New Innovations Are Coming To Leveraged Trading
Leveraged trading isn’t new. It’s been around for decades, but blockchain technology has given it a huge boost — making trading more accessible and more transparent. These days, you no longer have to be entirely reliant on traditional financial institutions or banks to be able to trade. Through DeFi platforms, you can sidestep middlemen and their fees, remove barriers to entry and improve the overall accessibility and financial efficiency for the masses.
For users looking to trade on leverage on-chain, you are limited on how your collateral is utilized, how you can maximize your leverage, and the ability to perform advanced trades. This substantially relies on the platform you are trading on.
In this blog post, we are giving you an overview of what leveraged trading is, the limitations of existing options in the market, and how LeverFi’s unique solutions fill those gaps to empower traders.
Leveraged Trading
What is Leveraged Trading?
Using leverage allows you to trade with more money than you actually have. It’s a way to amplify your buying and selling power, so you can open positions worth more than the capital in your account. Depending on which crypto exchange you use, you could be borrowing as much as 100 times the amount of money in your account.
For example, a trader with $1,000 can open a position worth $10,000 with the use of 1:10 (10x) leverage.
Limitations of Existing On-Chain Leveraged Trading Platform
Existing leveraged trading platforms operate similar to how centralized exchanges work, which do not fully capitalize on the unique properties of DeFi, such as composability:
- There are no platforms offering cross-margin collateral trading.
- Assets used as trading collateral do not earn any yield.
- Most platforms offer vanilla leveraged trading capabilities, leaving you with limited options if you need to execute more advanced trading strategies.
How LeverFi Improves On-Chain Trading For DeFi Users
LeverFi has created innovative solutions to help you go beyond these existing limitations as you trade. Here’s an overview of each of them, and how they would benefit you:
1) Yield-Bearing Collateral
Existing platforms require users to choose between using their assets to trade or using them to earn yield. If a user wants to use their deposited collateral for trading, they must give up the potential for earning yield on those same assets.
With LeverFi, you can do both!
LeverFi redeploys your deposited collateral to platforms such as Convex and Aave to earn yield for you. By putting your assets to work, you can earn more than if you were only trading.
2) Unified Collateral
Existing on-chain trading platforms uses isolated collateral for each trading position opened, which makes it harder to manage risks.
LeverFi allows you to unify your collateral into one single collateral basket, enabling you to leverage trade larger positions. Unifying collateral also helps spread risks across the entire collateral basket, lowering (but not removing) the chances of liquidation.
To top that off, LeverFi accepts a wide range of collateral, from token majors (BTC, ETH) to stablecoins (USDT, USDC, DAI) to LP assets (Curve-LP, Uni-LP, Sushi-LP).
3) Advanced Trading Strategy Execution
While LeverFi’s focus is on creating an easy-to-use platform for leveraged trading, we have not forgotten about advanced traders. Our robust platform design can support traders who engage in pair trading or hedging/market-neutral strategies with leverage.
So if you are bullish on the Ethereum Merge and wanted to beta hedge, you can borrow BTC from our BTC Lending Pool to purchase ETH, i.e. performing a Long ETH / Short BTC hedged trade.
Traders can use LeverFi alongside DEX or CEX derivatives such as futures and options to hedge, arbitrage, execute carry trades or create customized payoff strategies.
The Future is LeverFi
LeverFi is a game-changer in the leveraged trading space. And we are excited to have you onboard our journey! Our unique product offerings give you an edge as a leveraged trader, empowering you in a crowded DeFi space.
We hope this blog has helped you understand the potential LeverFi has to level up your leveraged trading, whether you are just starting or have been in the DeFi space for years.
We cannot wait to hear what you think of LeverFi, so keep engaging with us!
- Follow us on Twitter to learn more: https://twitter.com/leverfi
- Join our fast-growing Telegram community: https://t.me/leverfi
- Visit our website for more information: https://www.leverfi.io
- Check out our blog for product updates & DeFi insights: https://medium.com/leverfi
- Learn about the LeverFi product design: https://docs.leverfi.io
