Number Three. (Any views expressed in the below are… | by Arthur Hayes | Jun, 2022

  1. Borrow USD at less than 20%
  2. Convert USD into UST
  3. Deposit UST into Anchor and earn 20%
  4. Annualised Unrealised Profit = 20% — Borrowing Costs
  1. Withdraw UST + interest in UST from Anchor
  2. Convert UST into USD
  3. Payback your USD loan
  4. The residual is your profit
  1. Carry trades and cash-and-carry basis trades. The borrower would rather not post collateral, as it wants to have as much cash as possible to most effectively use these strategies. You can read one of my earlier articles, “All Aboard!”, for a detailed explanation of the cash-and-carry trade.
  2. Margin loans for speculation. These are for directional long and short traders. Usually, they will post some sort of collateral. But failure to appreciate the changes in volatility and liquidity of the underlying collateral can lead to losses for the lender.
  3. Mining asset-backed loans. A miner either pledges hardware (like ASIC Bitcoin mining machines) or crypto and receives fiat currency and/or stablecoin. These borrowers carry the least risk, as they have a strong crypto cash flow backing their loan. However, if you repossess ASIC machines from a defaulting miner, you must have a facility in which to plug in the machines and start mining to make full use of them.

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