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 changeDisclaimer
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