USE CASE #4 -LENDING BTC
Ready for a new MetalSwap Branded Use Case?
Let’s start immediately, and remember to try this use case straight away on MetalSwap TestNet Phase3!
Let’s imagine that you are availing yourself of a Borrowing service in a DeFi platform, and you put BTC as collateral to receive a loan, to perform any activity such as Margin Trading.
As you well know, the price of BTC will grow in the long run due to its design but you also know that another characteristic of BTC is high volatility and if this takes place, there will be a price Threshold in counter value, within which the smart contract will close your position by liquidating you.
That is unless you go and replenish the collateral.
And here is where the Insurance provided by MetalSwap comes to our aid, preventing this issue.
How? Let’s solve it together with a Practical example!
Important! Our platform runs in an ETH environment and the most widely used ERC-20 token anchored to BTC is WBTC. First, let’s go set up WBTC on the MetalSwap dashboard.
Assume that you take a loan of $19000 by placing as collateral 1 BTC with a countervalue of $24000 with the intention of closing it in the next two Weeks.
Assume that Dapp has the Liquidation Limit of 82%, in which case the position would be closed if BTC reaches countervalue of $19680.
Now, by opening in MetalSwap ‘s platform a downward position in the direction of the liquidation value we see that:
Dimension target: 1 WBTC
Duration: 15 DAYS
Cover- 0.3 WBTC (30%)
As you can see, by opening this insurance cover you will have a Liquidity Reward, automatically calculated, of 1799,11 $XMT.
By opening this position, if the BTC countervalue goes down, you will go into profit on MetalSwap and thus be able to go in and replenish the collateral borrowed, keeping your asset safe until you go to close the trade.
To open this position on MetalSwap’s platform, you will pay a Premium of 0.09087 wBTC, plus 0.3 wBTC Cover as margin to keep the position open whenever the price goes against the BTC price.
Once the Swap is closed automatically, after its Expiration date, the Cover will be returned when the price has dropped or remained the same as the opening. If the Swap is manually closed earlier, the Coverage will be returned minus a penalty.
If you want to keep this Swap open, our dashboard shows us that the WBTC price must never exceed the Threshold of 29642.7 USDT, otherwise your position will be Liquidated, eroding the entire Cover value.
WELL, THE TIME HAS COME TO OPEN THE SWAP!
Click the Execute Swap button, confirm your transaction, and your Swap is now OPEN!
You can click on it to see the situation of our current Opened Swap:
If the price increases over time, it will erode our WBTC 0.3 Coverage, however, we are comfortable in that your loan remains well Covered by your BTC put as collateral.
If the price goes down, the magic happened: your position goes in Profit following the difference between the commodity price and the moment you Opened the relative Swap, and if you wish, you can Close the position to buy more BTC and add them as collateral to your loan!
Essentially MetalSwap is used to hedge an established price, not allowing you to go below a certain Threshold; This allows you to know all the scenarios of your operation and holding off the volatility of the asset.
Now consider the two new buttons you can choose to click before your Swap expires:
> Refinancing Swap
> Close Swap
As mentioned earlier, if you wish to close your open Swap earlier than what has been set for any reason, you may do so, with a penalty. Your reward in XMT tokens will be proportional to the time your Swap was open and will not be what was indicated when you opened it.
By the way, if the price is approaching your Threshold but you don’t want to close or risk Liquidation, you can add some WBTC to raise the Cover and then click “Refinance Swap” to add more margin to the active Swap.
If the price falls below $23714.17 this position goes into profit by giving you the difference between our already purchased BTC and its new price!
Not only that, but you will also get $XMT rewards from using the MetalSwap app and your reward goes directly to the spot market to buy more $XMT ensuring consistent buying pressure directly from using the platform!
Now you can experience a Borrow service with much less anxiety!
You are now ready to test this 15-day Swap! We’ll see together how it goes!
What a time to be in DeFi!
❗ METALSWAP ‘s admins or moderators will NEVER contact you directly on any social under any kind of circumstances.
❗ Everything concerning $XMT ‘s smart contracts and addresses is shared by our official channels (list below), do not trust any different info from any different source.
To the MetalSwap!
… and beyond!
✎ What is MetalSwap?
MetalSwap is a decentralized platform that allows Hedging Swaps on financial markets with the aim of providing a coverage to those who work with commodities and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.
With MetalSwap we enable Hedge Swap transactions through the use of Smart Contracts, AMM style.
Kovan TestNet Phase3 infobox:
USDTTest -> 0x6dC0A769E20b4Ff186003f264C03E10d23d1A2f7
WBTCTest -> 0x4fE0C5E225a3bE22f8736225469dD8D86aDC0881
XMTT3 -> 0x63cFf925F431AdEA8a5cb19559dE4924E737E3fE
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