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So to clarify for those who don't care to know about defi, 2 people made on-chain leveraged bets with up to 2X leverage (which isn't a ton compared to what some

So to clarify for those who don't care to know about defi, 2 people made on-chain leveraged bets with up to 2X leverage (which isn't a ton compared to what some people do). If they are up 120M when ETH has gone up ~26% since it's low point of the last 30 days, they must have deposited ~150M to start with. Looping 3 times, and borrowing ~80% of their deposit value each time (pretty close to the max for most defi protocols), they would have borrowed (likely in a stablecoin) 120M, then 96M, and finally 76M, giving them a total deposit of 442M worth of ETH against a borrow of 292M of the stablecoin. After ETH went up by 26%, their initial 442M deposit is now worth 557M. Had the value of ETH gone down 21% at any point from the beginning of their levered position, their initial stake of 150M in ETH would have been liquidated by the protocol, so this is an incredibly risky play as you can imagine The fact that such a large position likely moves the market does at least make it a little bit safer for them, but by that same token, unwinding their position will move the market in the other direction just as easily (so they might only see a 110M in profit if they tried to unwind entirely, at this article was written)

laborcontract 3y ago
I don't like the title. "Looping" isn't really a strategy. It's just a levered punt on the direction of the market.
- pcthrowaway 3y ago
  I mean it's not really a trading strategy, more of a mechanical strategy for composing other financial primitives into leverage
Aurornis 3y ago
> The fact that such a large position likely moves the market does at least make it a little bit safer for them I would not be surprised if they had some inside information about some big moves that were likely to move the market in some way. I doubt their entry and exit timing was randomly chosen.

laborcontract 3y ago

I don't like the title. "Looping" isn't really a strategy. It's just a levered punt on the direction of the market.

pcthrowaway 3y ago
I mean it's not really a trading strategy, more of a mechanical strategy for composing other financial primitives into leverage

Aurornis 3y ago

> The fact that such a large position likely moves the market does at least make it a little bit safer for them I would not be surprised if they had some inside information about some big moves that were likely to move the market in some way. I doubt their entry and exit timing was randomly chosen.