How to create a decentralized structured product that outperforms ETH or other coins by ~13%

If you want to create a synthetic position allowing you to maintain the exposure on ETH or other coins and earn more, it’s a high time to start.

For example, you keep a certain amount of ETH and want to profit from its possible growth earning more as a result.
Before, you could place your ETH on a decentralized platform (AAVE, Compound) and receive an insignificant percentage on top about 0.1–1% APY what doesn’t look attractive. *

However, there may also be more ways to gain profit.

For instance, in case you supply 100 ETH to Compound with a current interest rate of 0.17% APY, you will get additional 1.43 COMP. In total the rate will be 1.04% ** But still not too attractive.

Now let’s make some leverage magic.

STEP 1

You have 100 ETH.

Sell 50 ETH at the price of $264.

Place 13.200 on Compound in USDC, under it you can borrow DAI for 70% of your collateral. It will be 9240 DAI.

Change them to USDC and place them on the Compound again. Repeat 10 times.

You get a position:

Supplied $43,129 USDC at 1.69%
Borrowed $29,929 DAI at 8.62%

(+ 34.11 COMP
- $1914 net borrowing costs ) = $3562/264 = 13.49 ETH
- Leverage cost

STEP 2

Sell 50 ETH at the price of $264.

Open 2X leverage long position ETHUSD

As a result, we will get a structured product, which consists of two positions.

1. $13,200 Yield Farming
2. $13,200 Long 2X ETHUSD

Now let’s consider the possible scenarios:

1. Price increase by 50%

ETH price = $396
Compound $13,200
Long x2 $26,400

Total $39,600/396 = 100ETH +Profit from Yield Farming (~13.49 ETH)
Initial deposit: 100 ETH
Total: 113.49 ETH

2. Drop by 50%

ETH price = $132
Compound 13,200
Long x2 $0

Total $13,200/132 = 100ETH +Profit from Yield Farming (~13.49 ETH)
Initial deposit: 100 ETH
Total: 113.49 ETH

3. Flat

ETH price = $264
Compound $13,200
Long x2 $13,200

Total $26,400/264 = 100ETH +Profit from Yield Farming (~13.49 ETH)
Initial deposit: 100 ETH
Total: 113.49 ETH

You can change the proportions depending on your forecast about the cryptocurrency market.

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HodlTree is a second-generation decentralized lending protocol. Our mission is to provide significantly improved interest rates for ETH & BTC with a targeted rate of around 8–20% APY and expand the list of coins in the nearest future. We are developing a decentralized solution for cryptocurrency holders where they can earn money without losing control over their coins.

For a long position, you have to pay for leverage.
You need to have time to buy ETH in case of a price drop.
The price of the Compound token is subject to change.
Yield farming profitability is subject to change.
The collateral factor is subject to change.
A margin call will be earlier than the price will reach $132.

*In case interest rates in the Compound do not change
** With current prices.
*** Percentages may change

Disclaimer

The Content is for informational purposes only, you should not consider any such information or other material as legal, tax, investment, financial, or other advice.

References: http://www.predictions.exchange/compound/None