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Leveraged Yield Farming
Provide multiple long and short strategies to take advantage of bull and bear markets
Please make sure to read the following chapters before starting:
Before learning to deal with various market strategies in the forest learning paradise of Mole, you need to know how to calculate various indicators and risk exposures. This is the basic skill. All right, Move!
First, go to the "Farm" and select your favorite trading pairs for farming. E.g. AVAX-USDT
First, add assets for farming as principle collateral. Both AVAX and USDT can be used as principle collateral. Principle collateral can be added in any proportion.
Mole uses 3x the leverage with the principle collateral 4.2486 AVAX worth $100.
Assets borrowed from user savings pool are used to increase leverage. The loans is the debt. The kind of debt token can be lent only the savings pool has it. In this case both AVAX and USDT are available in the savings pool, so they can be lent by users as debt tokens.
Lending debt assets is equivalent to SHORT operation. When the currency of this debt falls, the user has less debt to pay. Therefore, when selecting the debt token for borrowing, try to select the token in which you predict it will fall more, so that you can earn more income.
In the example we use USDT as debt token. When the user selects 3x leverage, which contained 1x of user's own assets. The debt is 2x, that is, the user's lent assets (debt) are worth $200 USDT.
The position value of the user is:
Position value = user's own $100 AVAX + Debt $200 USDT = $300
Since Mole will put the user's position assets into DEX to form LP to earn income, and the LP price in dex is 11111111.11, the estimated LP quantity is:
Estimated LP = 300/11111111.11 = 0.000027 LP
DEX trading pairs use the AMM mechanism, and the two tokens of LP trading pairs need to be 1:1. That is to say, AVAX:USDT = 1:1 = $150: $150 should be formed.
Let mole look at the current status of the user:
Current have ： $100 AVAX + $200 USDT
Expected position： $150 AVAX + $150 USDT
Then Mole sold $50 USDT to get equivalent AVAX, which could meet the expected position. Therefore, the indicator of "Amount to Trade" in the figure is $50 USDT, which will generate transaction fee of $0.15 USDT.
Well, Remember, the position is held by the user. If it rises, user will make a profit, and if it falls, user will lose money. Therefore, the position is LONG. As has been said before, when the debt falls, users can pay less debt, so the debt is equivalent to SHORT.
Position Value: LONG $150 AVAX + LONG $150 USDT
Debt : SHORT $200 USDT
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Risk Exposure: LONG $150 AVAX + SHORT $50 USDT
So the risk exposure is LONG $150 AVAX + SHORT $50 USDT.
And the debt ratio:
Debt Ratio = Debt $200/ Position Value $300 = 66.66%
The value users can get after closing their positions are called equity value. The current equity value is $100. If the market goes up later and users make a profit of $25, then equity value is $125.
The farming reward of leverage yield farm is compound interest. After receiving the reward from DEX, Mole will automatically convert it into LP for farming again. Yes, Mole works hard to keep users enjoy the profit happy.
When you are satisfied with the position you have opened, you can add the principle collateral to increase the position. There are two options:
After adding more principle collateral, the position value is increased. Since no more debt is borrowed, the debt ratio = debt / position value, the debt ratio decreases. It can reduce the liquidation risk.
If you are confident in your position, you can increase the principle collateral and debt at the same time. On the adding principle collateral page, you can select the corresponding leverage ratio to adjust the amount of borrowed debt.
You can reduce your position by reducing the principle collateral. After taking away part of the principle collateral, the leverage ratio will increase. Of course, it is not allowed to be higher than the maximum leverage ratio.
You can choose to repay part of the debt to reduce leverage and also reduce the liquidation risk.
There are two ways to withdraw the principle collateral:
Mole will convert the minimum required tokens into borrowed tokens to repay part of the debt and return the remaining assets to you, which can save potential slippage and transaction fees.
Mole will convert all of your position value to the borrowed token, and return it to you after paying off the required debt.
The token price will rise and fall. You can enter "Farm Positions" - > "Details" to view the Gain/Loss and also the details of your positions.
The fluctuation of token price will affect the value of LP, and then affect the total position value of users. If the user's total position value drops, the debt ratio will rise. If the debt ratio exceeds a certain liquidation threshold, liquidation will be triggered.
Remember, the indicators that affect the overall position value can be judged by the position risk exposure.
For example, use 3x leverage ratio to open position. The initial debt ratio of AVAX-ETH is 66.66%. In case of bear market, ETH will fall. If the debt ratio exceeds the liquidation threshold of 83.33%, Mole will help the user with liquidation. Liquidation is not only the protection of deposit users, but also the protection of loan users to prevent further decline.
5% of the fees will be charged for the liquidation meeting, of which 1% will be used to reward the liquidators, and 4% will enter the Mole Foundation to support the Mole ecology, including security reserve, operation and maintenance costs, R & D costs, ecological cooperation, etc.
However, there is no need to be too nervous. Assuming that the user opens a token1-token2 position and borrows token2 with 2, 2.5, or 3 times the leverage, the corresponding initial debt ratios are 50%, 60% and 66.66% respectively. Assuming that the liquidation threshold is 80% (in fact, for positions higher than three times the leverage, the actual liquidation threshold is higher than 80%, giving users more safe space), then the price of token1 than token2 (token1/token2) needs to be reduced by 61%, 44% and 31% respectively before liquidation be triggered.
Please refer to the following documents for the leverage and liquidation threshold of each farming pool:
Please refer to the following chapter:
Last modified 10mo ago