Compass Investments

Crypto vs. Dollar

📌 Cryptocurrency whales borrow $34 million and trade with bullish leverage.

Whale then used $34M worth of DAI to get the same amount of Circle USD (USDC) on the decentralized exchange 1inch (1INCH), 0xEd0C deposited to an address controlled by Binance. Eth

– Whale then used $34M worth of DAI to get the same amount of Circle USD (USDC) on the decentralized exchange 1inch (1INCH), 0xEd0C deposited to an address controlled by Binance.

An hour ago, Keith withdrew $30K $ETH ($101.7M) from #Bitfinex and invested $20K $ETH ($67.8M) in #Spark.

He then borrowed $34M $DAI in #Spark, exchanged it for $34M $USDC and withdrew to #Binance.

How does leveraged trading work on DeFi?

In general, leveraged trading on the Decentralized Finance (DeFi) platform allows users to maximize potential profits by borrowing funds without involving a third party.

Essentially, crypto traders deposit collateral, such as ETH, into a lending protocol such as Spark. They then borrow against that collateral, often in stable coins such as DAI or USDC. This borrowed amount is used to increase trading positions, potentially doubling profits.

However, leveraged trading also increases risk. If the market moves against a trader’s position, he or she may experience liquidation. Liquidation occurs when the value of collateral falls below a certain threshold. Liquidations can result in significant losses for the trader as collateral is sold to repay the loan.

In this case, Whale provided 20,000 ETH as collateral and borrowed $34 million; Lookonchain calculated a total collateral of 30,151 ETH ($122.33 million) for the $52 million borrowed from DAI, and the efficiency ratio for this addressable position was 1.63 The efficiency ratio was 1.63.

This strategy suggests a bullish outlook, and borrowing USDC for exchange deposits often indicates plans to buy more cryptocurrency. In addition, the trader likely believes that the value of ETH will rise faster than the interest on the loan.

As technology improves, the DeFi platform offers unique opportunities for such large-scale transactions. It provides unlimited access to leverage and liquidity without the need for traditional intermediaries. However, traders must closely monitor market conditions and clearing prices to avoid significant losses.

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