Advanced cLEND Strategies

NOTE: Obviously not financial advise this is meant to help you form your own strategies.

Basic Concepts of cLEND

cLEND is a unique lending platform in the CORE ecosystem that allows users to borrow DAI using CORE and coreDAO tokens as collateral.

  • coreDAO Lending: You can lend coreDAO tokens for $1 each.
  • CORE Lending: CORE tokens can be lent for $5500 each.
  • Interest Rates: 20% .
  • Liquidation: Loans are liquidated when the loan-to-value (LTV) ratio reaches 110%. Typically around the 6 month mark.

Understanding the Floor Price

One of the unique features of cLEND is the concept of a “floor price” and cLEND module predictability. This ensures that:

  • CoreDAO: Always valued at 1 DAI per CoreDAO.
  • CORE: Always valued at 5500 DAI per CORE.

This stability allows for 100% collateral borrowing, mitigating the typical market risks seen in other lending platforms from price fluctuations and liquidation thresholds.

Risk Considerations

Effective loan management and asset selection are crucial for capital efficiency.

  • Volatility and Impermanent Loss: Be cautious of market volatility and the risk of impermanent loss, especially when providing liquidity. Impermanent loss is also a tool to acquire tokens, example use token a to acquire token b indirectly via impermanent loss.
  • Diversification: Avoid over-leveraging on any single asset to minimize risk exposure.
  • Monitoring: Regularly monitor loan-to-value (LTV) ratios and market conditions.
  • Adaptability: Be prepared to adjust asset allocations and repayment strategies based on changing market dynamics.
  • Economic Trends: Stay updated on macroeconomic trends and regulatory developments that may impact DeFi markets.
  • Security Measures: Implement robust security practices to protect digital assets from cyber threats and hacking incidents.
  • Educational Resources: Continuously educate yourself on advanced DeFi strategies and economic theories to refine investment decisions.

Example Strategy with Risk Considerations:

  • Avoid Over-Leveraging: Take out a loan using 5% of total net worth in coreDAO.
  • Farming: Leave the remaining 95% of coreDAO staked to farm and earn CORE.
  • Insurance and Growth: Use farmed CORE as insurance and to increase loan limits.
  • Target Profits: Aim for more than 20% profit to outpace the interest rate.
  • Emergency Reserve: Keep the loan value in reserve just in case.
  • Stop-Loss Exits: Establish predefined thresholds for LTV ratios or asset prices.
  • Use Loan to Diversify Income Stream: Explore additional DeFi protocols or strategies to diversify income streams beyond yield farming.

Strategy Optimization

  • DeBank: Useful for monitoring and managing loans and overall DeFi positions. cVault Finance position start at 1.10 and drop down to 1 and around here get liquidated.

  • DeFi Llama: Research yields and identify potential high-yield opportunities, especially in Layer 2 solutions.
  • Beefy Finance: A platform for exploring various farming strategies (as an example of a protocol to research in DeFi Llama).

Advanced DeFi Strategies

Debt Recycling: Compound Your Returns

Objective: Maximize returns by recycling debt to reinvest in high-yield opportunities.

  • Strategy:
    • Borrow DAI using coreDAO or CORE as collateral.
    • Invest the borrowed DAI in yield-generating assets or liquidity pools.
    • Use the returns to repay the loan at full and borrow again to reinvest.
    • Repeat the process to compound returns.
  • Why It Works in Core: The fixed loan value and predictable interest rate help in planning and executing debt recycling strategies effectively.

Leveraged Trading

Objective: Utilize cLEND in the CORE ecosystem to engage in strategic trading, aiming to capitalize on price movements and optimize returns.

  • Strategy:
    • Identify Arbitrage Trading Opportunities: Identify price differences between tokens across different decentralized exchanges (DEXs).
    • Borrowing DAI with cLEND: Use coreDAO or CORE tokens as collateral on cLEND to borrow DAI.
    • Execute Token Trades: Purchase undervalued tokens on one DEX and sell them at a higher price on another DEX to lock in profits.
    • Repay Borrowed DAI: Immediately repay the borrowed DAI from cLEND after executing profitable trades to close the arbitrage loop.
  • Why It Works in Core: Leveraging cLEND for arbitrage trades allows for efficient capital deployment without tying up significant upfront capital. The stable floor prices of coreDAO and CORE tokens minimize price volatility risks during token trades, ensuring more predictable arbitrage trade opportunities.

Risk-Weighted Collateral Allocation

Objective: Optimize the allocation of collateral based on risk profiles within the CORE ecosystem.

  • Strategy:
    • Assign weights to coreDAO and CORE based on their risk and return profiles.
  • Example:
    • 60% in coreDAO 40% in CORE.
  • Why It Works in Core: The floor loan values provide a clear basis for risk-weighted allocation.

hardCORE Looping

Objective: Increase your CORE leverage.

  • Strategy:
    • Borrow against your coreDAO or CORE.
    • Reinvest the borrowed funds to acquire more coreDAO or CORE and take out additional loans.
    • Repeat the process to maximize leverage.
    • Warning: there is a point where there are diminishing returns and the capital efficiency decreases with each loop.
  • Example:
    • Initial Loan: 1,000 DAI using coreDAO.
    • Reinvestment: Purchase more coreDAO and repeat the process.
    • Farming: Use the remaining coreDAO to farm CORE.
    • Reinvestment: Reinvesting the farmed assets back into the strategy to increase the loan limit and amplify returns.
  • Why It Works in Core: The ability to borrow 100% of the collateral value allows for efficient looping strategies, compounding strategies, DCA strategies and more.

Layered Lending

Objective: Maximize capital efficiency by layering loans and investments.

  • Strategy:
    • Borrow DAI using CoreDAO or CORE.
    • Invest in other DeFi protocols that offer lending and borrowing services.
    • Use the returns from these protocols to repay the original loan and borrow more.
  • Example:
    • Initial Loan: 5,000 DAI.
    • Layer: Invest in other DeFi lending platforms and use returns to layer additional loans.
  • Why It Works in Core: The layered approach allows for maximum capital utilization and diversified returns.
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