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> This seems.. insane. What’s the interest rate and payment terms on these borrowed funds? I have $100k cash and need to buy a house.. maybe I just crypto loop
by pcthrowaway 3y ago
> This seems.. insane. What’s the interest rate and payment terms on these borrowed funds? I have $100k cash and need to buy a house.. maybe I just crypto loop to get 500k.
Just to address this directly, you're probably much more likely to get liquidated than to be able to bring your balance up to 500K when leveraging. In fact, if you're leveraged very close to the liquidation rate, with a lot of money at stake, people may even make plays to move the market to get you over the liquidation line and then liquidate you.
I mentioned turning 200 USD into 550 USD based on a stablecoin deposit, but that was both incredible luck on my part (I deposit as things were starting to flip from bearish to bullish) as well as being a lower-liquidity protocol where interest rates could fluctuate much more wildly.
To be clear, my earnings would have been a much smaller percentage had I deposited 100K USD, because the increased liquidity in that protocol would have resulted in much lower supply rates due to much higher liquidity, so I may have seen something more like 5-20% APR in that meantime (which is still not bad to be fair).
Had I leveraged even a little bit (going short against a volatile crypto-asset basically), I would have certainly been liquidated as prices for those have mostly all mooned in that time.
Looping doesn't just let you walk away with the money, as you necessarily have to redeposit it into the protocol to borrow more against your deposit.
If you're considering leveraging because you need to buy a house, you almost definitely shouldn't leverage unless the 100K is worthless to you without another 400K on top of it, and therefore you don't mind the much more likely scenario where it gets evaporated by market fluctuations