Economic Risks

Sell-offs:

Sell-offs occur when large amounts of MAI tokens are sold and result in the lowering of MAI’s market price. Large sums of MAI being sold in the market won’t necessarily decrease the price of MAI. The effects of a sell-off depend on various factors, including the speed of the sell-off as well as the trading volume at the time. Below are some mitigating factors to a sell-off scenario.
    When the price of MAI falls below $0.99 or rises above $1.01, users can engage in risk-free arbitrage through the Swap. Read more about Anchor here.
    If the price of MAI lowers, users will be able to repay their debt at a discount. This would create buy pressure for MAI, increasing its price.

Hyper-Borrowing:

Hyper-borrowing occurs when large amounts of MAI tokens are borrowed, flooding the market with excess supply, and reducing the market price for MAI. Large amounts of MAI being borrowed won’t necessarily decrease the price of MAI. The MAI tokens would need to be listed on the market to increase the supply of available MAI. If this occurs, the price of MAI could experience downward pressure. Below are some mitigating factors to this possibility.
    In order to prevent a hyper-borrowing event, the QiDao Protocol will set debt ceilings, which will continually increase with the size of the network. Users will be encouraged to keep total MAI borrowed near the ceiling to prevent large sums of MAI from being borrowed at once.
    If large amounts of MAI enter the market and lower the price, the community can use Anchor to arbitrage the price closer to the peg.
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