MY UPDATED LIQUIDITY STRATEGY: KONA&ABOREANFI

Since the AboreanFi launch, I've maintained approximately $10k in stable liquidity there. This both helps me evaluate my stable assets and earn Abstract XP.

However, I changed that today.

Kona introduced Lending/Borrowing a while ago. We can now borrow and lend on the Abstract. If you don't have any experience, you need to understand how it works first because there is a risk of liquidation on Lending/Borrowing platforms.

When you lend/borrow using stablecoins, this risk is much lower. In fact, in a scenario where everything works perfectly, there is no such risk. However, a risk arises when SC providers face major problems. Or, in a major crisis affecting the entire sector, stablecoins can depeg. Then there's the issue of the oracle not working and/or malfunctioning. The risk is low, but it exists. Managing the risk is up to you.

Anyway, let's get back to the topic.

I withdrew my $10k liquidity from Aborean and lent it all on Kona.

This value may vary for each currency, but for USDC, the LTV is 77%. This means that for every $100 you lend, you can borrow $77. Based on my figures, I could have borrowed a total of $7.7k. However, I settled for borrowing $7k. The remaining portion will leave me with a share in case the oracle malfunctions.

I returned the $7k that I borrowed, to Aborean as stable liquidity in the same manner. If you only want to use Kona in this scenario, you can increase your volume and consequently your gains by lending/borrowing again with the borrowed funds.

This way, even though I reduced my liquidity on Aborean by 30%, I acquired a $10k asset on Kona. So I still have $10k, but it's as if I'm using DeFi with 1.7x leverage. (APY and Abstract XP).

While I was conducting the transactions, the APY was positive despite my borrowing. As people engaged in lending/borrowing, the APY changed and turned negative, but it is currently around -0.30%. So as a result of this transaction, I only owe $30 for one year. However, it is quite cheap for 1.7x leverage.

The process I described only applies to situations where you borrow and lend stable assets. If you borrow/lend volatile assets, you should actively monitor your position and be aware of the risk of liquidation.