Crypto traders are bound to be familiar with the term “LONG & SHORT” when dealing with crypto assets.
An investor can either acquire (go long) or sell (go short) an asset that they believe will appreciate in value.
THE CONCEPT OF TRADING
The act of speculating on cryptocurrency price movements via a CFD trading account, or buying and selling the underlying coins via an exchange, is known as cryptocurrency trading.
THE CURRENT PROBLEM
Long or short positions in DeFi are rather straightforward; a user provides one asset, borrows another, and then utilizes the borrowed funds to acquire more of the supplied asset, resulting in a leveraged position.
The lack of availability of a wide range of assets under present money market regulations is one of the key issues encountered in this scenario. Every major DeFi loan site, for example, only covers a few crypto assets, limiting consumers to around 50% of the market share.
UNILEND FINANCE TO THE RESCUE
UniLend Finance is committed to creating a permissionless money market where anybody can lend and borrow any digital asset. This means that anyone can build up a lending/borrowing pool for any ERC20/ERC20 crypto asset. Users are urged to interact with the protocol and take use of a variety of innovative DeFi tactics that will be possible once all crypto assets are listed without authorization.
With the upcoming launch of UniLend V2, it is quite an easy feat to create a long/short position. Let us understand this with examples
Long Positions with UniLend V2
- John is very bullish on ETH and wants to leverage a long position in order to maximize his profits.
- John then lends $1000 worth of ETH to (let’s say) ETH/USDC pool and borrows $500 USDC.
- USDC is then swapped to $500 worth of ETH to increase John’s portfolio exposure to ETH and now has a total of $1500 worth of ETH.
- If the price of ETH goes up by 1%, the total profit for John is $15 compared to the $10 profit he would’ve had without any leverage position.
Short Positions with UniLend V2
- Alice believes that ETH will be on a downtrend in the upcoming days and wants to leverage a short position.
- Alice lends a stablecoin (let’s take $1000 USDC, for example) to ETH/USDC pool and borrows $500 worth of ETH.
- Alice then swaps ETH back to $500 USDC and has now acquired $1500 USDC in total.
- Now, Alice has a debt of $500 worth of ETH. If the price of ETH drops by 1%, Alice’s debt value drops to $495, which she repays and gets a $5 profit on her short position.
The basic idea is that users borrow an asset they intend to short, and when that asset’s value lowers, the user’s loan value drops, allowing them to profitably conclude their short positions.
Do More With DeFi!
UniLend has a vision of being the base layer on which future DeFi protocols will be built. Omnis opens a vast range of applications previously unseen in DeFi. For example, the ability to take leverage to long or short any asset is just one of the advanced trading strategies that users can employ using Omnis. We are yet to see what innovations can happen by building over UniLend Omnis.