Leverage
Users can create leveraged cBTC exposure through Nectra. After creating a position, the issued nUSD is used to acquire cBTC, which is then used as additional collateral for the position. The loop can be performed several times to increase leverage.
Nectra's system maximum LTV of 83.3% caps the maximum obtainable leverage at 5.68X.
Using the flash borrow functionality to borrow cBTC allows users to create leverage fairly simply
For example, a user with $100 of cBTC who wants 3x leverage could:
Flash borrow $200 of cBTC.
Deposit the original $100 cBTC + the $200 borrowed cBTC ($300 total collateral).
Withdraw $202 nUSD ($2 nUSD will be used to pay the swap and flash borrow fees).
Swap the $202 nUSD for approximately $201 cBTC (after ~0.5% fees).
Repay the $200 cBTC flash borrow using their newly acquired $201 cBTC (with ~ 0.5% fees).
The result is approximately $300 worth of cBTC exposure with a debt of $202 nUSD, resulting in an LTV of roughly 67.33% ($202 / $300).
Warning: Using leverage increases your exposure to the price movement of cBTC and, thus, the likelihood of being liquidated. Use with caution.
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