Constant Multiple
An advanced automation strategy to mantain your Vault's Multiple factor in a predefined value.
Last updated
An advanced automation strategy to mantain your Vault's Multiple factor in a predefined value.
Last updated
Oazo Apps 2023
Constant Multiple is an advanced automation strategy that allows you to maintain your Vault’s Multiple factor in a predefined value, by automatically buying or selling your collateral when your collateralization ratio changes.
Constant Multiple is currently available on Maker positions.
You must first set the auto-buy and auto-sell triggers to use this strategy. As their name implies, when your Vault’s collateralization ratio hits these values, a sell or buy action will be triggered, selling or buying your collateral to reach the predefined multiple factor. The figure below shows a graphical representation of how Constant Multiple works.
This automation is similar to Auto-Buy and Auto-Sell, but instead of targeting a fixed collateralization ratio, it targets a multiple factor. It cannot be combined with Auto-Buy and Auto-Sell, but you can have a Stop-Loss active for your vault at the same time.
To enable Constant Multiple, you need to set up five parameters:
Sell Trigger: The Collateralization ratio that will trigger a collateral sell action
Buy Trigger: The Collateralization ratio that will trigger a collateral buy action
Target Multiple: The multiple that is returned to as a result of a buy or sell action
Max Buy Price: The maximum collateral price for an automated buy action
Min Sell Price: The minimum collateral price for an automated sell action
When your collateralization ratio based on the next collateral price hits the sell trigger, the sell action will sell part of your collateral to DAI, which will be used to repay your debt and decrease your multiple factors. Similarly, when the next collateralization ratio hits the buy trigger, the buy action will generate more DAI debt with your collateral, use it to buy more collateral, lock it back into the Vault, and increase your multiple factor.
You can limit the collateral price range where the automation will be active by setting the maximum buy price, and the minimum sell price. In this case, if the next collateral price is outside of your range, the Constant Multiple will not trigger.
Keep in mind that all calculations of collateral prices, as well as collateralization ratios, are based on MakerDAO’s Oracle Security Module, which are updated every hour, and can differ significantly from the collateral’s market price.
Constant Multiple is an advanced automation strategy. All parameter values should be backed up by a risk analysis, based on your personal strategy and risk tolerance. You can read more about Constant Multiple risks here.
Please keep in mind that all your positions and automation strategies should come as a result of your own risk assessment. In particular, for the Constant Multiple feature, the values for the buy and sell triggers should be chosen in such a way that your position’s risk is not increased due to unexpected market conditions or volatile prices.
If used correctly, Constant Multiple can be a powerful tool to help you maximize your profits without lifting a finger! However, there are some risks that you should understand before using it:
Recurring Sell actions in a downtrending market could increase your exposure to an asset whose value is falling, and the value of the asset could then rise. This would result in you ‘selling the bottom’ and losing money.
Recurring Buy actions increase your exposure in an uptrending market, and the value of the asset could then fall. This would result in you ‘buying the top’ and losing money.
As with all our automation features, there are other implied risks, including but not limited to:
Oracle manipulation: The triggers are based on the next Maker Oracle price, so if a bad actor can somehow manipulate this value, it can potentially affect your position by forcing a buy or sell operation on your Vault.
Price volatility: Maker Oracles update every hour, but the buy and sell price of the collateral is based on spot price, which changes in real-time. This can potentially make the Constant Multiple trading prices not optimal.
Unknown exploits: Summer.fi smart contracts have been through security audits. However, it is impossible to guarantee that the contracts are 100% safe against attacks.
Yes! You can use it alongside Stop-Loss to protect your vault from liquidation. However, you cannot use Constant Multiple simultaneously as Auto-Buy or Auto-Sell due to the potential conflicting triggers.
Constant Multiple is only available on Summer.fi Multiply Vaults. If you have an existing Borrow vault, you can easily convert it to a Multiply Vault and set up a Constant Multiple.
You may notice that some multiples are disabled in the Constant Multiple Set up or Management screens. This may be because your Stop-Loss Protection would be triggered if your vault hit these multiples. To prevent your Stop-Loss from being executed accidentally, the relevant multiples are disabled. To re-enable them, adjust your Stop-Loss Protection trigger and try again.