One Step Forward, Three Steps Back
Last month XH5 took a huge step forward when the Shave Vault was permanently locked on October 6th. For three years I have been making donations into that account in order to repurchase the outstanding XH5 tokens that have been given away. Now, with the account locked, nobody can remove those donations. They are permanently locked in liquidity pool shares that will hopefully trade XH5 for as long as the Stellar network exists.
This should keep the price of XH5 balanced against not only XLM, but CSM, LSP, AQUA, Indocoin, and many more. The Shave Vault now has XH5 permanently paired against 28 other tokens on the Stellar DEX.
Unfortunately, what has become known as the Bloody Alice Incident occurred just prior to locking the Shave Vault, and it actually set back not only the XH5 token but the Stellar Drones as well.
While building out another Stellar Drone Vault, a miscalculation created an unbalanced liquidity pool that dumped thousands of dollars of worthless tokens on the market creating a feeding frenzy for arbitrage bots. These arbitrage bots constantly attempt to send small amounts of XLM to themselves via path payments that they hope return more than they sent. This is possible because of slight discrepancies in price across the order books. The Bloody Alice Incident created a massive discrepancy that was quickly taken advantage of, with arbitrage bots buying worthless tokens and selling them into the unbalanced liquidity pools for a profit.
It was a very expensive disaster that stripped much of the future funding out of both XH5 and the Stellar Drones. All of those funds were stripped from my own wallets and the forced liquidation caused valuable tokens to be sold well below where they had been purchased. Many people who had open buy orders for Stellar Drones were able to scoop them up at a massive discount.
Just to be clear, these were tokens that I had purchased and which were sold at a massive discount. I lost a significant amount of money because of my mistake, and though I have learned how not to make that mistake again in the future, it was a devastating blow to my confidence.
The Stellar Drones, and XH5 now that the Shave Vault has been permanently locked, cannot be stopped. They will continue to trade autonomously for as long as the Stellar network exists.
But that says nothing about their price.
Just because a massive portion of the total XH5 supply is locked up in liquidity pool shares inside the Shave Vault does not guarantee that the price will grow or even remain stable. It very much depends on the interplay between assets against which it is paired. If those assets lose value the Shave Vault will automatically sell XH5 in order to purchase more of the asset that is decreasing in value. This puts downward pressure on the market and is yet another reason that I stress to everyone that they should not purchase XH5.
XH5 will find its own equilibrium, most likely after the distribution phase is complete. And that won’t happen until after Phase 4 has begun, which doesn’t start until July 2023.
To be honest, I am both surprised and grateful for the number of XH5 holders that have decided not to dump on the market. This includes early airdrop recipients as well as people I have introduced to Stellar, people who have created a wallet and learned about trustlines as their first introduction to cryptocurrencies.
I am grateful to all of you for making this life token experiment more meaningful.
Life is your Adventure, Live Your Dream