Fully-Redeemed Against: A Personal Story (It Worked Out Actually)

I have a confession.

About two weeks into Liquid Loans launch, I lost all of my PLS …

Well at least most of it.

But the good news is it actually worked out, and I ended up with MORE $PLS than before.

Here’s how it went down.

How It Went

I fell asleep, and when I awoke my vault was fully-redeemed. 

This means that another user took most of the PLS from my vault and paid off an equivalent amount of my debt.

This happened because I found myself as the lowest collateralized vault after redemption volume had increased significantly.

Although I didn’t actually have an economic loss, because I kept my borrowed USDL, I lost most of my PLS.

But here’s where it gets interesting.

Why It Worked Out

The price of PLS dipped 15% the day after I got redeemed.

So instead of holding a large amount of PLS, I was almost entirely in USDL.

I was then able to buy back at a lower price, and I ended up with much more PLS.

This goes to show that redemptions are mostly neutral, unless you don’t act fast enough and the price of PLS moves without having exposure. 

If you don’t buy your position back it could end up working out like described above, or it could be detrimental as I am about to describe.

How It Could’ve Gone Badly

The price of PLS could have risen 15%, rather than falling the same amount.

In that case, I would’ve missed that awesome gain and would’ve had to contemplate buying back higher, which nobody wants to do.

Even worse, I could have opted to not buy back at all, and completely missed the next potential bull run.

Either way, it is best to understand how to not get redeemed against.

But, if you do, stay vigilant and get your position back as soon as possible.

The Bottom Line

I got lucky. 

The price of PLS could have easily risen instead of falling, causing a completely different outcome and feeling.

But nonetheless, getting redeemed is not the end of the world.