Borrowing with Zero Interest to buy more Bitcoin, to be used as collateral to buy more bitcoins

Hi Guys,

I’ve been away from the space for a while and checked on Sovryn today, and after seeing the news about “0% fees borrowing”, I have a mathematical dilemma, which I hope someone more expert than me can answer.

I’ll be using simple numbers to illustrate the concept.

What happens if.

I use 1 bitcoin as collateral to borrow 16k USD (as I assume the USD I receive will be below market value)

I then use those 16k to buy more bitcoin, let’s say 0.9BTC

I then use those 0.9BTC to borrow 14k USD

Which I then use to buy 0.8 BTC

And I use them as collatoral, to borrow 12k

Which I then use to buy 0.7 BTC

(I will stop here for simplicity)

Now, let’s assume bitcoin doubles in value (from 20k to 40k)

My 0.7 BTC is worth 28k USD, I sell all of it and get 28k USD

I use 12k to repay the third loan, and 14k to repay the second loan.

I’m left with 2k USD and 1.7btc

Its possible, but its super high risk. If your Loan’s Collateral Ratio (CR) falls below 110% in Normal mode or 150% Recovery Mode then you lose all your bitcoin collateral. And you have to pay an origination fee (In normal mode 0.5%) every time you take out a loan.

Also i recommend reading about the Recovery Mode in the wiki: Zero: Protocol for Zero-Interest Loans | S O V R Y N

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