Longing 📈

Longing, or going long, is a strategy used to profit from an increase in the price of an asset. KasLend enables users to borrow an asset with the expectation that its price will rise, allowing them to sell it later at a higher price and keep a profit after repaying the loan.

Example:

Bob's Longing Strategy with KasLend

Bob believes that the price of TokenA will rise in the near future. He wants to maximize his potential profit by using leverage through KasLend. Here's how Bob uses KasLend to execute a leveraged long position:

1. Providing Collateral: Bob deposits 100 TokenA as collateral on KasLend. Let’s assume TokenA is currently priced at 1 TokenA = 10 KAS. The total value of Bob's collateral is 1,000 KAS (100 TokenA × 10 KAS).

2. Borrowing KAS: KasLend allows Bob to borrow against his collateral. For simplicity, let's assume KasLend allows a 75% Loan-to-Value (LTV) ratio. Bob can borrow up to 75% of the value of his collateral, which means he can borrow up to 750 KAS (1,000 KAS × 75%).

3. Buying More TokenA: Bob takes the 750 KAS he borrowed and uses it to purchase more TokenA. If the price of TokenA is still 10 KAS per TokenA, he can buy an additional 75 TokenA (750 KAS ÷ 10 KAS).

4. Price Increase: After some time, the price of TokenA rises to 15 KAS per TokenA. Bob’s total holdings of TokenA are now:

   • Initial 100 TokenA (collateral) + 75 TokenA (purchased with borrowed KAS) = 175 TokenA.

   • The total value of his holdings is now 2,625 KAS (175 TokenA × 15 KAS).

5. Selling TokenA and Repaying Loan: Bob sells 175 TokenA at the new price of 15 KAS, earning 2,625 KAS.

6. Repaying Loan: Bob repays the 750 KAS he borrowed, along with any interest accrued. Assuming a simple interest rate of 5%, the total repayment is:

   • Loan Repayment = 750 KAS + (750 KAS × 5%) = 787.5 KAS.

7. Bob’s Profit: After repaying the loan, Bob is left with:

   • 2,625 KAS (from selling TokenA) − 787.5 KAS (loan repayment) = 1,837.5 KAS.

   He also gets back his original collateral of 100 TokenA.

8. Leveraged Gain: Without leverage, Bob would have only had 100 TokenA, which would now be worth 1,500 KAS (100 TokenA × 15 KAS). However, by using leverage through KasLend, Bob now holds 1,837.5 KAS, effectively increasing his profit through borrowing.

Profit Calculation

The profit Bob makes from this leveraged strategy can be broken down as follows:

$$Profit=(TokenA Quantity×New Price)−(Loan Amount+Interest)$$

Where:

• TokenA Quantity is the total amount of TokenA Bob holds after borrowing.

• New Price is the increased price of TokenA.

• Loan Amount is the KAS borrowed.

• Interest is the accrued interest on the loan.

For Bob's case:

$$Profit=(175×15)−(750+37.5)=2,625−787.5=1,837.5KAS$$

By using KasLend, Bob was able to amplify his gains by leveraging his collateral, turning a smaller price increase into a larger profit through borrowing and buying additional assets.