Amplify Exposure to your Crypto with downside protection
Multiply vaults of Summer.fi make it very straightforward to increase your exposure to an asset with multiples up to 5x available, but it doesn’t stop there.
A lot of DeFI users shy away from multiply because they think of it far too risky. While it is true that multiply positions do have liquidation risk, there are many different ways to approach multiply, depending on your tolerance for risk.
Multiply approach #1: Buying dips
Increasing exposure is all about your entry. The simple math is that you need to close your position at a higher price than when you opened it, in order to be profitable.
One way to increase the probability of doing so by Multiplying when you see a large price decrease in the market. Of course, this is easier said than done.
How do you do it?
Determine if the dip or decline in price is big enough for you. Is it anything >10% in 1 day? 80% off the all time high? Whatever the number is, make sure you have it in your mind.
Select the best vault type for you and your position based on what you care about most. LTV%, Max Multiple, Borrow Rate or something else.
Open your Multiply Position and increase your expsore in one transcation.
Add a summer.fi stop loss because there is a possibility that you are wrong.
Monitor your liquidation price or LTV %.
Monitor the market for further decreases in price, so that you can either double down on your position or cut your losses.
Real Life Example
Ryan knew everything there was to know about Ethereum as an ecosystem. In 2018, he could not believe that the price had fallen as much as it had to less than 100$ at one point. He used a summer.fi Multiply vault to buy more ETH every time he felt the asset was undervalued.
For him that meant price declines of >10% in one day, which happened 16 times in 2018, with an avg entry price of 436.68 ETH/USD.
Ultimately, he ended up reducing his expsore two years later in 2021, when the price of ETH rose to 2,000 ETH/USD.
Multiply approach #2: Accumulating over time, at your own pace.
Not everyone wants to buy every dip. Some people want to just increase their exposure over time, little by little and Summer.fi. multiply vaults also give you that ability.
A simple way to do this one summer.fi is to simply increase the exposure to an asset with our one transaction increase exposure over time. While this seems extremely straightforward, there are some steps you find valuable to think about.
How do you do it?
Determine your accumulation range. Think about the upper and lower bound of the price of an asset that you are willing to purchase at. For example, maybe you’d never buy WBTC above 40k BTC/USD and never want to buy below 10K BTC/USD.
Determine your accumulation time frame. Think about the beginning and end of your strategy. For example, you only want to accumulate for 12mo.
Select the best vault type for you and your position based on what you care about most. LTV%, Max Multiple, Borrow Rate or something else.
Open your Multiply Position and increase your expsore in one transcation.
Add a summer.fi stop loss because there is a possibility that you are wrong.
Monitor your liquidation price or LTV %.
Monitor the market for further decreases in price, so that you can either double down on your position or cut your losses.
Multiply approach #3: Following a trend
Especially in a bull market, some of the greatest trades are actually made after a trend has been established. Thus, waiting to buy dips is actually not in your favour, as you might be waiting a long time.
One approach to this is buying key levels up until a point. For example, say you identify that 2900 ETH/USD is an important level, you can buy that price break out and more from a Multiply vault in one transaction. In fact you can even set it and forget it with “Auto Sell” and “take profit” automation.
How do you do it?
Determine the price levels at which you believe a sustained rally might occur. For example, you may think that anything above 2k ETH/USD and we are off to the races.
Select the best vault type for you and your position based on what you care about most. LTV%, Max Multiple, Borrow Rate or something else.
Open your Multiply Position by only depositing collateral.
Add a summer.fi stop loss because there is a possibility that you are wrong.
Add a Auto buy trigger for the price at which you believe a sustained rally would occur, think about the price at which you would not want to buy above and make sure to limit your max buy price at that level.
Monitor your liquidation price or LTV %.
Monitor the market and consider the price at which you will be ready to close your position and take profits.
Multiply approach #4: Shorting a rise in price
Prices don’t always go up. Summer.fi also give users the ability to increase their exposure to an asset, by going short another asset. For example, users can borrow ETH against USDC to express this view.
The steps here are simple, simply open a “short” multiply position and monitor its health.
Things to keep in mind for all multiply positions
Multiply positions are inherently a bit more agressive of a strategy and therefore create the potential for losses. Here a few things to always keep in mind when opening a multiply position.
Know your time horizon. Your time horizon is an important aspect to consider for your multiply position. That is to say, how long do you expect to keep it open? and do you fully understand the eb’s and flows that can happen in the market within?
Understand your entry price, and why its your entry price. Your entry price will ultimately determine your multiply position success. Thus you should be confident that your entry price is a good one for reasons that you will have to come up with on your own.
Know your exit price. Of similar importance to your entry price, knowing your exit price is also critical. Don’t just leave your positions success to luck, think about the price at which you need to reduce your exposure via multiply, before you open the position.
Use a stop loss.
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