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Thanks for this in-depth review. During the October dump LN markets ran into some issues. I’m not sure how deep the liquidity is but a few traders were pissed at the team
Volatility however is how you get "chopped" up through liquidation. Price dumps, you get liquidated, it bounces and you buy back higher to chase.
This is definitely true. The dumps and the chop crush this strategy.
Most of the time though you pay to have a long open, but over time, its roughly equivalent to borrowing fiat at 10% to buy Bitcoin with.
True but this is boring. Idle hands are the devils playground! Using LN makes life worth living!!
I think I recall seeing that the October thing was an exchange API breakage, something external reported the price incorrectly which caused their engine to mis-price and liquidate people.
Very similar to what broke some stableshitcoin on exchanges that started the cascade in the first place.
Liquidity shouldn't be an issue since Bitmex is the ultimate market maker, may just want to use slugs to avoid slippage if you go big.
but this is boring
lol very true, until the price starts to run and you log in to check and see a whole bunch of free sats... or when there's blood in the streets and you log in and see you're not liquified
Exactly I need that rush when the price action is so dull
Looking at the historical funding rates on LNM, it seems that if you held a long position your cost is roughly 10% a year... which is about 2x as high as say a Robinhood, but on par with a Fidelity
For some periods, like recently where sentiment is very bearish, funding is negative and you actually get a yield to have a long open.
Most of the time though you pay to have a long open, but over time, its roughly equivalent to borrowing fiat at 10% to buy Bitcoin with.
So the only thesis you need is that Bitcoin grows at >10% a year and can simply not trade it, set and forget a long.
You might even use it to "borrow" against your Bitcoin at 10% to cover life expenses, eg sell some Bitcoin, then buy an equivalent amount back on LNM.
Volatility however is how you get "chopped" up through liquidation. Price dumps, you get liquidated, it bounces and you buy back higher to chase. You need very low leverage to mitigate that... and ideally only adjust your positions when the market is boring.
The trade-off for low leverage ofc is greater impact of rug pull / technical risk of LNM itself. Afaik, they back their books with Bitmex, and price calculation is an average of exchanges that have API's that can break. Glitches further exacerbates volatility risk.