Trading: The Long & Short Positions

Lendefi will deliver leveraged trading for both bull and bear markets.

Lendefi Protocol
Jul 4, 2021 · 3 min read

The Lendefi protocol will bring advantages to lenders and traders within the DeFi environment. With Lendefi’s imminent mainnet launch onto the Binance Smart Chain, we discuss the two forms of leveraged trading that will be available through the protocol. These different trading options will ensure that Lendefi has relevance during both bull and bear markets.

Lendefi benefits both parties within the DeFi lending equation. Lenders are able to generate interest payments on digital assets and enjoy greater returns than those delivered by the fiat banking industry. Traders are able to borrow funds through undercollateralized loans to access leveraged trading positions and improve their potential profits. Both parties are secured by the Lenedfi protocol, which automates and monitors the loan and trading positions.

We’ve discussed the Lendefi model in greater depth within our previous article: The Value Of LDFI Tokens.

The majority of the user interaction with the protocol will occur when traders access leveraged trades. With Lendefi, traders will have the option to access both long and short leveraged trading positions. This will allow traders to profit from the rises and falls inherent within cryptocurrency markets.

To identify the opportunities of these two types of trades it is instructive for us to discuss how they function.

Long Leveraged Trades

A long trading position reflects a trader’s bullish market sentiment. In a long trade, the trader invests into assets based upon their speculation that the value of the asset will rise. Long trading positions are viewed as a more traditional investing perspective.

The leveraged long trading positions delivered by the Lendefi protocol mean investors can deposit digital assets into the protocol and borrow against them by a factor of up to five. The investment is then placed into an approved digital asset such as BTCB and CAKE. If the value of the chosen asset rises, the lender can close the trading position and extract their leveraged profits from the protocol.

Short Leveraged Trades

A short trading position is adopted when a trader expects the price of an asset to fall. In this case the trader borrows the digital asset from the lending pool and pays a fee for this service. The assets are then sold at the current market price and if the market falls, those assets are repurchased at the lower price. The trader is left with a profit that reflects the asset’s price drop because they were able to purchase more of the asset at a lower price than they originally borrowed.

The leveraging of a short trading position functions in the same manner as a long trading position. Traders can choose how much they wish to borrow from the lending pool against their initial deposit.

Trading For Bulls And Bears

Lendefi’s ability to offer both long and short leveraged trading positions delivers greater flexibility for cryptocurrency traders. The two trading positions provide relevance for Lendefi in both bull and bear markets. Without the option for short trading positions, Lendefi would have less relevance during bear market cycles.

As the protocol moves rapidly towards mainnet launch on the 12th of July, the functionality inherent within the protocol is undergoing increased testing and utilization. During this period, both the long and short trading tools can be simulated to ensure that they are functioning correctly.

We will continue to address Lenefi’s functionality and user interface in further detail within our upcoming articles and videos.

The Lendefi protocol will deliver leveraged trading and secured lending for cryptocurrency markets. Utilizing an undercollateralized loan model, Lendefi facilitates a trustless relationship between lender and borrower, managed by the protocol to remove counterparty risk.

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Leveraged trading via secured undercollateralized loans.