Difference between revisions of "Investing & Trading with Decentralized Loans and Assets on DeFiChain"
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'''🡺 The best case for this investment: Asset price decreases and DFI price increases''' | '''🡺 The best case for this investment: Asset price decreases and DFI price increases''' | ||
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+ | <hr> | ||
==Part 2: Liquidity mining== | ==Part 2: Liquidity mining== | ||
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'''🡺 The best case for this investment: The price of the asset increases''' | '''🡺 The best case for this investment: The price of the asset increases''' | ||
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<hr> | <hr> | ||
=== Liquidity Mining – Long DFI / Asset neutral === | === Liquidity Mining – Long DFI / Asset neutral === | ||
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− | |[[File: | + | |[[File:rading Liquidity Mining – Long DFI - Asset neutral.png|alt=|right]]'''<big>Investment thesis</big>''' |
*Generate crypto cashflow with liquidity mining. | *Generate crypto cashflow with liquidity mining. | ||
− | * | + | *Long term the DFI price will increase and the asset price will stay unchanged. |
'''<big>DefiChain procedure</big>''' | '''<big>DefiChain procedure</big>''' | ||
− | * | + | *Put some coins (e.g. DFI) as a collateral into decentralized loan and mint decentralized token (e.g. TSLA token) + dUSD |
− | + | *Put dUSD and asset with the pool ratio into liquidity mining | |
− | *Put dUSD and asset | ||
''<big>Goal in the future</big>'' | ''<big>Goal in the future</big>'' | ||
*Get DFI rewards with each minted blocks + trading fees | *Get DFI rewards with each minted blocks + trading fees | ||
− | *Remove liquidity | + | *Remove liquidity |
+ | *If the pool ratio is different to start swap missing asset/dUSD | ||
+ | *If needed: Buy missing asset/dUSD | ||
+ | *Close loan by putting asset token/dUSD + interest back | ||
− | '''Profit:''' <code> | + | '''Profit:''' <code>LM rewards/fees - interest - loss of pool ratio change</code> |
'''<big>Remarks</big>''' | '''<big>Remarks</big>''' | ||
− | + | *LM block rewards are paid in DFI | |
− | *LM block rewards are paid in DFI | + | *The fees from LM are paid in asset token and dUSD |
− | *The fees from LM are in asset token and dUSD | + | *Pool ratio change reduces your overall profit 🡪 asset neutral position |
− | * | + | *Your DFI amount getting back in step 6 is the same as in step 1 → you open a long position on DFI |
− | * | + | *Not all your capital is generating rewards (2/3 – 1/10 with respect to loan collateral) → reduced yield rate |
'''<big>Example</big>''' | '''<big>Example</big>''' | ||
− | + | Generate 1 TSLA and 700 dUSD with 1,120 DFI (200% collateralization and DFI price $2.50). Put them into Liquidity Mining with a DEX price of 700 dUSD/TSLA. | |
<code>liquidity token = sqrt(TSLA token * dUSD token) = sqrt(1 * 700) = 26.45</code> | <code>liquidity token = sqrt(TSLA token * dUSD token) = sqrt(1 * 700) = 26.45</code> | ||
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<code>dUSD = 1000 TSLA 🡺 dUSD = 836</code> | <code>dUSD = 1000 TSLA 🡺 dUSD = 836</code> | ||
− | Removing liquidity | + | Removing liquidity will give you 0.164 less TSLA and 136 more dUSD. Swapping the 136 dUSD will result in an overall amount of <code>TSLA = 0.836 + 0.136 = 0.972</code>. |
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− | If in the same time frame DFI | + | ''<u>0.028 TSLA are missing</u>'' to close the loan and must be bought from reward income. |
+ | If in the same time frame the DFI price dicreases to $4.00, you will make additionalyl to ''<u>your Liquidity Mining rewards</u>'' a ''<u>profit of $1,680</u>'' with your DFI long position. | ||
− | '''🡺 The best case for this investment: | + | '''🡺 The best case for this investment: Pool ratio remains unchanged and DFI increases.''' |
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<hr> | <hr> |
Revision as of 19:06, 29 September 2021
We explain DeFiChain - Investing & Trading with Decentralized Loans and Assets on DeFiChain
Part 1: Long and short positions with stock token
With decentralized loans and assets on DefiChain, you can invest in different assets betting on increasing (long) or decreasing (short) prices. We will explain 3 different ways of investing. |
Long position - Neutral DFI
Investment thesis
The future price of an asset will be higher than it is today. DefiChain procedure
Goal in the future
Profit: Remarks
🡺 pay attention of the pool ratio
Example With a DFI price of $2.50 you sell 280 DFI, and receive 700 dUSD. You buy 1 TSLA for those 700 dUSD and hold it. After some time the TSLA price rises to 1000 dUSD and the DFI price to $4.00. Selling TSLA for dUSD gives you 1000 dUSD and you make 300 dUSD profit.
🡺 The best case for this investment: The asset price increases |
Short position - Long DFI
Investment thesis
The future price of an asset will be lower than it is today. DefiChain procedure
Goal in the future
Profit: Remarks
🡪 pay attention of the pool ratio
🡪 you open a long position on DFI
🡪 reduced yield for short position on asset
Example With a DFI price of $2.50 you put 280 DFI into a decentralized loan = $700. For the value of $700 you get 0.5 TSLA (200% collateralization and TLSA price of $700). You sell this 0.5 TSLA on DEX and get 350 dUSD. After one year the TSLA price decreased to $500 and the DFI price increased to $4.00. Now you buy back the 0.5 TSLA for 250 dUSD and 0.01 TSLA for 5 dUSD (interest). With 0.51 TLSA you can now close your loan and make 95 dUSD profit. You also receive back your DFI, which are now worth $1120 and you make an additional profit of $ 420. Your DFI long position was the right choice. 🡺 The best case for this investment: The Asset price decreases and DFI price increases! |
Long position - Long DFI (leverage)
Investment thesis
The future price of an asset and DFI will be higher than it is today. DefiChain procedure
Goal in the future
Profit: Remarks
🡪 pay attention of the pool ratio
🡪 you open a long position on DFI
🡪 reduced yield for long position on asset
Example With a DFI price of $2.50 you put 280 DFI into a decentralized loan. For the value of $700 you get 350 dUSD (200% collateralization). You use this dUSD to buy 0.5 TSLA on DEX. After one year TSLA price goes up to $1000 and DFI price up to $4.00. Now you sell the 0.5 TSLA for 500 dUSD. With 357 dUSD (350 dUSD plus 7 dUSD fee) you can close your loan and made 143 dUSD profit. You also receive back your DFI, which are now $1120 worth and made an additional profit of $ 420. Your DFI long position was right. 🡺 The best case for this investment: Asset price decreases and DFI price increases |
Part 2: Liquidity mining
With decentralized loans and assets on DefiChain you can generate cashflow with liquidity mining. In this case you have four different ways depening on your investment strategy. |
Liquidity Mining – Neutral DFI / Asset long
Investment thesis
DefiChain procedure
Goal in the future
Profit: Remarks
Example Swap 560 DFI to 700 dUSD and 1 TSLA, which has an overall value of $1400 (DFI price $2.50). Put both of them into LM with a DEX price of 700 dUSD/TSLA.
Remove liquidity after some time with increased price to 1000 TSLA.
Removing liquidity and swapping the 0.836 TSLA abd 836 dUSD into USD will result in an overall amount of Additional to your Liquidity Mining rewards, you got $272 profit from price movement of TSLA, this is the profit from asset long position you made. Remark If in the same time frame DFI goes up to $4.00, you will only get 478 DFI for your USD position. 🡺 The best case for this investment: The price of the asset increases |
Liquidity Mining – Long DFI / Asset neutral
Investment thesis
DefiChain procedure
Goal in the future
Profit: Remarks
Example Generate 1 TSLA and 700 dUSD with 1,120 DFI (200% collateralization and DFI price $2.50). Put them into Liquidity Mining with a DEX price of 700 dUSD/TSLA.
Remove liquidity after some time with increased price to 1000 TSLA.
Removing liquidity will give you 0.164 less TSLA and 136 more dUSD. Swapping the 136 dUSD will result in an overall amount of 0.028 TSLA are missing to close the loan and must be bought from reward income. If in the same time frame the DFI price dicreases to $4.00, you will make additionalyl to your Liquidity Mining rewards a profit of $1,680 with your DFI long position. 🡺 The best case for this investment: Pool ratio remains unchanged and DFI increases. |