Added Collateral To Avoid Liquidation - Pawned BCH in Blockng

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Written by

#Club1BCH - BCH little Enthusiast

1 year ago

In community: Cryptocurrency and Blockchain(7b7f)

Topics: Crypto loan, Blockng.money, BCH, Collateral, Liquidation

Liquidation, if you are a trader or already around in crypto for a while you'll know how scary this word is. In crypto it's a form of getting your collateral when the price set of your liquidation loan entry was hit just so the platform can get something when market goes wrong and you might not be able to pay your loan.

If you haven't read my article yet, PAWNing Bitcoin Cash ($BCH) Via BlockNG..this article is related to it. I find it fun entering something then get me brothered afterwards, lmao. But I always find solutions to every frustrations and with that, I learned more.

Added collateral to avoid liquidation in a snap

We know how volatile crypto is, you will never know when it pumps or dumps hard during your sleeping time. This is why usually traders put stop-loss or take profit just so whenever the market swing on both sides their position entry has clear direction. Some traders who doesn't put SL & TP usually stay late just to monitor their trades, those are noob traders usually.

With this, I was bothered market will be crazy and drop more so I added my collateral before I sleep last night. As you can see my last collateral was 0.50 BCH, the liquidation price is $218.191 per BCH.. I can't afford to lose 0.50 BCH if ever BCH price drops on that level so I added it.

I had 0.065BCH left in my Metamask wallet after I wrapped the 0.50BCH to make it as collateral. After my loan executed I bought BCH again with the loaned amount, it was 0.289BCH so in total I have 0.35 BCH left in my wallet.

I wrapped the 0.33 BCH to add on my collateral. After that my remaining amount to be loaned was added, it became $90 from $20+..but I didn't add my loan anymore as the purpose of it is just to make my collateral safe.

After adding my collateral my liquidation price was adjusted at lower price, from $218.191 it is now $131.444.. it is already safe as I think BCH won't drop drastically on that level not unless world news will be chaotic something like World War III will happen.

(After adding my collateral, I sleep soundly lol)

I'll just remove the .289 BCH on collateral when BCH price pumps up to sell it and pay my loan.

Detailed explanation on things you should consider before availing the loan

I wasn't able to explain this well on the last article, since @Mr.Valentine ask me about the 3% interest, so here it is;

Maximum collateral ratio 75% - this means 75% of your collateral value will be available for you to loan.

Example given:

Your collateral amount is $100, then the amount you can avail to loan is $75..it is not neat $75 that will come to your wallet due to some fees, but it's not much since we are in SmartBCH. That $75 is the 75% of your collateral value.

Liquidation fees 12.5% - this is the percentage discount a liquidators get when buying collateral that is nearly liquidated

Borrow fee 0.50% - this is the fees that will be added to your debt once your loan was executed, aside from the gas fees of approving the transactions.

Interest 3% - this interest is calculated annual or yearly, that'll be added on your debt.

I'm always an explorer, trying things out just to see if it is profitable or not. Then write my experience on it, coz I love sharing what I experienced and what I've learned. I'm a risk taker, some of my actions wasn't perfectly calculated but I don't regret any of it..as I after experience, I always believe it's the best teacher.

If you wonder why I loan and I bought BCH not other tokens in SmartBCH? Well, hopefully I can discuss the reasons in my next article, for you to know why, it's part of the experiment strategy. As well as why I trusted blockng.