Rattibha

Looking for a way to long/short arbitrum altcoins that aren't listed on CEX?
Add @SiloFinance into ur trading tools set!
📍In this thread
1️⃣ What is Silo finance
2️⃣ Why is Lambro looking at it
3️⃣ Strategies you can run with lending market
4️⃣ Speculation, action plan & Summary

TLDR
Silo Finance is a lending market with isolated pool, enabling altcoins lending with isolated risk.
Lambro thoughts
❓Newly deployed on Arbitrum, opportunity?
❓Tool for strategies on volatile arbitrum altcoin?
🤔Thoughts of Silo token
Unrolled
2lambroz.substack.com

2lambroz.substack.com

1️⃣ What is Silo finance
Silo finance is a permissionless isolated-Market lending protocol.
It enables lending of long-tail assets with isolated risk to avoid bad debt.
Silo solves the fragmented liquidity problem of isolated lending by introducing “bridge Asset”

Lets go over 3 key points of the protocol
🔹Isolated Lending pools
🔹Bridge Asset ETH & Xai
🔹Interest Rate Model

🔹Isolated Lending Pools
As mentioned before in my @eulerfinance thread, lending protocol with shared pool has better lending liquidity.
However due to the shared lending pool design, all the asset shares bad debt risk, limiting type of assets that can be listed

By isolating each asset into their own lending pools @SiloFinance can allow users to borrow & lend any exortic altcoins without sharing the same bad debt risk between different asset

🔹Bridge Asset ETH & Xai
The purpose of the bridge assets is to act as a connector between different markets. It allows assets to be isolated from each other yet linked to share liquidity through bridge assets to improve the liquidity problem caused by isolation.

There are two type of bridge asset, ETH & XAI.
I won’t go into detail about XAI as it’s on arbitrum where i think the potential opportunity is right now.
But tldr it is a over-collateralized stablecoin to serve as a second bridge.

Instead of borrowing ETH to go from asset A to B, users will be able to collateralize XAI to borrow any token asset in the protocol. However i think the adoption of XAI was not very popular and they are focusing more on USDC now.

🔹Interest Rate Model
Assets set into tiers based on asset’s characteristic.
U can imagine it as the more volatile the asset is, the higher it's floor borrow rate is for different % of utilisation.
I have added base and an extreme case for ur reference.
docs.google.com

docs.google.com

2️⃣Why is lambro looking at it
Buy early, sell high, short it on it’s way down easy to say but how many people actually plan it?
Do you know where you can do this with most arbitrum small coins?

I believe in having a system, understanding and having the tools by my side when you need it is key.
E.g. when shit hit the fan in umami a few weeks ago, can u react asap in where to short it?

Most of the arbitrum coins are small micro caps and not listed on CEX
Making it difficult/improssible for you to leverage long or short and this is why i have been looking at different isolated lending pools and fix yield protocols.

3️⃣ Strategies you can run with lending market
🔹Short
🔹Leverage Long

🔹How to short a token in a lending market.
Example
1 ) Umami price is currently 10.13usd
2 ) I can borrow 1 Umami token from silo finance for 1.97% apy(cost to short) and sell it in a dex for 10.13usdc

3 ) When Umami price drop, assuming it drops to 8usd i can buy 1Umami token and return it to silo finance
4 ) My short strategy profit would be
10.13-8-(cost to short, apy*time) = approx 2 USD assuming u only held this short position for a short time

⚠️Things to note
• apy changes depend on pool utilisation rate
(ur cost to hold a short position changes, specially with small pools)
• Check the lending pool size to see the capacity you can borrow without pushing the borrow interest high

• Take into account for Slipperage & trading fee specially for small micro caps
• Make sure u have enough collateral in shorting altcoins as tokens are likely to be more volatile

🔹Leverage Long/farm
Example
1 ) Umami price is currently 10.13usd
2 ) I can deposit my 1 Umami token to silo finance for 27.7% apy and borrow 3usd
3 ) Usd the 3usd to buy more Umami
4 ) Repeat 2 depending on how degen n how much leverage do i want

⚠️Things to note
• Same with shorting
• There is a limit in leverage depending on the liquidation threshold and how much u borrow per step2
🐑If you are interested in know the full strategies you can do with lending markets let me know! i will write more

4️⃣ Speculation, Action plan & Summary
📍Lets look at silo recent news from their monthly newsletter
🔹Launched on Arbitrum
🔹”keep adding new markets”
🔹$silo rewards program (buyback)

🔹$silo rewards program (incentives for liquidity providing)
🔹Proposal just past to increase the protocol fee for Arbitrum & ETH

📍Silo token current state
✅5.6M MCAP (relatively small)
🤔29.2M FDV (mcap & fdv difference quite big)
🤔23.68 TVL (14.07m is XAI)
❌Approx 15months into vesting (relatively aggressive vesting stage now)

📍Data on usage Silo on arbitrum
As u can see above most pools are quite small, basically can’t do any strategies with size yet.
Maybe on shorting DPX (419.8k available to borrow) or umami in very small size (69.8k available to borrow)

📍Speculation & Action plan
Action plan wise that aren’t much tbh with u unless u want to short DPX.
I don’t have enough conviction to buy their coins yet.

I will be keeping my eyes on their update closely mainly on
• New market silo is adding
• Incentives they are giving to different pools
For
Maybe parking some of my trading bag of arbitrum altcoins there to earn some short term lending + incentive yield before I sell.

Depending on the new tokens they are launching i might leverage long or short on these altcoin
Their TVL n Fees contributing towards the buyback program vs their vesting
@SiloFinance will be great if u can share me some easy way for me check/track will be great!

📍Summary
I am very interested in different lending protocols that are expanding. E.g. @eulerfinance expanding to BNB, Polygon and Silo going to arbitrum. I think its a sector we should keep an eye on, from using the protocol point of view or buying the token.