As we continue to ride through a volatile 2022, many users are becoming aware that markets have structurally changed from the heydays of 2021, where high yields were in abundance, and market valuations are moving up only.
With rising Fed rates, inflation and crypto contagion from some of the biggest names in the space, crypto markets seen drawdowns in 2022, and are trapped in range-bound swings.
This means that compared to the past two years, investors and traders may not benefit as much from or “buy-and-HODL” or “farm-and-forget” strategies as compared to opportunistic short-term long/short trading.
Earn and Trade Long/Short Using LeverFi
We all know the popular saying “high risks, high rewards,” but where does high risks leave you in a volatile, bear market? When traders use LeverFi’s platform, they can perform leveraged trades with less risk.
LeverFi lets traders deposit a wide range of collateral including Curve-LP tokens, and trade changes in asset prices at up to 10x leverage. The collateral are sent to various platform such as Aave or Convex to generate yields of up to 10% for traders. This means that traders get to earn on their collateral, while trading at the same time.
LeverFi allows traders to both long and short assets with leverage, which means that traders can effectively maximize their opportunities in a sideways-bound market.
Chain Deployments and Growth Trajectory
LeverFi will initially be deployed on the Ethereum chain to source user interest, product feedback and market validation.
Subsequently, LeverFi will deliver native deployments on other blockchains with strong communities such as Avalanche, Arbitrum and more.
In the future, LeverFi will expand to include a consolidated platform that better aggregates yielding, liquidity, and trade routing across multiple chains, allowing for more flexible utilization of collateral, improved swap pricings, and a wider variety of assets.
Leveraged Spot Trading (non-PVP)
The LeverFi platform allows users to engage in leveraged spot trading. This means that when users enter a trade (e.g. long BTC) by margin, the underlying asset is actually purchased on the liquid secondary market via decentralized exchanges.
LeverFi is not a trade counterparty to our users, and is therefore not a PvP trading protocol.
We believe that a non-PvP design removes a key conflict of interest between the LeverFi protocol and traders using our platform, and also does not create unnecessary risks for the protocol in the event that markets start trending in a specific direction.
Trading Mechanics
Unified Collateral
- Traders are required to deposit collateral before they can start trading. LeverFi uses Chainlink USD price oracles to price collateral deposit values with publicly verifiable prices.
- Collateral deposited into LeverFi is then redeployed for yield on other DeFi protocols. Traders can claim the yield generated separately (non-compounding).
- LeverFi allow users to unify their collateral assets into the same basket, and leverage trade positions with larger sizes.
- Cross-margin can also help to spread risks across the entire collateral basket, lowering (but not removing) the chances of liquidation.
Optimized Trade Executions
- Traders using LeverFi do not have direct access to the trading assets, however, traders can withdraw trading profits if they have achieved a net positive profit and loss (PnL) portfolio.
- LeverFi trades are natively routed through multiple DEXs for optimized trade pricings, allowing traders to execute chunky trades with low slippages.
Robust User Protection Design
- Traders with a net negative profit and loss (PnL) portfolio will be limited on collateral withdrawals until borrowed assets are repaid to the lending pools.
- When traders leverage trade on LeverFi, all the open trading positions are entered, stored and settled on-chain. This ensure on-chain verifiability and interactions.
- Trading accounts that exceed the liquidation threshold will have their collateral liquidated to repay borrowed assets, and ensure that no bad debt are incurred by lenders.
Illustration on How LeverFi Works
To better illustrate how trading on Leverfi’s platform works, the following is a possible scenario:
- A trader deposits $10,000 worth of Curve-BUSDv2 tokens (4.7% APR) and $15,000 worth of Curve-tricrypto2 tokens (16.4% APR).
- Let’s assume a leverage ratio of 5x and LTV of 80% for the collateral deposited. The trader can therefore utilize up to $100,000 ( 25,000 * 0.8 * 5 = $100,000) worth of lending funds from the Lending Pools (“Leverage Liquidity”).
- Now, assume the same trader buys 5 BTC at $20,000 each, for a total sum of $100,000. The BTC purchase is routed through the native on-chain DEXs (Uniswap, Sushi, etc) for the best pricing.
- The trader has now used up all his Leverage Liquidity at this point and he can no longer trade unless he adds more collateral or the BTC increases in value. The BTC is held in Lever contracts, and not withdrawable by the trader.
- The $100,000 used by the Trader is borrowed from Lenders who deposit into the Lending Pools. Lenders earn interest rates on their assets lent out for as long as the trader has not repaid his borrowings.
- Idle liquidity in the Lending Pools is deployed to lending protocols (such as Aave) to generate passive yield.
- Lenders are protected by Liquidators who will liquidate the wallet below the Liquidation Threshold. Liquidated funds are first used to pay off borrowed funds and accrued interest, and the remaining goes to the Liquidator as a fee. This protects lenders’ assets, and ensure borrower accountability.
In the above example, the trader has successfully leveraged $25,000 worth of collateral to:
- gain $100,000 BTC worth of exposure; and also
- earn a weighted-average yield of 11.7% on his collateral.
Power Up Your Trading Game with LeverFi
Backed by world-class investors, LeverFi delivers Web3 innovation across liquidity management and leveraged trading.
LeverFi offers a unique platform for traders to yield farm, earn and leverage trade in size at the same time. With the revolution in DeFi taking shape, we are positioned as a unique offering within the crypto scene and are growing in popularity every day.
- Follow us on Twitter: https://twitter.com/leverfi
- Join our fast-growing Telegram community: https://t.me/leverfi
- Visit our website for more information: https://www.leverfi.io/
- Learn about the LeverFi product design: https://docs.leverfi.io/
