Arth Loan Strategies

Hey Everyone,

MahaDAO has recently launched Arth loans on Binance! Arth loans provide Maha holders with an amazing opportunity to utilize their Maha without selling it! Even though this opportunity exists, many holders have never utilized a Defi platform and/or may be confused about what they should do. So, in this post, I will discuss what Arth loans are, some of the risk of taking an Arth loan, and strategies I would use if I decided to take an Arth loan.

What is an Arth Loan?

Arth loans allow you to use your Maha as collateral so that you can take out a loan in Arth. These loans are 0% interest loans!

Why would I want to take an Arth Loan?

People regularly take loans on assets that they don’t want to sell in order to not only keep that asset and its future value, but to also have liquidity to do other things such as day trading, swing trading, buying NFTs, etc.

Ex: I think Maha is going to appreciate in the future. However, I want liquidity to do a day trade. So, I use my Maha as collateral to take out an Arth loan. I will then take my Arth and swap that into which every crypto I wanted to day trade. Once the day trade is complete and I will then swap that crypto back into Arth and pay back the loan!

By executing the example above, not only are you able to keep your Maha, but you were are also able to make additional profit by executing a day trade! Furthermore, there is no payment date on these loans! This means that if your trade does not go well or the market turns red you can pay back the loan whenever you decide to!

What are the risk with taking an Arth Loan?

The major risk that you face when taking a loan is liquidation. A liquidation happens when your debt value is worth more the value of your collateral. A liquidation can also occur if your collateral meets a predetermined liquidation threshold. For Arth loans the liquidation amount is 110%. Once that number, circled in red hits, 110%, you will be liquidated.

To avoid liquidation, you can either pay off some of the Arth loan or add more Maha to use as collateral. If a liquidation occurs, you are at risk of losing some of your collateralized Maha. Even if some of your collateral is liquidated, you will still be able to keep the loan of Arth.

Where can I get an Arth Loan?

What I would do with an Arth Loan

If I didn’t lock my Maha for four years, I would use all my Maha as collateral and take out a loan with a collateralization ratio (CR) over 350%. I would ensure that the CR is this high because it will ensure that I have enough room to avoid liquidation in case there was a random crash in the market. However, you should take out a loan for which ever amount you are comfortable with. I would then take my Arth to buy more Maha and then deposit it use it as additional collateral. Not only did I gain more Maha at an extremely low price, but I also increased my CR which puts me further away from being liquidated! I am extremely bullish on Maha, especially at this current price ($3.50), and I think it is extremely undervalued. So, I have essentially took out a 0% loan and purchased more Maha, which is extremely likely to appreciate in value relatively soon!

Would you use the Arth Loans to deposit them in the stability pool?

Yes, but only when more people start taking loans. People have different risk tolerances; thus, people will be willing to take loans that put their CR closer to 110%. This leaves them extremely vulnerable to any slight adjustment in the market. Due to this, I would deposit my Arth loan in the stability pool only when I think I would be able to benefit from people being liquidated.

Conclusion

I hope this post provided you with a brief overview of Arth loans, the risk associated with taking loans and how to use these loans to your advantage! I will write another post about how I would utilize Arth loans to liquidity farm once dexs on BSC are announced. I would like to say that nothing in this post should be considered financial advice! Also, if you have any further questions, please feel free to leave a comment on this post or message me on Telegram!

3 Likes