Looking for a way to long/short arbitrum altcoins that aren't listed on CEX?
Read this to add improve trading tools set!
Looking for a way to long/short arbitrum altcoins that aren't listed on CEX?
Add SiloFinance into ur trading tools set!
📍In this thread
Click to skip to section
1️⃣ What is Silo finance
2️⃣ Why is Lambro looking at it
3️⃣ Strategies you can run with lending market
4️⃣ Speculation, action plan & Summary
TLDR
Silo Finance is a lending market with isolated pool, enabling exortic altcoins lending pools with isolated risk.
Lambro thoughts ( Click to jump to thoughts )
❓Newly deployed on Arbitrum, opportunity?
❓Tool for strategies on volatile arbitrum altcoin?
🤔Thoughts of Silo token
1️⃣ What is Silo finance
Silo finance is a permissionless isolated-Market lending protocol.
It enables lending of long-tail assets with isolated risk to avoid bad debt.
Silo solves the fragmented liquidity problem of isolated lending by introducing “bridge Asset”
Lets go over 3 key points of the protocol
🔹Isolated Lending pools
🔹Bridge Asset ETH & Xai
🔹Interest Rate Model
🔹Isolated Lending Pools
As mentioned before in my @eulerfinance thread, lending protocol with shared pool has better lending liquidity.
However due to the shared lending pool design, all the asset shares bad debt risk, limiting type of assets that can be listed
By isolating each asset into their own lending pools @SiloFinance can allow users to borrow & lend any exortic altcoins without sharing the same bad debt risk between different asset
🔹Bridge Asset ETH & Xai
The purpose of the bridge assets is to act as a connector between different markets. It allows assets to be isolated from each other yet linked to share liquidity through bridge assets to improve the liquidity problem caused by isolation.
There are two type of bridge asset, ETH & XAI.
I won’t go into detail about XAI as it’s on arbitrum where i think the potential opportunity is right now.
But tldr it is a over-collateralized stablecoin to serve as a second bridge.
Instead of borrowing ETH to go from asset A to B, users will be able to collateralize XAI to borrow any token asset in the protocol. However i think the adoption of XAI was not very popular and they are focusing more on USDC now.
🔹Interest Rate Model
Assets set into tiers based on asset’s characteristic.
U can imagine it as the more volatile the asset is, the higher it's floor borrow rate is for different % of utilisation.
Full list
2️⃣Why is lambro looking at it
Buy early, sell high, short it on it’s way down
easy to say but how many people actually plan it?
Do you know where you can do this with most arbitrum small coins?
I believe in having a system, understanding and having the tools by my side when you need it is key.
E.g. when shit hit the fan in umami a few weeks ago, can u react asap in where to short it?
Most of the arbitrum coins are small micro caps and not listed on CEX
Making it difficult/improssible for you to leverage long or short and this is why i have been looking at different isolated lending pools and fix yield protocols.
3️⃣ Strategies you can run with lending market
🔹Short
🔹Leverage Long
Example
Umami price is currently 10.13usd
I can borrow 1 Umami token from silo finance for 1.97% apy(cost to short) and sell it in a dex for 10.13usdc
When Umami price drop, assuming it drops to 8usd i can buy 1Umami token and return it to silo finance
My short strategy profit would be
10.13-8-(cost to short, apy*time) = approx 2 USD assuming u only held this short position for a short time
🔹How to short a token in a lending market.
Example
Umami price is currently 10.13usd
I can borrow 1 Umami token from silo finance for 1.97% apy(cost to short) and sell it in a dex for 10.13usdc
When Umami price drop, assuming it drops to 8usd i can buy 1Umami token and return it to silo finance
My short strategy profit would be
10.13-8-(cost to short, apy*time) = approx 2 USD assuming u only held this short position for a short time
⚠️Things to note
apy changes depend on pool utilisation rate
(ur cost to hold a short position changes, specially with small pools)
Check the lending pool size to see the capacity you can borrow without pushing the borrow interest high
Take into account for Slipperage & trading fee specially for small micro caps
Make sure u have enough collateral in shorting altcoins as tokens are likely to be more volatile
🔹Leverage Long/farm
Example
Umami price is currently 10.13usd
I can deposit my 1 Umami token to silo finance for 27.7% apy and borrow 3usd
Usd the 3usd to buy more Umami
Repeat 2 depending on how degen n how much leverage do i want
⚠️Things to note
Same with shorting
There is a limit in leverage depending on the liquidation threshold and how much u borrow per step2
🐑If you are interested in know the full strategies you can do with lending markets let me know! i will write more
4️⃣ Speculation, Action plan & Summary
📍Lets look at silo recent news from their monthly newsletter
🔹Launched on Arbitrum
🔹”keep adding new markets”
🔹$silo rewards program (buyback)
🔹$silo rewards program (incentives for liquidity providing)
🔹Proposal just past to increase the protocol fee for Arbitrum & ETH
📍Data on usage Silo on arbitrum
As u can see above most pools are quite small, basically can’t do any strategies with size yet.
Maybe on shorting DPX (419.8k available to borrow) or umami in very small size (69.8k available to borrow)
📍Speculation & Action plan
Action plan wise that aren’t much tbh with u unless u want to short DPX.
I don’t have enough conviction to buy their coins yet.
I will be keeping my eyes on their update closely mainly on
New market silo is adding
Incentives they are giving to different pools
For
Maybe parking some of my trading bag of arbitrum altcoins there to earn some short term lending + incentive yield before I sell.
Depending on the new tokens they are launching i might leverage long or short on these altcoin
Their TVL n Fees contributing towards the buyback program vs their vesting
📍Summary
I am very interested in different lending protocols that are expanding. E.g. @eulerfinance expanding to BNB, Polygon and Silo going to arbitrum. I think its a sector we should keep an eye on, from using the protocol point of view or buying the token.
I might be too early or even wrong, share me ur thoughts!
comment or DM me
always looking to meet more frens in the crypto space!
Thanks for reading!
