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Are they in the red on the loan? The numbers and functions are where I get confused. "a whale has deposited 5.7M SOL ($170M and borrowed 108M USDC and USDT bor
by wronglebowski 4y ago
Are they in the red on the loan? The numbers and functions are where I get confused.
"a whale has deposited 5.7M SOL ($170M and borrowed 108M USDC and USDT borrowed)"
So they put in 5.7 SOL at some price, and used it to borrow stablecoins? If their position is liquidated how does that play out? If he traded coin for coin how do they get the traded assets back?
- renewiltord 4y agoHe keeps what they gave him, they keep what they get from what he gave them. Ideally they over collateralize. So if SOL is 100 USDT, he puts in 5 SOL and gets 50 USDT per SOL (250 USDT). If SOL approaches 50 USDT, (say 51 USDT) they sell the SOL he gave them and keep the proceeds (they have 255 USDT and are ahead by 5 USDT). The loan has reached an end condition. Another thing that could happen is he does something with the 250 USDT loaned to him and he gets 300 USDT. He gives back the 250 USDT and gets back his 5 SOL and now has 5 SOL and 50 USDT (minus some small interest or fee). This is another end condition. All works on the small scale. But presumably you can think of exploits on the large scale. A simple one is that the loan is so large in that they can't liquidate without slippage (price moving as they sell causing them to gain less than they anticipated). In this case, they might want to exit a little earlier.