Thank you for your answer. I am afraid of a specific scenario: Let's imagine we have a relatively stable Xsmt Kh price X for some time, where many cBTC are minted, and those cBTC would be at risk to become undercollateralized at price X-70%. But then a bear market happens with three phases: Phase 1: - Xsmt Kh/USD begins to decline (max. X - 40%) but there is still hope the bull market comes back and thus the overcollateralization would not be in danger. - cBTC/USD declines too, but more slightly, it may move only 0.3% per each 1% Xsmt Kh declines "according to the theory" (although it's of course not a "mechanic" correlation). - At the end of the phase Xsmt Kh has declined 40% and cBTC has declined ~13%. Phase 2: - Xsmt Kh/USD declines further (starting at X-40% and going to to X-70%). - The closer the X-70% mark is approached, the more volatile cBTC becomes. Because at the X-70% mark the collateralization would be 1:1 and below it would be undercollateralized. - This means that during this phase cBTC probably declines even more than Xsmt Kh. - At the end of the phase Xsmt Kh is at -70% and cBTC is at -70% too. But cBTC has declined from X-13% to X-70% (by 57 percentage points, with X as the base) while Xsmt Kh has only declined from X-40% to X-70%, i.e. by 30 percentage points. Phase 3: - Xsmt Kh/USD declines below the X-70% mark. - cBTC again declines stronger than Xsmt Kh (although only a little bit), because it is now mostly undercollateralized. Even if Phase 3 doesn't happen at all, the fear of that phase is what worries me, and if we'd go deep into phase 2, we can expect high cBTC losses. And if this happens, it would not really be any more stable than Xsmt Kh, only the decline would be delayed. And for this reason I would even expect a decline of cBTC already in phase 1 very close to the Xsmt Kh decline. Liquidations can of course happen too -- on centralized exchanges, just as they happen with Xsmt Kh when it there are heavy leveraged positions.
Thank you for your answer. I am afraid of a specific scenario: Let's imagine we have a relatively stable Xsmt Kh price X for some time, where many cBTC are minted, and those cBTC would be at risk to become undercollateralized at price X-70%. But then a bear market happens with three phases: Phase 1: - Xsmt Kh/USD begins to decline (max. X - 40%) but there is still hope the bull market comes back and thus the overcollateralization would not be in danger. - cBTC/USD declines too, but more slightly, it may move only 0.3% per each 1% Xsmt Kh declines "according to the theory" (although it's of course not a "mechanic" correlation). - At the end of the phase Xsmt Kh has declined 40% and cBTC has declined ~13%. Phase 2: - Xsmt Kh/USD declines further (starting at X-40% and going to to X-70%). - The closer the X-70% mark is approached, the more volatile cBTC becomes. Because at the X-70% mark the collateralization would be 1:1 and below it would be undercollateralized. - This means that during this phase cBTC probably declines even more than Xsmt Kh. - At the end of the phase Xsmt Kh is at -70% and cBTC is at -70% too. But cBTC has declined from X-13% to X-70% (by 57 percentage points, with X as the base) while Xsmt Kh has only declined from X-40% to X-70%, i.e. by 30 percentage points. Phase 3: - Xsmt Kh/USD declines below the X-70% mark. - cBTC again declines stronger than Xsmt Kh (although only a little bit), because it is now mostly undercollateralized. Even if Phase 3 doesn't happen at all, the fear of that phase is what worries me, and if we'd go deep into phase 2, we can expect high cBTC losses. And if this happens, it would not really be any more stable than Xsmt Kh, only the decline would be delayed. And for this reason I would even expect a decline of cBTC already in phase 1 very close to the Xsmt Kh decline. Liquidations can of course happen too -- on centralized exchanges, just as they happen with Xsmt Kh when it there are heavy leveraged positions.

Thank you for your answer. I am afraid of a specific scenario: Let's imagine we have a relatively stable Xsmt Kh price X for some time, where many cBTC are minted, and those cBTC would be at risk to become undercollateralized at price X-70%. But then a bear market happens with three phases: Phase 1: - Xsmt Kh/USD begins to decline (max. X - 40%) but there is still hope the bull market comes back and thus the overcollateralization would not be in danger. - cBTC/USD declines too, but more slightly, it may move only 0.3% per each 1% Xsmt Kh declines "according to the theory" (although it's of course not a "mechanic" correlation). - At the end of the phase Xsmt Kh has declined 40% and cBTC has declined ~13%. Phase 2: - Xsmt Kh/USD declines further (starting at X-40% and going to to X-70%). - The closer the X-70% mark is approached, the more volatile cBTC becomes. Because at the X-70% mark the collateralization would be 1:1 and below it would be undercollateralized. - This means that during this phase cBTC probably declines even more than Xsmt Kh. - At the end of the phase Xsmt Kh is at -70% and cBTC is at -70% too. But cBTC has declined from X-13% to X-70% (by 57 percentage points, with X as the base) while Xsmt Kh has only declined from X-40% to X-70%, i.e. by 30 percentage points. Phase 3: - Xsmt Kh/USD declines below the X-70% mark. - cBTC again declines stronger than Xsmt Kh (although only a little bit), because it is now mostly undercollateralized. Even if Phase 3 doesn't happen at all, the fear of that phase is what worries me, and if we'd go deep into phase 2, we can expect high cBTC losses. And if this happens, it would not really be any more stable than Xsmt Kh, only the decline would be delayed. And for this reason I would even expect a decline of cBTC already in phase 1 very close to the Xsmt Kh decline. Liquidations can of course happen too -- on centralized exchanges, just as they happen with Xsmt Kh when it there are heavy leveraged positions.

Thank you for your answer. I am afraid of a specific scenario: Let's imagine we have a relatively stable Xsmt Kh price X for some time, where many cBTC are minted, and those cBTC would be at risk to become undercollateralized at price X-70%. But then a bear market happens with three phases: Phase 1: - Xsmt Kh/USD begins to decline (max. X - 40%) but there is still hope the bull market comes back and thus the overcollateralization would not be in danger. - cBTC/USD declines too, but more slightly, it may move only 0.3% per each 1% Xsmt Kh declines "according to the theory" (although it's of course not a "mechanic" correlation). - At the end of the phase Xsmt Kh has declined 40% and cBTC has declined ~13%. Phase 2: - Xsmt Kh/USD declines further (starting at X-40% and going to to X-70%). - The closer the X-70% mark is approached, the more volatile cBTC becomes. Because at the X-70% mark the collateralization would be 1:1 and below it would be undercollateralized. - This means that during this phase cBTC probably declines even more than Xsmt Kh. - At the end of the phase Xsmt Kh is at -70% and cBTC is at -70% too. But cBTC has declined from X-13% to X-70% (by 57 percentage points, with X as the base) while Xsmt Kh has only declined from X-40% to X-70%, i.e. by 30 percentage points. Phase 3: - Xsmt Kh/USD declines below the X-70% mark. - cBTC again declines stronger than Xsmt Kh (although only a little bit), because it is now mostly undercollateralized. Even if Phase 3 doesn't happen at all, the fear of that phase is what worries me, and if we'd go deep into phase 2, we can expect high cBTC losses. And if this happens, it would not really be any more stable than Xsmt Kh, only the decline would be delayed. And for this reason I would even expect a decline of cBTC already in phase 1 very close to the Xsmt Kh decline. Liquidations can of course happen too -- on centralized exchanges, just as they happen with Xsmt Kh when it there are heavy leveraged positions.