Guide to borrowing bitUSD

in #bitshares5 years ago

A lot of people are asking about borrowing on the bitshares DEX, so I decided to explain in a simple post how to do it, and what the pros and cons are.

The short summary is:
It's risky, but it's also basically a free loan.

Assuming you already have a bitshares account with some bts on it and are logged in, then go to the EXCHANGE tab and press any market where one of the currencies is bitUSD. For example bts/bitUSD.

Then press ‘borrow bitUSD’ as you can see in the bottom right corner of this screenshot.
Screen Shot 2018-01-29 at 22.26.00.jpg

Then you will get to a window that looks like this:
Screen Shot 2018-01-29 at 22.31.21.jpg

If you have bitshares (bts) then you can lock them as collateral and borrow bitUSD for them, which is equivalent to normal USD. All you have to do is put up at least 1.75 times the value of the USD.

So to explain it really simply, if bitshares is worth 1USD then you need to lock 175bts to borrow 100bitUSD.

So you type how many usd you want to borrow and how many of your available bts you want to lock up. Then you can also see how low the bts price can go before you will be forced to sell them at a bad rate and possible lose all of them.

In the example in the screen shot, I'm borrowing 50bitUSD and locking up up 340bts. That gives a ratio of 3.23. And I would be margin called (i.e. forced to sell) if bitshares would fall to 3.88 for a dollar.

I advise to you lock up a lot more than 1.75 times the value. Because anytime the bts/bitUSD exchange rate drops and your bts are worth less than 1.75x the value of bitUSD you will be forced to sell at a bad rate.
In essence, you can lose the bts you have locked.

That’s why it’s risky. So I advise to always lock up at least 5x times the value of the bitUSD. Recently there was a crazy dip, and a user called aloha had locked up 54,000,000bts for 11,000,000bitUSD.

He lost more than 40million bts in a few hours because he wasn’t careful enough!

So always be sure to have a good cushion protecting yourself. And check in on bitshares regularly if you have borrowed money to be sure you are safe.

But here’s the pro: You can borrow money for free.

That’s right: 0% interest rate.
Try to find that anywhere else.

That’s why everybody thinks bts will rise steady but surely. Because as more and more people find out about it, more and more bts will be locked as collateral. And since they are taken off the market it should create and upwards trend for the price if the demand increases or stays the same.

And if you want to pay back the loan, you can just press borrow bitUSD again. Then type 0 in the USD field and then press update position. Then the bitUSD will be taken from your account and the bts will be unlocked again.

It should be noted that locking up bts for borrowed smartcoins is only a good strategy for those who believe the bts price will go up. If you believe it will fall, then it’s probably better to sell them now and buy back when they’re down.

Hope this guide helps, and please let me know if something in the text is unclear.


this concept of bitshares is very interesting!

It's risky, but it's also basically a free loan [...]
But here’s the pro: You can borrow money for free.

I don't get why it's called by many a free loan. You lock let's say BTS worth ~200 USD and you get bitUSD worth 100 USD.

If you buy bitUSD (if you need them) you would have 200, not 100 bitUSD. Thus you don't get any loan.

That’s right: 0% interest rate.
Try to find that anywhere else.

As explained above, you end up with less money at disposal than before. What is more, the interest rate is not 0% as you lend (well, kind of) 50% or more of your BTS for free the risk to lose a lot of them!
If you use as collateral your house, you can still live in the house and use borrowed money. It's not true in the case of BTS - bitUSD 'borrowing'.

Good job, if you follow me I can upvote more of your future post.

Thanks for your vote. You seem new here, so I would caution you to not ask for follows or upvotes as it pisses of some people and isn't well seen on steemit. But if you write cool posts then I will definitely follow you.
I generally check out the posts of everyone who comments on my ones and if I like them then I always follow.
Also check out steemfollower, it's really good for getting more votes on your post in a non-annoying way.

Thanks Andrea. Good to know the advice can benefit more people.

Also be very careful with copy/pasting comments as many people don't like that either and might even downvote for that reason. I guess everybody likes to feel that their post has been read and understood by the commenter.

I am seeing a lot of post on BTS, is there any news ?

I think it's mostly that a lot of people are expecting crypto trading to move from centralized exchanges to decentralized exchanges this year. Even more now that there has been another hack on an exchange.

And if this move happens then bitshares will be very well positioned to take the lead because it has a good history and is battle tested so to say.

ahhh okay, nice thanks for the descriptive reply

Be careful doing this. A lot of steemit users lost everything doing this during the last crypto bloodbath.

I agree, that's why I advise to always try to keep a 5x ratio of collateral and watch it often as long as you're borrowing. And even better, keep some other cryptos on the bts exxhange at hand so you can quickly add more bts if you need.

Often I keep aside enough to clear the loan outright. as in using only 50% of my BTS in a loan and having more crypto somewhere to add or clear it if things start going south. Then I will buy the cheap BTS and wait for it to go up.
Margin is risky, but if you be sure it's in a dip or just aim for 2-3c it's ok also

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