BTESTA.Finance’s Short & Long
Greeting to all BTESTA crews👋🏼 As we are the leverage yield farming protocol, we saw the opportunity that users can choose their way of longing and shorting.
We’ve launched BUSD-BNB pool available to do short and long as following;
- BUSD-BNB LP for borrowing BNB with leverage up to 3x
- BUSD-BNB LP for borrowing BUSD with leverage up to 3x
As the BUSD-BNB pair we provide, users can activate their position by borrowing BUSD (for longing BNB) and borrowing BNB (for shorting BNB).
As a basic of trading, we all know that long position is the way we expect that the price of what asset we buy will definitely increase, meaning we hold our asset and take profit from the rising price or losing their principle when the price drops.
Imagine when you open a position, the portion asset you deposit (not borrowing asset) will be long. When that asset price rise up from your opened-position time, you will receive profit but if the price drops, you will lose money. However, you will receive that value depending on the price at the closing position time. And this of course opposite to shorting position.
In this part, let us talk about shorting strategy. Shorting or short selling is the method when you expect that your asset’s value will decrease after borrowing and sell it as you hope that you will rebuy it later in order to pay debt at lower price, to make profit when the price drops.
In other words, if you borrow an asset with leverage above 2x, this means you’re playing short with your borrowed asset. To follow the process, our protocol will have to create out LP token with 50:50 ratio (eg. BNB-BUSD) so the protocol need to convert some of your borrowed asset to another paired asset to make both assets’ portion equal
Here’s shorting example;
- You want to farm BNB-BUSD so you add 1 BNB.
- You choose 3x leverage, meaning you are borrowing 2 BNB.
- You’re now holding 3 BNB. Then the protocol needs to convert 50% of BNB into BUSD for creating your LP positions. So we will sell 1.5 BNB and convert it to BUSD.
- Your LP position will be at 50:50 ratio (you have 1.5 BNB and BUSD worth 1.5 BNB)
- As you are having 1.5 BNB in your hand and still having 2 BNB in debt, protocol will buy 0.5 BNB with BUSD which means you’ll have 2 BNB in hand to pay back to protocol.
From the above, you’ll see that you’ll have to buy BNB back with same amount of borrowing (after selling them at the time of opening position) when you want to close position. And if the BNB price drops as you expect after your position is active, it means you will get a lower BNB price. Here you go! you can take a profit from the asset’s price decease with shorting method.
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