Difference between revisions of "Investing & Trading with Decentralized Loans and Assets on DeFiChain"
Line 10: | Line 10: | ||
|[[File:Bild 2-1.png|alt=|right]]'''<big>Investment thesis</big>''' | |[[File:Bild 2-1.png|alt=|right]]'''<big>Investment thesis</big>''' | ||
The future price of an asset will be higher than it is today. | The future price of an asset will be higher than it is today. | ||
− | |||
'''<big>DefiChain procedure</big>''' | '''<big>DefiChain procedure</big>''' | ||
Line 18: | Line 17: | ||
''<big>Goal in the future</big>'' | ''<big>Goal in the future</big>'' | ||
*Sell asset for <code>y amount</code> of dUSD | *Sell asset for <code>y amount</code> of dUSD | ||
− | |||
− | |||
'''Profit:''' <code>(y-x) dUSD</code> | '''Profit:''' <code>(y-x) dUSD</code> | ||
Line 34: | Line 31: | ||
'''<big>Example</big>''' | '''<big>Example</big>''' | ||
− | |||
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. | 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. | ||
Line 51: | Line 47: | ||
'''<big>DefiChain procedure</big>''' | '''<big>DefiChain procedure</big>''' | ||
− | |||
* Put some coins (e.g. DFI) as a collateral into a decentralized loan and mint a decentralized token (e.g. TSLA token). | * Put some coins (e.g. DFI) as a collateral into a decentralized loan and mint a decentralized token (e.g. TSLA token). | ||
* Sell the token on the DEX and get dUSD amount <code>x</code> from selling. | * Sell the token on the DEX and get dUSD amount <code>x</code> from selling. | ||
Line 58: | Line 53: | ||
* Buy token + fee back with dUSD amount <code>y</code> (from holding) | * Buy token + fee back with dUSD amount <code>y</code> (from holding) | ||
* Close loan by putting token + fee back | * Close loan by putting token + fee back | ||
− | |||
− | |||
'''Profit:''' <code>(x-y) dUSD - interest</code> | '''Profit:''' <code>(x-y) dUSD - interest</code> | ||
Line 75: | Line 68: | ||
*You will have a liquidation risk if the price of your collateral falls too low. | *You will have a liquidation risk if the price of your collateral falls too low. | ||
− | |||
− | |||
'''<big>Example</big>''' | '''<big>Example</big>''' | ||
− | |||
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. | 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. | ||
Line 93: | Line 83: | ||
|[[File:Bild 5-1.png|alt=Long position - Long DFI (leverage)|right]]'''<big>Investment thesis</big>''' | |[[File:Bild 5-1.png|alt=Long position - Long DFI (leverage)|right]]'''<big>Investment thesis</big>''' | ||
The future price of an asset <u>and</u> DFI will be higher than it is today. | The future price of an asset <u>and</u> DFI will be higher than it is today. | ||
− | |||
'''DefiChain procedure''' | '''DefiChain procedure''' | ||
− | |||
* Put some coins (e.g. DFI) up as collateral for a decentralized loan and mint dUSD. | * Put some coins (e.g. DFI) up as collateral for a decentralized loan and mint dUSD. | ||
* Buy your preferred asset on the DEX with <code>x</code> dUSD | * Buy your preferred asset on the DEX with <code>x</code> dUSD | ||
''<big>Goal in the future</big>'' | ''<big>Goal in the future</big>'' | ||
− | |||
* Sell the asset for <code>y</code> dUSD | * Sell the asset for <code>y</code> dUSD | ||
− | |||
* Close a loan by putting tokens + interest back | * Close a loan by putting tokens + interest back | ||
− | |||
− | |||
'''Profit:''' <code>(y-x) dUSD - interest</code> | '''Profit:''' <code>(y-x) dUSD - interest</code> | ||
− | |||
'''<big>Remarks</big>''' | '''<big>Remarks</big>''' | ||
− | |||
* Trades and profits are in dUSD. | * Trades and profits are in dUSD. | ||
* DEX prices are relevant for trades, not the price feed. | * DEX prices are relevant for trades, not the price feed. | ||
− | |||
'''🡪 pay attention of the pool ratio''' | '''🡪 pay attention of the pool ratio''' | ||
* Getting your DFI amount back in step 4 is the same as in step 1. | * Getting your DFI amount back in step 4 is the same as in step 1. | ||
− | |||
'''🡪 you open a long position on DFI''' | '''🡪 you open a long position on DFI''' | ||
* Not all your capital is invested (2/3 – 1/10 with respect to loan collateral). | * Not all your capital is invested (2/3 – 1/10 with respect to loan collateral). | ||
− | |||
'''🡪 reduced yield for long position on asset''' | '''🡪 reduced yield for long position on asset''' | ||
* You will have a liquidation risk, if the price of your collateral falls too low. | * You will have a liquidation risk, if the price of your collateral falls too low. | ||
− | + | ||
'''<big>Example</big>''' | '''<big>Example</big>''' | ||
− | |||
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. | 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. | ||
Line 172: | Line 150: | ||
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. | 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. | ||
− | + | <code>liquidity token = sqrt(TSLA token * dUSD token) = sqrt(1 * 700) = 26.45</code> | |
Remove liquidity after some time with increased price to 1000 TSLA. | Remove liquidity after some time with increased price to 1000 TSLA. | ||
− | + | <code>pool ratio = TSLA/dUSD = 1/1000 🡺 dUSD = 1000 TSLA</code> | |
− | + | <code>26.45 = sqrt(1000 TSLA) 🡺 TSLA = 26.45/sqrt(1000) = 0.836</code> | |
− | + | <code>dUSD = 1000 TSLA 🡺 dUSD = 836</code> | |
− | Removing liquidity and swapping the 0.836 TSLA abd 836 dUSD into USD will result in an overall amount of <code>2*$836 = $1672 = $1440 + $272</code> | + | Removing liquidity and swapping the 0.836 TSLA abd 836 dUSD into USD will result in an overall amount of <code>2 * $836 = $1672 = $1440 + $272</code> |
Additional to ''<u>your Liquidity Mining rewards</u>'', you ''<u>got $272 profit</u>'' from price movement of TSLA, this is the profit from asset long position you made. | Additional to ''<u>your Liquidity Mining rewards</u>'', you ''<u>got $272 profit</u>'' from price movement of TSLA, this is the profit from asset long position you made. | ||
− | |||
'''<big>Remark</big>''' | '''<big>Remark</big>''' |
Revision as of 20:40, 28 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 |