Summary : Add a long position automated vault
Abstract : The idea is to increase leverage options but remove liquidation risk
Overview : The idea is to implement the same automated vault however with coins flipped so that the exposure is Long instead of Neutral
It would remove liquidation risk and also increase long term profitability because of rebalancing of assets keeping long exposure.
With a 3x leverage it would be something like this
- Added collateral: $4000
- Total position value: $12000 (borrowed 8000 BUSD)
- BNB: long 4500 - short 500 = long 4000 (effectively 2.5x Long)
- BUSD: long 1500 - short 1500 = 0 (neutral)
Motivation : Most people are bullish in the cripto market, so it is a great addition to be long exposed and rebalanced automatically
It’s not possible to remove liquidation risk on long or short positions. This is only possible on market-neutral positions because anything but huge price movements will not have a large effect on equity value on a neutral position. There is no way to insulate equity on leveraged long or short exposure which can swing wildly on any price movements.
The main use of a long or short AV, without a special setup, would be as a management helper that rebalances to a specific leverage level. The demand for this, compared to a market-neutral vault, would be much much smaller, because the benefit(rebalancing a leverage level) when compared to what market-neutral offers, is very limited.
Fair enough, changed the name for low risk of liquidation since if prices move too suddenly it may keep rebalancing
However I still think that it would rebalance before it liquidates, even more if it stays at around x3 leverage, we don’t really need x8 leverage
And I disagree with the saying that because pools have low tvl they don’t have enough supply
I still think that if we add demand for it, we will bring suply of people that generate volume in the pool and maybe even more TVL directly to pancake
Btw even if we had 100% TVL from pancake, it would be the same as being the pool provider itself, and I don’t really see a problem there, just keep the rebalance a little bit tight for lower volatility or in steps, like rebalance 1-2% of the position at a time (if needed according to an Oracle).
Remembering that BTC, ETH and BNB have low volatility in their prices, for smaller coins yeah it may bring high risk.
Rebalancing long positions would not lower the risk of liquidation without additional capital available to add collateral. We don’t have any infrastructure for this kind of thing.
More importantly, we haven’t seen many users present the requirement of needing a fixed leverage. What’s been more commonly requested is liquidation protection through on-chain stoploss, but this has its own risks which is why we have not implemented it.
I haven’t looked at the math, but would it be possible to open both an x5 or x8 long and short position and balance it to be around x2/x3 on crypto? Essential opening a secondary position to reduce some of the risks of the primary and farm at higher leverage. Users are already farming at 3x so it would just increase the pay (Besides the auto rebalancing which is not necessarily ideal). It would also open up vaults for non-stablecoin paired farms: for example, farming btc-eth to long eth
The idea is a bit more interesting but probably still not a great setup. You could open a BTC-ETH and an ETH-BTC position but you would end up being long on both assets. You can’t mitigate much of the exposure unless you open additional positions on pairs like stable-BTC and stable-ETH, and then rebalancing becomes more expensive because you would have to rebalance all the positions. There would still be liquidation and BTCB-ETH only has ~1Mn in open TVL from leveraged positions combined atm so I have doubts on how much demand there would be.
Yea ETH-BTC is not the best example, I was just thinking about how we could use these high apy pools like CAKE-BNB in some kind of vault-like product. But looking further into what is actually available (given our lending pools) it seems like most liquidity and profits are in stablecoin paired pools