DeFi Investing Strategies acquire more Ethereum without additional capitol using DeFi CDPs
Debt based Ethereum Investment Strategy
Purpose to illustrate an investment strategy which allows you to use debt to control a rapidly appreciating asset. A risky strategy, but illustrated for educational purposes only. This strategy aims to provide a greater the market rate of appreciation, using leveraged investing. Using the asset pool of Ethereum as collateral the fund borrows against the asset, to purchase more of the asset and add to the holdings. In this manner the fund seeks to increase the amount of holdings by 62%, thus after paying interest charges on borrowing of 10% and administrative fees of 10%, the fund will still return approximately 40% above yearly rate of appreciation.
Basis for predicted earnings
Deposit 1000$ worth of Ethereum in a CDP on MakerDao. Borrow 40% or 400$ in USDT Transfer 400$ USDT to Uniswap, buy $400 worth of Ethereum. Transfer 400$ worth of Ethereum to MakerDao. Deposit 400$ worth of Ethereum in original CDP. Now CDP contains $1000+$400=1400$ of Ethereum. Borrow 40% of $1400 or $560-$400 originally borrowed, or 160$ worth of USDT. Transfer 160$ in USDT to Uniswap. Buy 160$ worth of Ethereum. Transfer 160$ worth of Ethereum to MakerDao. Deposit 160$ worth of Ethereum Inyo original CDP. Now CDP contains 1560$ worth of Ethereum. Borrow 40% of 1560 or 624-400-160= 64$in USDT. Transfer 64$ worth of USDT to Uniswap. Buy 64$ worth of Ethereum. Transfer 64$ worth of Ethereum to MakerDao. Add this 64$ worth of Ethereum to original CDP. Now CDP contains 1000+400+160+64=1624$ worth of Ethereum.
Stop and Examine.
Original CDP now contains 1624$ worth of Ethereum versus 1000$ worth of Ethereum. We have gained 624 new Ethereum or 62.4% of the original investment. This is derived by debt, but this is debt to own an appreciating asset. This is good debt.
Ethereum versus Binance Chain
It is possible to do this on Ethereum and Binance Smart Chain. The fees on Binance are much lower. I refer you to @emper
Summary
This is a use of debt, to buy assets, so called good debt. While most would discourage borrowing to buy cryptocurrency, I just provide information. The decision to use the strategy is up to you. I refer you to posts by @empoderat to see results for this strategy with Bitcoin, on Binance Chain.
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