Quick Review for appreciation after 12 days of leveraging $sOHM into $wsOHM
Hi Ohmies! This article is a sequel of ‘How to cast a magic spell to your $OHM and (3,3) strategy using Abracadabra.money’ to review quickly how much values are appreciated after 12 days using leverage and share some updates. If there was some doubt or questions before ape into leveraging because of liquidation risks, I hope this article be helpful.
Tl; dl: In case I borrowed 50% with 3x loops, I earned 81.3% more than the case if I didn’t use leverage and liquidation price decreased to 16.77%
Suggestion: Before you read below, read the prequel first to understand how this product works and the options I choose.
Appreciation Comparison
Let’s get into the most important part first; how much values are increased? See the screenshot below.
- Left shows metrics on 23rd Aug at the time of leveraging. Index was 12.4
- Right shows metrics on 4th Sep at the time of writing. Index is 14.5
The value of early capital was,
$110,249 — $51,913 = $58,336
(at the prequel article, it was $59,840, but it has reduced a bit during the staking process)
The current net worth is,
$141,618 — $51,913 = $89,705
So the capital appreciation is,
$89,705 — $58,336 = $31,369
While 12 days, compared to the early capital, the price has risen 10.99%, and the index has risen 16.93%, so, naturally, the value has increased 29.78%. But calculating fluctuation of price and index is no great import but more meaningful to calculate how much we gained from the leveraging.
So what if we didn’t ape with leverage? The asset would be increased as,
$58,336 * 1.1099 * 1.1693 = $75,708
so the benefit would be as,
$75,708 — $58,336 = $17,302
But because we gained $31,369 from using leverage, the pure effect of the leverage is,
$31,369 — $17,302 = $14,067
This $14,067 is 44.84% of the total gain of $31,369, and we earned 81.3% more than the case if we didn’t use the leverage.
(borrowing 50%, looping 3x)
How has the liquidation risk changed?
At the time of right after leveraged, the liquidation price of $OHM was $184.81, and the price of 1 $OHM was around $285.91.
(at the time of being, I needed to calculate it manually using $wsOHM price)
So if the price of $OHM fell by around 35.36%, it would be on the verge of liquidation.
But now we can see the liquidation price has decreased to $153.81, and the decreased amount of $31 is 16.77% of $184.81. So compared to the price of $OHM at the time of aped, the fall rate to be liquidated has increased from 35.36% up to 46.2%. Amazing!
Conclusion
Since the $wsOHM compound itself same as $OHM, the liquidation price has fallen spontaneously!
This means if you enter at the proper stage, you can keep getting benefits using leverage and reduce the liquidation risk while the collateral value grows stably. So, is there any reason not to ape?
But it’s only proper to enter when you’ve got a conviction that the current price of $OHM will not drop to liquidation price. Maybe I was fortunate, so for this, you will need to research and monitor how everything is going inside of OlympusDAO, not only price or stuff.
Wrapping up…
It was simple calculations, but I wanted to share the real numbers with demonstration and how this economical product works. Through this article, I hope more people understand leverage and participate in (3,3).
I started this article for education beyond (3,3) but now would like to continue more series entitled “Understanding Olympus” with various contents.
I want to express my gratitude and love to all my colleagues and friends in OlympusDAO, who continue to create unprecedented product in DeFi world.
Writer on Twitter: @Dave_GMI
As always, Ohmies, (3, 3) and see you in OT.
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