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This happens quite regularly in the world of margin trading. Imagine the following: 1. I own ETH, and want to hold my ETH position so I can enjoy price increa
by nahollander 8y ago
This happens quite regularly in the world of margin trading.
Imagine the following:
1. I own ETH, and want to hold my ETH position so I can enjoy price increases, but I need liquidity to live my day to day life and, well, it's hard to pay for things with ETH.
2. Instead of selling ETH and exiting my position, I put ETH up for collateral and borrow a stable-coin (like DAI) against it. That way, I maintain my price exposure to ETH, but have liquid cash to use for my day-to-day needs.
- matte_black 8y agoAnd if you don’t use coins for day to day living expenses?
- cortesoft 8y agoYou could cash out the borrowed coins for cash.
- TekMol 8y agoOh! So this is not about lending buying power. But about lending in the context of betting on currencies. A lends 10 Xcoins to B. B puts 11 Ycoins into escrow. A will either get back 11 Xcoins or 11 Ycoins. If Xcoins rise in price relative to Ycoins, B is happy and A is sad. If Xcoins fall in price relative to Ycoins, B is sad and A is happy.