Arbitrage & Leverage with Teddy Protocol and Defrost Finance
In this article we will show you a creative way to use your AVAX.
Here’s the Overview:
- Borrow $TSD using $AVAX from Teddy Cash
- Swap $TSD for more $DAI.e @Axial 🔺
- Deposit $DAI.e into BENQI
- Use qiDAI to mint $H20 @Defrost
- Deposit $H20 into Curve Finance
- Deposit Curve LP into Defrost Finance
- Repeat
Now let’s break down the details, one step at a time.
Step 1: Borrow $TSD using $AVAX from Teddy Cash
Head over to Teddy Cash.
Use the Trove option to borrow $TSD.
This option has a minimum collateral ratio of 110%, liquidation fee of $200 and borrow fee of 0.52% (the fee varies between 0.5% and 5% depending on TSD redemption volumes).
Step 2: $TSD for more $DAI.e @Axial 🔺
Head over to Axial.
Swap the $5,500 TSD with DAI.e that takes advantage of the arbitrage and gives up to 1% bonus right now. This more than pays for the borrowing fee of $TSD.
Step 3: Deposit $DAI.e into BENQI
Head over to BENQI and supply DAI.e as per below. You will then receive qiDAI which will be used in the next step.
Important note: You can stop here and enjoy the current returns in BENQI or implement a folding strategy, but if you decide to further leverage your strategy, then do look out for the next steps below.
Step 4: Use qiDAI to mint $H20 @Defrost
Next, mint $H20 at Defrost Finance. This option has a minimum collateral ratio of 110%, liquidation fee of 8% and borrow fee of 1.00% (It’s important to not get too close to the minimum collateral ratio and have a margin of safety).
Step 5: Deposit $H20 into Curve Finance
Deposit the $H2O that was minted into the Defrost H20 factory pool at Curve.
https://avax.curve.fi/factory/8/deposit
Step 6: Deposit Curve LP into Defrost Finance
Deposit the Curve LP at Defrost Finance.
https://avax.curve.fi/factory/8/deposit
Step 7: Further Leverage
You can adjust your leverage by borrowing more $TSD or by repeating the same steps using your farm rewards.
Conclusion
Leverage is a very powerful tool but not something you want to set and forget. Understand the pros and cons before beginning this process and factor in the risk of the tokens before making your decision.
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