Understanding Liquidity Management For Investors And Issuers

Product Tinlake/ Centrifuge app
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Understanding Liquidity Management For Investors And Issuers

Update on Redemption Requests on Tinlake

TL;DR

  • Strong Investor demand for redemptions has reduced available pool liquidity.
  • Redemption demand is correlated with recent market conditions.
  • In some pools, new redemption requests will be fulfilled once the underlying assets mature (or additional investments are made).
  • Issuers with outstanding redemption requests will not be able to finance new assets until all redemption requests are fulfilled.
  • Locked redemption requests will continue to accrue interest but will not continue to earn CFG rewards. Locked redemption orders can be canceled at any time.
  • In response to these shifting market conditions, the Centrifuge and Tinlake ecosystems continue to fully operate as designed.

Due to the recent market conditions, redemption requests have increased in some of Tinlake’s revolving pools. Until investors add more liquidity, this leaves repayments from Borrowers as the main source of incoming liquidity. In pools where assets have not yet reached maturity, redemption requests will be fulfilled once additional liquidity becomes available.

How epoch-based investments/redemptions work in Tinlake
In times of no available liquidity in a pool, locked redemption requests remain locked until liquidity becomes available.

This happens two ways:

  1. The issuer receives repayment of an asset
  2. More liquidity is added to the pool by new and/or existing investors

For Tinlake’s Revolving Pools, all investment inflows and outflows are locked over a defined period of time, this is what we call an “Epoch”. Epochs for TInlake pools are usually set to a minimum of 24 hours. After the minimum epoch time has passed, locked orders are executed following predetermined priorities (e.g. DROP/senior tokens have a higher redemption priority than junior/TIN tokens and risk metrics such as the Min TIN buffer are also taken into account.)

Throughout the epoch, the issuer can use the available liquidity reserve after redemption transactions have been executed to finance asset originations through to the next epoch. Repayments of assets can happen at any time throughout the epoch. Funds received are collected in a separate reserve to provide investors priority for their redemptions.

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What this means for Investors during this time:

  • Longer time periods until redemption requests are fulfilled
  • Less liquidity available for redemptions
  • Locked redemption requests continue to accrue interest until fulfilled but do not continue to earn CFG rewards. Locked redemptions orders can be canceled at any time
  • It’s possible that redemption orders are partially fulfilled.

What this means for Issuers during this time:

  • Less liquidity available for financing new assets
  • Greater demand for redemptions
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