📉Shorting a Token

YouTuber Prime Investors was kind enough to allow us to embed the video to show how to short for those who learn better by watching. Please see below for the cautions about shorting.

Short selling or “Shorting” is the common financial term used to sell an asset that is borrowed in the expectation that the asset can be bought later at a lower price. In many ways, shorting a token is the same as using leverage. The only difference is the order of certain steps. Shorting a token also relies on using leverage. This means the same cautions apply to the shorting of a token strategy.

CAUTION: Using leverage increases a loan’s token price sensitivity which can result in higher chances of loan liquidation. It is important to fully understand your Health Factor Score and liquidation risk at all times.

1. Supply an asset on Goledo.

Supply USDT/ETH/WBTC on Goledo

1. Borrow the token the user thinks will go down in value. The linked borrowing example uses USDT, but the same steps apply for any token. In this example, we will use CFX.

Borrow assets on Goledo

1. Trade the borrowed CFX for a stablecoin on a DEX such as Swappi.

Swaps on Swappi

1. Return to Goledo and repeat steps 1-3 until you have reached a satisfactory loan to value and Health Factor Score.

CAUTION: Higher levels of borrowing will result in a more volatile Health Factor Score. In the above example, the value of the supplied stablecoins may remain the same, but the Loan value to pay pack may greatly increase resulting in a greater amount to pay back.

This strategy should only be used by people comfortable with potential liquidation.