What is the advantage of bidding for collateral from auction

Question

DeFiChain - International

Dan Vo

What is the advantage of bidding for collateral from auction

is it really that discounted from the true value? They look about the same to me

#blockchain #cryptocurrency #defichain #english

0

28.01.2022

8 ответов

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Dennis Washington

DcShel Shelton
The problem right now is that to bid on an auction...

When the price of the collateral increases the vaults will no long be at auction. If you are minting the dToken you are going short on the position, in which case winning the auction could be a benefit as it gives you useable capital, while your collateral is tied up in the short. This is a strategy, it means you believe the asset price is going to fall. The dtokens are not trading at a premium, as has been explained many times in this Chanel, these are not synthetic stocks, they are free to move in the market according to supply/demand. 1 dtoken is Collateralized at 150% so that token represents a collateral stake of 150% this is the price on the Dex. Taking a short position to bid on a vault is a great plan if you are taking the short because you have good fundamental analysis that indicates a price drop

0

29.01.2022

DcShel Shelton

Dennis Washington
When the price of the collateral increases the vau...

I think that is what a lot of defaulted loan holders are holding out for. Unless someone finds them profitable when dUSD falls in line before they rise enough....

0

29.01.2022

Dan Vo Автор вопроса

Dennis Washington
When the price of the collateral increases the vau...

I have followed this https://defichain-blog.com/en/general-information/liquidation-everything-half-as-bad/. Apart from the Dex premium which sounds like will remain even after the dusd issue is fixed the only way I can see it being lucrative is if you can get the tokens at a discount, but the current model doesn't support this. Wonder what would happen if there's all this unclaimed tokens that noone bids for

0

29.01.2022

Dennis Washington

Dan Vo
I have followed this https://defichain-blog.com/en...

As can be see by the amount of premium burned from auctions, they are getting bid on. It is lucrative as long as you believe you can get the token cheaper in the future, this is the idea of a short. I short a token now expecting to get it cheaper later, use the borrowed tokens to buy vault, use won collateral for what ever I want, when token falls pay of short. Given it is risky as all shorts are Don't let the guys at wallstreetbetz hear of these shorts... 😆 This is not financial advice

0

29.01.2022

Dan Vo Автор вопроса

Dennis Washington
As can be see by the amount of premium burned from...

This will work as long as it's just the token price that has fallen and not a macro event that causes everything to fall at the same time. In that case only bidding on a Vault of stable coins would work

0

29.01.2022

shane smith

DcShel Shelton
The problem right now is that to bid on an auction...

This is very helpful to know about the auction status. Where can I go to learn technically HOW these premiums exist and WHY they are not converging to closer to the market price?

0

29.01.2022

Dennis Washington

shane smith
This is very helpful to know about the auction sta...

An base level economics course, or online there is a number of resources regarding collateralization, short positions, and perceived value

0

29.01.2022

DcShel Shelton · Accepted Answer

The problem right now is that to bid on an auction, you have to pay with the actual dStockToken that is at a premium to buy on the DEX. For instance right now the TESLA is $846 and to swap for it on the DEX it is a $1190 a 40% premium. so yeah unless you are going to gain more than 40% profit on the collateral, then you will loose your tail bidding on most auctions. Now you could open a vault, put in collateral and mint dTSLA for market price and bid on it and win the collateral assets that way, but now you are stuck with your collateral stuck in a vault and no way to pay back your loan, that needs that same dTSLA that you used to buy the auction with. meaning youd have to now spend 40% premium to go back and retire your loan and free your collateral. so many vaults are not going to be auctioned while the prices are where they are on the collateral. Maybe when the prices increase a lot on the collateral by a significant amount.

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What is the advantage of bidding for collateral from auction

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