Case Study #4: Using Liquidations as a Stop Loss to Save BIG (2.27X Your PLS Bag)

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By Connor
Estimated reading: 2mins
Liquid Loans Case Study #4

Most users think liquidations mean ‘game over’.

In traditional finance, that certainly is the case - with your entire position going to zero.

But in the Liquid Loans protocol, you only lose 10% of your total position. 

And in some cases, you can actually end up with a BETTER position compared to if you had not taken a loan.

This is exactly what happened with this wallet, which we will be analyzing in depth.

Liquidation Event

This particular vault had 2.538 Billion PLS at price 0.000109 on March 23rd when their vault was liquidated. 

This equates to roughly 276K USD.

After liquidation, they were left with 250,909 USDL.

Sure, they lost nearly over 25,000 USD instantly, but here is where they SAVED BIG.

The price of PLS continued to fall from there, and dropped down to 0.00004 USD per PLS.

Meaning if they held their PLS all the way down without opening a vault, they’d still have 2.538 Billion PLS, but at a total valuation of 101,520 USD.

This means that by using Liquid Loans as a stop loss, they saved 149,389 USD worth of crypto.. wow!

Buying Back Lower

DeFi Lending Stop Loss

Everybody has heard a story of somebody panic selling their crypto, it rising in price, and having to buy back higher.

But have you heard about buying back lower?

Since they now have 250,909 USDL (which has been earning yield in the Stability Pool this whole time) they can buy PLS back at a lower price.

Their 250,909 USDL can now command 6.272 Billion PLS if they buy back at 0.00004 USD per PLS.

This user has the opportunity to 2.27X their original position in PLS by using Liquid Loans at a stop loss.

This proves that Liquid Loans is a powerful multifaceted DeFi tool.

The Bottom Line

Sure, it would be better to sell out of PLS, rather than getting liquidated.

But, neither you nor I have a crystal ball. 

If you believe in PLS long-term, then you want to be holding it.

One way to go about this is to hold PLS in a vault.

If the price dips, you are left with your stablecoin, and you can buy back lower if the price continues to fall. 

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.

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