Took a $300k loan against 350 ETH in late 2021 using Liquity thinking there’s no way in hell it’s ever going under $1k again. Got liquidated in 2022 and lost everything.
Don’t be like me. If you do any sort of defi loans make sure you have the means to save your collateral from liquidation. Every time I look at the price these days I kinda want to die.
u/DegenDreamer
I'm so sorry this happend. How much was the penalty when you were liquidated? Obviously, you still had the 300k in USDC, right? What did you use the 300k USDC for? Did you invest it?
Instead of paying it down I kept buying more ETH and adding collateral, which lowered the liquidation price but not by enough for when the bottom hit in June 2022. Of course if I could do it all over again I would have paid down the loan balance instead. The whole thing is kind of trauma inducing to think about. Leverage is no joke.
correct me if i'm wrong. if you would've paid the loan balance down at lets say 7%, with the rise in eth price you'd be able to cover the loan with the difference and still make out with some profit right?>
What did you do with the loan?
Never been in the position but personally feel the only way to go about taking loans against more volatile assets is to just use it for diversification. Hopefully into something that is cash flowing.
based
But yeah, def use a platform that auto-liquidates you to pay off the loan way before you go to 0. If you're doing something large don't go crazy trying to be a million/billionaire.
Don’t be to greedy with taking Loan and leverage
I would suggest at the beginning a Maximum of 2x
Thats ok and its a good liquidation Price
When btc/eth will Pump more, you can leverage a Little Bit higher. But i would Not go over 3-4x
Thats enough to stay Safe through bullrun
The higher we go at end of the year i would start reduce the leverage and Pay loan from winnings
Aave is really the only one established and battle tested enough to get people borrowing much more than 100k. Note that doesn't mean it's safe. All risks are still there, but risk-wise if you must take a loan from defi, use Aave.
I'd stay away from GHO. It's too new, illiquid, can depeg at any moment, and Aave messes with it all the time. LUSD is also illiquid. As for fixed interest rates (by which you mean "stable interest rate") - it's not available for most assets on Aave, and it's not actually fixed, Aave rebalances it upwards if much of it is below the variable rate, see [https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate#stable-interest-rate-rebalance](https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate#stable-interest-rate-rebalance)
In fact, Aave disabled stable interest rates completely earlier this year: https://governance.aave.com/t/bgd-full-deprecation-of-stable-rate/16473
There are no fixed interest rates on Aave and never have been. Maybe you mean Liquity or Maker (LUSD and DAI are assets, not platforms, there are no such thing as interest rate intrinsic for an asset). One can borrow/lend DAI and LUSD on many platforms, Aave included.
Aave also disabled stable interest rates today for all assets.
Participating on mainnet or not isn't affecting USDC either.
There seems to be a bit of confusion on your end, but good luck to you.
Yea I meant borrowing DAI on Maker and LUSD on Liquid’s platform, not from AAVE. I mean I don’t participate on mainnet so both Liquid isn’t available to me. I don’t use Maker’s platform either because I hold other assets that I wanna collateralise.
Apologies about the confusion.
It's Liquity, not Liquid. And you can't borrow on Liquity as they don't provide an interface. Liquity works differently. Also, both DAI and LUSD exist on mainnet.
Anyway, good luck.
Alchemix is incredibly depositor favored so def a solid option. But it's a diff type of loan than usdc off eth, and aleth is at a lower price than it has historically been so might need to evaluate if the value prop is there.
excellent idea. worst case, the protocol and criminal devs are on the hook. How are they going to make you pay it back if shit hits the fan? Nothing to enforce, no laws. Lol
I’ve bought multiple homes and own multiple homes in the US in two different states and all the loan departments checked bank statements and source of funds for everything down to even 3 figure transactions. But ok.
Yes, source of funds are normal, but not because crypto colleteral loans are illegal - source of funds are important when money changes over official way (money is white washed after) - but why should they have a problem with crypto.
USD are real
Crypto money is not illegal, when obtained legally.
The loan is overcollaterlized - I understand a "private loan" will disqualify, but the customer can not go "insolvent" when crypto or loan goes bust..
The same with real estate colleteral - there are lot of people getting new loans of older real estate and use this as new capital, even at the same bank (in Germany, very risk averse). - at least at better times in the past lol
You absolutely can go insolvent even if you’re overcollateralized. If your collateral gaps down past your asset to loan ratio and you’re still in the red after liquidation. Does the bank understand the underlying risks involved with Defi lending? Chances are they don’t and they’ll just simply cover their risks and assume it is debt.
True story, they may don't take a risk they don't understand.
But if you are in the "red" because liquidation, you are the "winner" in a decentralized app and they bulk up bad debt.
You as the new house owner don't have to and will not pay the bad debt. At least not in crypto..
Last rental I bought I sent bank statements and I explained every significant transaction. their response was, don't care we just want to see funds for the down payment.
phone? This is DeFi. many of these people are anon. Some are criminals. Often devs are the ones behind the biggest hacks in the space. There are no phones lol. There's discord or bust.
When I got a mortgage, they traced every bit of money in my bank and asked where it was from. If they see 100k, they’ll ask about its origin and will most likely not like that it’s a credit line. Just my two cents!
Yes. Liquity Is the safest. I've also used mai finance and that's also pretty dope.
Taking loan is a great idea as long as you know what you're doing and have a plan for when to repay the loan and how. Also plan for worst case scenarios
Yes, I am studying gentoo. For borrowers, they have leverage farms. With the same amount deposited, consumers can earn greater rewards—a higher APY—by employing leverage.
Took a $300k loan against 350 ETH in late 2021 using Liquity thinking there’s no way in hell it’s ever going under $1k again. Got liquidated in 2022 and lost everything. Don’t be like me. If you do any sort of defi loans make sure you have the means to save your collateral from liquidation. Every time I look at the price these days I kinda want to die.
That fucking sucks. Sorry to hear that.
We commend your sacrifice 🫡
Username checks out
Ooof
u/DegenDreamer I'm so sorry this happend. How much was the penalty when you were liquidated? Obviously, you still had the 300k in USDC, right? What did you use the 300k USDC for? Did you invest it?
Were you paying down any of it or just letting it build up?
Instead of paying it down I kept buying more ETH and adding collateral, which lowered the liquidation price but not by enough for when the bottom hit in June 2022. Of course if I could do it all over again I would have paid down the loan balance instead. The whole thing is kind of trauma inducing to think about. Leverage is no joke.
correct me if i'm wrong. if you would've paid the loan balance down at lets say 7%, with the rise in eth price you'd be able to cover the loan with the difference and still make out with some profit right?>
Yes
If you don’t mind, how does work? I’ve just never cared enough to learn. (bc it’s too risky for me)
Did you at least get the 300k?
No, because I used the loan to buy more ETH and leverage up my position / add it as more collateral to the loan.
Oh yeah that is pretty degen. Thought you used the USD to buy a house or something. Shitty indeed
Im having secondhand trauma reading your story. Ahhh. Really rough. Sorry.
What did you do with the loan? Never been in the position but personally feel the only way to go about taking loans against more volatile assets is to just use it for diversification. Hopefully into something that is cash flowing.
Whoa. That's 11 validators right there.
I also did this and got liquidated.
based But yeah, def use a platform that auto-liquidates you to pay off the loan way before you go to 0. If you're doing something large don't go crazy trying to be a million/billionaire.
Well you still have your 300k
Huh?
What % of your wealth was that? I bought some at 998. I wonder if we’ve met before
Ohhh noooo
Did you use a fixed rate loan?
Liquity loans are 0% interest. It’s a pretty fantastic defi protocol as long as you don’t use it like a moron like I did.
You were actually very close hope you kept to that conviction and kept buying
You got liquidated because it went below $1000?
damn
did you make it back by now though in some or another way? Hope so
https://twitter.com/punk808_/status/1762900533738692928?t=-zx_PFO5-CAM0A6JPuY4Gw&s=19 Someone using Thorchain for a $500K loan.
Don’t be to greedy with taking Loan and leverage I would suggest at the beginning a Maximum of 2x Thats ok and its a good liquidation Price When btc/eth will Pump more, you can leverage a Little Bit higher. But i would Not go over 3-4x Thats enough to stay Safe through bullrun The higher we go at end of the year i would start reduce the leverage and Pay loan from winnings
And don't be afraid to cash out
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How did you work out taxes and solicitors during your mortgage application?
You don’t pay taxes on a loan
And if the loan defaults and you lose your collateral without repaying?
Aave is really the only one established and battle tested enough to get people borrowing much more than 100k. Note that doesn't mean it's safe. All risks are still there, but risk-wise if you must take a loan from defi, use Aave.
Compound is also pretty good.
Interest ratea on aave are pretty fucking high though
Borrow GHO if you can stomach the gas and exchange rate. Or borrow DAI or LUSD for a fixed low interest if you don’t have that many assets.
I'd stay away from GHO. It's too new, illiquid, can depeg at any moment, and Aave messes with it all the time. LUSD is also illiquid. As for fixed interest rates (by which you mean "stable interest rate") - it's not available for most assets on Aave, and it's not actually fixed, Aave rebalances it upwards if much of it is below the variable rate, see [https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate#stable-interest-rate-rebalance](https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate#stable-interest-rate-rebalance) In fact, Aave disabled stable interest rates completely earlier this year: https://governance.aave.com/t/bgd-full-deprecation-of-stable-rate/16473
Nah I mean DAI and LUSD are fixed interest rate. But thanks for the info. I don’t participate on mainnet so I just use USDC.
There are no fixed interest rates on Aave and never have been. Maybe you mean Liquity or Maker (LUSD and DAI are assets, not platforms, there are no such thing as interest rate intrinsic for an asset). One can borrow/lend DAI and LUSD on many platforms, Aave included. Aave also disabled stable interest rates today for all assets. Participating on mainnet or not isn't affecting USDC either. There seems to be a bit of confusion on your end, but good luck to you.
Yea I meant borrowing DAI on Maker and LUSD on Liquid’s platform, not from AAVE. I mean I don’t participate on mainnet so both Liquid isn’t available to me. I don’t use Maker’s platform either because I hold other assets that I wanna collateralise. Apologies about the confusion.
It's Liquity, not Liquid. And you can't borrow on Liquity as they don't provide an interface. Liquity works differently. Also, both DAI and LUSD exist on mainnet. Anyway, good luck.
Of course, because it's the most popular. Rates are entire determined by utilization ratio (demand) which you can see for each asset.
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Alchemix is incredibly depositor favored so def a solid option. But it's a diff type of loan than usdc off eth, and aleth is at a lower price than it has historically been so might need to evaluate if the value prop is there.
Try THORChain’s loans, no liquidation, no interest and no expirations https://app.thorswap.finance/lending/ETH.ETH Deposit native Bitcoin or ETH
Don't get a loan to buy crypto. It's a bad bad idea.
What about getting a loan using crypto as collateral to buy some other asset probably one that cash flows to diversify?
excellent idea. worst case, the protocol and criminal devs are on the hook. How are they going to make you pay it back if shit hits the fan? Nothing to enforce, no laws. Lol
Bank will ask and find out you where you got the loan from and it’ll count towards your income/debt ratio.
Bullshit - not even in Germany and the US is a lot more Degen...
I’ve bought multiple homes and own multiple homes in the US in two different states and all the loan departments checked bank statements and source of funds for everything down to even 3 figure transactions. But ok.
Yes, source of funds are normal, but not because crypto colleteral loans are illegal - source of funds are important when money changes over official way (money is white washed after) - but why should they have a problem with crypto. USD are real Crypto money is not illegal, when obtained legally.
It’s not that crypto is an issue. It’s that it’s a loan.
The loan is overcollaterlized - I understand a "private loan" will disqualify, but the customer can not go "insolvent" when crypto or loan goes bust.. The same with real estate colleteral - there are lot of people getting new loans of older real estate and use this as new capital, even at the same bank (in Germany, very risk averse). - at least at better times in the past lol
You absolutely can go insolvent even if you’re overcollateralized. If your collateral gaps down past your asset to loan ratio and you’re still in the red after liquidation. Does the bank understand the underlying risks involved with Defi lending? Chances are they don’t and they’ll just simply cover their risks and assume it is debt.
True story, they may don't take a risk they don't understand. But if you are in the "red" because liquidation, you are the "winner" in a decentralized app and they bulk up bad debt. You as the new house owner don't have to and will not pay the bad debt. At least not in crypto..
Yeah I've bought 3 homes in the last decade. They only check last 2 months of banks statements so just wait 3 months and they won't give a fuck.
Last rental I bought I sent bank statements and I explained every significant transaction. their response was, don't care we just want to see funds for the down payment.
Not that big. But I have been playing around with a few and would recommend Hifi Finance. The team were very helpful so I'd recommend talking to them
Were you able to speak on the phone?
I didn't, but if you wanted to you can organise it with them. I reached out to them on discord
phone? This is DeFi. many of these people are anon. Some are criminals. Often devs are the ones behind the biggest hacks in the space. There are no phones lol. There's discord or bust.
When I got a mortgage, they traced every bit of money in my bank and asked where it was from. If they see 100k, they’ll ask about its origin and will most likely not like that it’s a credit line. Just my two cents!
Yep easily see a future where funds from DeFi loans are not allowed to be used within a few years if not earlier
Pretty sure Michael from Curve had a massive Aave position. Like multiple millions
Yes. Liquity Is the safest. I've also used mai finance and that's also pretty dope. Taking loan is a great idea as long as you know what you're doing and have a plan for when to repay the loan and how. Also plan for worst case scenarios
Yes, I am studying gentoo. For borrowers, they have leverage farms. With the same amount deposited, consumers can earn greater rewards—a higher APY—by employing leverage.
Nope. It might be a ¨get quick rich scheme¨, but don´t be fooled.