Hello and welcome,
In this article I will explore an opportunity to utilize the Nexo and Sparta platforms to balance exposure to asset appreciation with the cost of still having the access to their underlying value. I have also provided opportunities to capitalize on that access.
https://nexo.io/ - The Nexo platform offers the opportunity to store various digital assets and based on the value of those assets allows users to take out over-collateralized loans at various ratios.
https://sparta.akropolis.io/stats - The Sparta platform offers the opportunity to take out under-collateralized loans based on at the time of writing, a single asset, the DAI stable coin. (see where this is going?)
Nexo's LTV ratios can be found here: https://support.nexo.io/hc/en-us/articles/360008240893-What-Loan-to-Value-LTV-I-can-get-on-my-assets-.The assets I will focus on for this article are Ethereum and Nexo as this blog is primarily about DeFi, and Ethereum is very correlated with DeFi. (All ratios are approximate values) The LTC ratios at the time of writing are as follows:
PAX Gold (PAXG): 70% ( I do not recommend using this based on what I perceive as a lack of ability to increase in value at a rate which can outpace the cost of the loan.)
Eithereum (ETH): 50% (Which has appreciated in value by 64.9% since last year today) https://www.coingecko.com/en/coins/ethereum
Nexo (NEXO): 15% with a stipulation that it will be increased further (I am very excited for when this does increase, as I perceive this as the best asset to use as collateral for a loan. All other assets cease to accrue interest when used as collateral, the NEXO token provides dividends even when used as collateral.) which has appreciated by 78.7% since last year today.) https://www.coingecko.com/en/coins/nexo
Okay now the symbiotic relationship. For demonstration I will use arbitrarily made up numbers:
Total assets held on the Nexo platform: $10,000 in Ethereum. Total loan value potential: $5,000. The opportunity exists to take this $5,000 over to the Sparta platform and deposit it into their pool https://sparta.akropolis.io/pool, using the "buy share" function. If deposited into the pool, the borrow function has to potential to request a loan for $10,000.
Using these two platforms in this way allows users to capitalize on an asset's appreciation in value while still having access to the value of the underlying asset. To reiterate: you can use that $10,000 as you would have used your $10,000 all while being exposed to the Ethereum asset and its potential to appreciate in value.
This opportunity is not free, it has a varied and also variable cost:
Nexo loans can vary from 11.9% interest to 5.9%.
Sparta loans can vary from 10%-150% (luckily this is set by the user.)
Looking at this it would be easy to think: "But surely the appreciation of Ethereum alone in 1 years time won't be worth the hassle, and there certainly is potential for losses." To this I say, remember that you still have $10,000 to do with as you please, were you to use that to supply liquidity to (https://uniswap.org/+https://www.ampleforth.org/geyser/), or (https://www.curve.fi/susdv2/deposit+ https://mintr.synthetix.io/ LP rewards), or https://app.mstable.org/save that would provide additional opportunity.
When using the Sparta platform, the user buys ASPT(akropolis sparta pool token) which increases in value as interest is accrued. This is incalculable from the tools available to the user and also no tracker has been posted, but the result is an effective interest rate of less than the selected value. Your stake in the pool increases in value with even just your loan, this will further increase with widespread use of the Sparta platform (https://wiki.akropolis.io/sparta/.)
The NEXO token distributes dividends equal to the company's profits (as long as you have completed all the steps in KYC (know your customer)), which you are increasing by taking out a loan. Furthermore staking NEXO reduces the interest rate of your loan.
Well okay, there it is. I hope this brings about curiosity and thoughts or even shed light on further levels of depth to DeFi available to descend into.
Until next time.
EDIT: I added in after initial post by how much ethereum and nexo have appreciated in 1 years time. (this of course at the time of writing.) I also added the coingecko links for future comparison. I didn't do the math for you on this article I think I will do some math on later articles.
Quick work is though: ~70% appreciation in value + ~10%-30%+ interest accrued all at the cost of anywhere from less than 15.9% to choose your interest rate. Of course there is no guarantee in appreciation in value.