Non-liquidatable leverage > Perps
Now that we’ve got your attention, read on to learn how for certain users non-liquidatable leverage is better than perps
Summary:
- Traders on perps deal with uncertainty of funding rates and liquidation huntings.
- They need to constantly monitor their positions and is not ideal for longer timeframe (>1 week) trades.
- Non-liquidatable leverage solves this!
- Using non-liquidatable loans, for a fixed duration, users can position themselves better while not getting bothered by liquidations.
- Fixed interest on Timeswap loans makes it cost efficient for traders to maintain their positions.
Introduction
Leverage, the double-edged sword of crypto trading, has long been both the boon and bane of many traders. While it offers the potential for amplified gains, it also carries the risk of catastrophic losses. In DeFi, leveraging through perpetuals (perps) has been a popular choice. However, there’s a new sheriff in town, and it goes by the name of non-liquidatable leverage. Let’s delve into why it is superior to perps and how Timeswap’s approach towards leverage trading gives you an edge over others.
Understanding the Allure of Leverage
In a trending market, leverage is akin to a secret weapon, offering the potential to magnify profits and capitalise on market movements. It’s the bread and butter of trading strategies, especially during bull runs when every percentage point matters. However, traditional leveraging methods, such as perps, come with their fair share of pitfalls.
The Pitfalls of Perps
Leveraging through perps introduces a level of uncertainty due to two primary reasons:
Temporary volatility: The majority of traders tend to have a medium-term view of the markets. Being early to a trade or not timing it properly boasts the need for constant monitoring of positions, leaving no peace of mind. Not being able to gauge the market volatility is what makes them trade with excess leverage or they tend not to open the trade at all.
Variable funding rates: In trending markets, the OI quickly skews in one direction (long/short), which leads to very high funding rates. These hourly funding payments start cannibalising your margin, increasing both the cost and the risk of liquidation.
While some traders thrive in this environment, many others find themselves at the mercy of unpredictable price swings and funding fees. For the average degens with a medium to long-term outlook on the market, navigating this volatility can be daunting.
Position Hunting and Portfolio Wrecks
One of the recurring nightmares for leveraged traders is the dreaded scenario of position hunting. Position hunting is where the market dumps for a brief time interval, only to recover back to the original levels. Such price spikes and wicks often trigger liquidations, leading to significant losses and shattered portfolios. This constant fear of liquidation looms large, hindering traders from taking full advantage of leverage opportunities.
For eg: A similar price wreck happened on the 3rd of January, which triggered about $700M in liquidations on Centralised Exchanges alone.
The Savior: Non-Liquidatable Leverage
Enter non-liquidatable leverage, the knight in shining armour for degens seeking medium-term leverage without the fear of liquidation. Timeswap pools operate in a non-liquidatable manner, enabling users to open leveraged positions without the risk of getting wiped out. This seemingly simple upgrade has seen tremendous uptake, with Timeswap pools processing over $25 million in volume for non-liquidatable leverage.
- The user experience of non-liquidatable leverage is way better than perps. I.e constant monitoring (perp trading) vs peaceful sleep (Timeswap).
- While perps are better for short term trades (1–3 day duration), non-liquidatable leverage is far superior when it comes to medium term trades (1 to 8 weeks)
How to open leveraged trades on Timeswap?
While the current UI is optimised for lending/borrowing, leveraged trades can be opened by combining the borrow feature with the liquidity on a DEX. Let’s take an example of the USDC/ARB pool to open a long position on $ARB.
Step 1: Open the borrow tab on the USDC/ARB pool and input the amount to borrow, 5,000 USDC in our case. Here, we’re effectively using 4,218 ARB as collateral, while our borrow positon is immune from liquidations till 2nd May (75 days). Our interest cost here is $62, excluding the rewards.
Step 2: Go to a DEX, and swap 5,000 USDC for 2,577 ARB.
Step 3: Repeat in loops. This will lead you to a leveraged Long position on ARB.
Stay tuned for a UI dedicated to traders!
Timeswap: Redefining Leverage Trading
Unlike perps, leverage on Timeswap is bolstered by lenders and liquidity providers (LPs) earning fixed yields and transaction fees. This unique model offers a superior user experience, allowing traders to take positions without the need for constant monitoring. Following are the two main benefits of leveraging tokens using Timeswap:
No need to actively monitor your positons: Timeswap pools work as an option under the hood, allowing traders to access non-liquidatable leverage without worrying about liquidations. This gives a UX where traders/borrowers don’t need to be actively monitoring their positions. To make sure positions are settled from time to time, each pool has a maturity date before which borrowers/traders need to close their positions. Positions can be reopened once new pool is launched.
Fixed cost of leverage: The cost of opening a trade using Timeswap is fixed and known upfront. You only need to take into account the borrow APR (on Timeswap) and the swap fees (on the DEX) when opening a trade.
Become Non-liquidatable -> #Take0Ls
The essence of no liquidations is #Take0Ls, it portrays how Time travelers don’t take Ls (liquidations). Dive into the world of non-liquidatable leverage with Timeswap. With no liquidations and fixed borrow costs, Timeswap offers a superior alternative to traditional leverage avenues.
⏳ Time Travel here -> app.timeswap.io ⏳
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