day, the table terra.oracle_prices was used in combination with anchor.liquidations.
2. Next, we find the days where the total amount liquidated exceeded $10M. These days will be classified as the start date of the drawdown.
3. We then calculate the length of the drawdown, or recovery, why finding the first date after the start date where the average price of date is larger than the average price of the start date: date.avg_price > start_date.avg_price
4. Now that we have found the recovery date, we can calculate the difference between the two dates to find the length of the recovery.
5. Finally, we select the max price of the start date and the minimum price between the start date and the recovery date to calculate the how much the price of LUNA decreased in the drawdown.

Results

On this chart, we can the avg, min and max daily price of LUNA along with the total amount of USD liquidated per day. We can see that the price of LUNA is going down when the total amount liquidated is high. The $10M liquidation threshold we are using in this dashboard is plotted as well. We will not consider the recent drawdown on April 11th as we have not recovered yet.

Using this graph, we are able to identify 10 separate drawdowns. A table is provided with the start date (liquidation date), the recovery date, the number of days it took to recovery from the drawdown, the maximum price on the liquidation date, the minimum price between the liquidation date and the recovery date and finally the % drawdown between the max price and the minimum price:

We can see that the largest drawdown was in May 2021, when the drawdown was about 73%. It took 76 days to recover from this drawdown. The most recent drawdown on the 21st of January 2022 was the second-largest in terms of drawdown percentage at 44.5%. It took 36 days to recover from this drawdown. The other drawdowns where between 10 and 30%, all with a varying number of recovery days.

Finally, we'll look at the average number of days it took to recover from a drawdown of a certain percentage. We can clearly see that it takes longer to recover from larger drawdowns. We can also see that some percentage bins have around the same number of recovery days. For instance, a drawdown of 0-15% should take only about 2 days to recover and a drawdown of 15%-40% should take around 1 week to recover. Above 40%, there is not much data. But based on the current date it could take anywhere from 1 month to 2 months to recover from a 40% drawdown.

Key findings

• There have been 10 separate liquidation-inducing drawdowns in the price of LUNA where the total liquidated amount was over $10M.
• The largest drawdown was in May 2021 at 76%. It took 76 days to recover.
• For drawdowns between 0-15%, it takes an average of 2 days to recover.
• For drawdowns between 15-40%, it takes about 1 week to recover.
• For drawdowns over 40%, the recovery period can be anything from 1 month to a couple of months.