Seamless

Seamless Protocol has introduced it’s newest ILM strategy the USDC/ETH 1.5x Short ILM. This ILM offers a strategy to short ETH via leverage. Adding this strategy to the shelf of ILMs helps round out options for users enabling them to pick either short or long strategies depending on their individual attitudes about the market.

Introduction

Recently, Seamless Protocol introduced ILMs (Integrated Liquidity Markets) helping users to automate their DeFi strategies. To learn more, checkout the Introducing ILMs Blog Series here!

This series dove into topics covering how ILMs work, their comparative advantages, the benefits of auto-compounding, and introduced the inaugural wstETH/ETH 3x Loop strategy.

Building upon this foundation, Seamless is excited to introduce the next ILM strategy tailored for individuals seeking to capitalize on any adverse ETH price movement.

Capitalizing on the Bear Market

Ethereum, often hailed as the backbone of DeFi, holds immense value and potential within the crypto ecosystem. However, this credence does not always correlate with an upwards price trend, as we have seen in the current market. So how can someone benefit in times when there is a downward price trend of ETH?

Introducing the USDC/ETH 1.5x Short ILM

Designed to increase your short exposure to Ethereum, this new ILM strategy harnesses the power of automation to capitalize on any downwards trend of ETH. To learn more about what it means to “short”, recommend you check out this article.

Here’s how the 1.5x USDC/ETH Short ILM works:

Leveraging USDC Collateral: Users deposit their USDC holdings as collateral.
Borrowing Unlocked: With USDC as collateral, the ILM automatically borrows ETH available from Seamless Protocol.
Automated Reinvestment: This ETH is seamlessly swapped for more USDC on Base Dexes to add more exposure to USDC and downward ETH movement.
Continuous Rebalancing and Optimization: The USDC/ETH ILMs automatically rebalances debt (ETH) to target the intended leverage ratio, reducing any risk of liquidation.

Benefits of this new type of ILM

Enhanced Exposure: By increasing exposure to the downwards trend of ETH price, investors can better capitalize on the downward movement — whether that is as a hedge, or as an investment.
Automated Strategies: The ILM automates the process of borrowing, swapping, capital deployment, and optimization, freeing users from the complexities of manual trading and decision-making.
Risk Management: Built-in risk management mechanisms such as rebalancing help mitigate downside risks, ensuring capital preservation and security in volatile market environments.
No Extra Cost: Seamless does not introduce any added fees with ILMs, ensuring users are able to put more of their crypto to work.

Investors looking to benefit from the adverse movement of ETH stand to gain a lot from the fee-less, automated, straightforward nature of the USDC/ETH 1.5x Short ILM.

What would have happened if you shorted ETH versus depositing into the USDC/ETH 1.5x Short ILM in May?

The graph is a backtest indicating what would happen during a short bear run, assuming a DEX fee/slippage rate of 1% and an ETH borrow interest rate of 3% APY.

Both the ILM Equity line (blue) and ETH short line (red) move inversely to the ETH price line (yellow) — as ETH price increases, both the ILM Equity and ETH short decrease. This is what being short means — it is a position which benefits from adverse price movement.

The ILM Equity line is largely of less value than the ETH short — this is because during the period of May — Aug 2024, ETH price was increasing. Consequently, the ILM Equity was impacted by 50% more than just being short ETH. However, as the ETH price dropped, the ILM Equity value quickly overtook the ETH short value.

Conclusion

The USDC/ETH 1.5x Short ILM is an instrument for capitalizing on the drop of price in ETH — it is a useful tool to have in the arsenal of an investor holding the belief that ETH may enter a bear market.

Whether you’re new or seasoned, the USDC/ETH 1.5x Short ILM merges automation and lack of fees to provide a seamless pathway to maximize your rewards, even during a bear market.

Seamless offers products for bears and bulls alike. If you are looking for long ETH strategy check out this article on Seamless’s 1.5x and 3.0x ETH/USDC strategies.

Stay tuned for more updates and insights as we continue to explore the transformative potential of Integrated Liquidity Markets in the world of decentralized finance!

Seamless Protocol is the first decentralized, native lending and borrowing protocol on Base. Seamless lays the foundation for Modern DeFi, focusing on lower-collateral borrowing and a better user experience to inspire the masses.

Join the community and get plugged in via the following links:

🧑‍💻 Website: https://seamlessprotocol.com

📱 App: https://app.seamlessprotocol.com

🐦 Twitter/X: https://twitter.com/seamlessfi

🏰 Farcaster: https://warpcast.com/seamless

👾 Discord: https://discord.com/invite/Uye9jCVgUp

‍