📈Using Leverage
YouTuber Prime Investors was kind enough to allow us to embed the video to show how to use leverage for those who learn better by watching. Please see below for the cautions about using leverage.
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.
Using leverage is a classic strategy in asset trading dating back centuries. While tokens may be a new asset, the principle behind it remains the same. Borrow money to reinvest. In this case, you are borrowing, supplying then borrowing again. The example given in the written and video walkthroughs are examples of how to generate leverage.
Supply a token of your choosing. In this case, we will follow the example in Supplying CFX on Goledo.
Borrow a token of your choosing. In this example, USDT will be borrowed.
Note: Borrowing stablecoins helps lock in a flat price for the loan. This can help reduce the number of variables to consider when determining the safety of your Health Factor Score.
Trade the borrowed stablecoins for CFX on a DEX such as Swappi.
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 tokens can move while the stablecoin loan value remains the same.
This strategy should only be used by people comfortable with potential liquidation.
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