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Concentration of funds is a great advantage for borrowing.
by nootropicat 5y ago
Concentration of funds is a great advantage for borrowing.
- whatshisface 5y agoWhy would someone borrow when they already have funds? For example I heard of one guy locking up $600k collateral to borrow $300k. Makes no sense.
- randomhodler84 5y agoThere are reasons, firstly tax advantage in that there is no capital gain from selling the cryptocurrency; the other is that you don’t lose your position on the cryptocurrency, ideally over time you can increase your borrow as the underlying collateral increases in fiat value. One can also use the borrowed funds to speculate on other cryptocurrency, as a collateralized margin loan. Many lending systems offer incentives too, where you can be paid to borrow.
- ricardobeat 5y ago> use the borrowed funds to speculate on other cryptocurrency If you want to maximize your potential losses, that’s a great idea.
- randomhodler84 5y agoTrue that!
- nootropicat 5y agoMost farms require stablecoins, so the tactic is to borrow on your eth and farm with it
- chrisco255 5y agoIn this case, liquidity is pooled across the Aave protocol. There's no difference in the interest rate for someone lending / borrowing $50M or $50. It's easier, but you should probably never have more than 10-20% of your portfolio in a single wallet. And probably should shrink that down even further as your net worth grows.