I haven’t really been brave about using leverage in DeFi before, mainly because I was worried about the uncertainty of the borrowing interest rates. When the market is doing well, the rates might still be relatively stable. But once market volatility picks up, borrowing costs often jump up along with it. The return space I’d calculated could get squeezed instantly, even flipping to negative. I’ve experienced this kind of passive situation once before, and it left a deep impression.
This time, on @TermMax , I tried borrowing to execute a leveraged strategy. I started with a small position, keeping a cautious mindset. The most straightforward feeling is that the interest rate was locked in the moment I took the loan. Throughout the entire borrowing period, it wouldn’t suddenly change due to shifts in market sentiment. That means before I even build the position, I can precisely calculate the actual cost of the leverage trade, instead of finding out only at repayment that the cost was far higher than expected.
Since the cost is fixed, my strategy planning has become a lot clearer. Previously, when borrowing at a floating rate, I always had to leave some margin of safety to deal with extreme cases of rate fluctuations. Now that psychological burden is basically gone. I can put more effort into judging market conditions and managing position sizing, rather than getting distracted worrying that the borrowing cost itself might spiral out of control.
After using it for a few weeks, although the market saw a noticeable fluctuation in the middle, my borrowing cost was completely unaffected. This experience of being “disconnected from market sentiment” feels quite reassuring. For someone like me who already takes on a certain amount of risk just by using leverage, at the very least I don’t want additional uncertainty tied to the borrowing cost variable. Fixed-rate borrowing directly removes that source of risk.
#termmax @TermMax
This time, on @TermMax , I tried borrowing to execute a leveraged strategy. I started with a small position, keeping a cautious mindset. The most straightforward feeling is that the interest rate was locked in the moment I took the loan. Throughout the entire borrowing period, it wouldn’t suddenly change due to shifts in market sentiment. That means before I even build the position, I can precisely calculate the actual cost of the leverage trade, instead of finding out only at repayment that the cost was far higher than expected.
Since the cost is fixed, my strategy planning has become a lot clearer. Previously, when borrowing at a floating rate, I always had to leave some margin of safety to deal with extreme cases of rate fluctuations. Now that psychological burden is basically gone. I can put more effort into judging market conditions and managing position sizing, rather than getting distracted worrying that the borrowing cost itself might spiral out of control.
After using it for a few weeks, although the market saw a noticeable fluctuation in the middle, my borrowing cost was completely unaffected. This experience of being “disconnected from market sentiment” feels quite reassuring. For someone like me who already takes on a certain amount of risk just by using leverage, at the very least I don’t want additional uncertainty tied to the borrowing cost variable. Fixed-rate borrowing directly removes that source of risk.
#termmax @TermMax