Compound borowing strategy : correlating market direction whith the borrowed token

Hello Evbdy,

let’s say you strongly believe that your collateral whith which you are borrowing will raise significantly in next months, let’s say you bet ETH will raise this year and double.

so you borrow ETH and it’s value double this year 2021, isn’t it a bad idea if you spent ETH in playing in other protocols?, now you have to give back double than you get, plus interest of course. So it would have be better to borrow DAI.

so it’s a good idea instead to borrow ETH when this one start to fall after getting to the ATH of this supposed bull market, then if you get it at ATH and transform it into DAI, if ETH is divided by 2 you will have to whithdraw half of what you get.

All the difficulty is to hit the correct flow of ETH.

Do you think is worthit to think like that or it’s almost imposible to predict the future?

Do you think it’s just better to borrow in DAI and so you are not worried about the direction of the token you borrowed?

Thanks and keep learning evbdy.

1 Like

Very interesting thinking. I was thinking about this but I dont know if I understand correctly this borrowing. Like you said if you borrow Eth and than it changes drasticly. But if you lend Dai you dont have to worry about returns. Its risk reward situation if you borrow ETH. But you also need to put in a little bit of assets, what about those assets and value if it changes? I dont understand this correctly.

my point is

First os all I lend ETH or WBTC, so instead of doing nothing these assets now are working so I can get more exposure to a bull market as the one we are right now.

So I borrow DAI bcs if I borrowed ETH or WBTC and these are multiplying I would have to whitdraw double,

If I was able to predict the futur, wich I’m not, but let’s say I can, then I will borrow ETH or WBTC in a scenario where the bear market starts after the bull run is over, so in this case I will have to whitdraw less.

the point is I can’t predict the future.

so I cannot borrow ETH / WBTC my sleeping assets in a bull run, I would have to whitdraw more, maybe double more.

but it will a good point to borrow them in case I can identify the final of the bull run and the start of bear market, I woul have to withdraw less, maybe double less.

Just a mental game whith no real application as in fact I cannot predict the future,

BUt in fact I’m lending some of my sleeping assets ( wbtc ), and there is some risk associated, and I’m getting NOW in a bull market DAI, because imagine if I borrow ETH and as we are in bull market this asset doubles in price, bad for me, I presume.

I just repeated all the same again, hope my thought was clear for you, and btw I use Compound, because % are better for me and I finded the protocol to be very safe, my other option was AAve, but % is worst. these 2 protocols are very safe and you can find safetiness whith

Thanks for your reply, lets investigate this industry and see how profitable it can be for th people.

this is getting each time more interesting and imagine when they will create real lending whith less collateral, or even mortages, sounds interesting.