You can get leverage/equity on your ETH.
Example, you have 100 ETH. You can get 300 ETH with leverage (3x) using Maker's CDPs. If ETH goes from from $130 to $180, instead of making $5000 from holding your 100 ETH, you could make $15,000.
You cannot get 3x leverage.
With a CDP you can stake the 100 ETH to mint and withdraw DAI (where one DAI equals one USD). The CDP requires 150% collateral. The amount of DAI you can mint and withdraw is roughly 66% of the value of ETH staked.
In theory, 3x leverage is possible, but as the CDP gets liquidated once you go below 150% collateral ratio, it's not practical, as a 3x leverage is only possible at exactly 150%. If eth drops a single cent, you'll get liquidated.
It is recommended to have at least 200% collateral, a lot of people have 250% and more.
Quick overview on relation of collateral ratio to leverage:
I personally go with the last option, as I do not have to constantly monitor the cdp or eth price. Other people use bots for this.
And then we have CDP #3228 who's threading the needle
You buy ETH with the DAI and put that new ETH into the CDP allowing you to generate more DAI and buy more ETH. Repeat this multiple times. I didn't bother doing the math but a quick google seaech told me that 3x leverage is indeed possible.
Yeah, I gotta say -- Digix has been a complete disappointment.
I finally capitulated back in Dec. and tax loss harvested my DGD for ETH.
So far I've not been disappointed one bit with that decision.
MKR I'll probably hold on to damn near indefinitely.
I get the feeling MKR price is more tethered to USD value as opposed to ETH value since its a DAI ecosystem. Thus it'll hover around $750 until stability fee is increased, debt ceiling expands, announcement of MCD or general sentiment changes. Thoughts?
> I get the feeling MKR price is more tethered to USD value as opposed to ETH value since its a DAI ecosystem.
Not at all. The USD is very stable compared to cryptos. If ETH doubles in value, do you really expect MKR not to, because it is more tethered to the USD? DAI of course should be tethered to the USD, but MKR doesn't need to be stable and will have similar volatility to any other speculative crypto.
fluxETH2 - 3 years account age. 300 - 1000 comment karma.6 months ago
That was not the case in the last bullrun, it ran up in sync with eth & went up even more.
Sorta correct. It’s definitely highly dependent on Eth until MCD because the value is created through Eth not the USD. Stability fee will be changed shortly I believe. The debt ceiling won’t be raised until the peg is sorted out. MCD will be this year.