Unveiling a new ILM: Maximizing ETH Exposure for Optimal Returns
Introduction
Recently, Seamless Protocol introduced ILMs (Integrated Liquidity Markets) helping users to automate their DeFi strategies. To learn more, checkout the Introducing ILMs Blog Series here!
This series dove into topics covering how ILMs work, their comparative advantages, the benefits of auto-compounding, and introduced the inaugural wstETH/ETH 3x Loop strategy.
Building upon this foundation, Seamless is excited to introduce the next ILM strategy tailored for individuals seeking to multiply their Ethereum (ETH) holdings for increased exposure and potential returns.
Unlocking the Power of ETH
Ethereum, often hailed as the backbone of DeFi, holds immense value and potential within the crypto ecosystem. However, simply holding ETH in a wallet may not fully capitalize on its potential for generating returns. That’s where the latest ILM strategy comes into play, offering a dynamic solution to leverage ETH holdings for optimal gains.
Introducing the ETH/USDC 1.5x Amplifier ILM
Designed to amplify your exposure to Ethereum, the ETH/USDC 1.5x Amplifier ILM harnesses the power of automated strategies to maximize returns while mitigating risks. Here’s how it works:
- Leveraging ETH Collateral: Users deposit their ETH holdings as collateral.
- Borrowing Unlocked: With ETH as collateral, the ILM automatically borrows available from Seamless Protocol.
- Automated Reinvestment: This USDC is seamlessly swapped for more ETH on Base Dexes to add more exposure to ETH.
- Continuous Rebalancing and Optimization: The ETH/USDC 1.5x Amplifier ILM automatically rebalances debt (USDC) to target the intended 1.5x ratio, reducing any risk of liquidation.
Benefits of the ETH/USDC 1.5x Amplifier ILM
- Enhanced Exposure: By leveraging ETH holdings, users amplify their exposure to the Ethereum ecosystem, magnifying returns in bullish market conditions.
- Automated Strategies: The ILM automates the process of borrowing, swapping, capital deployment, and optimization, freeing users from the complexities of manual trading and decision-making.
- Risk Management: Built-in risk management mechanisms such as rebalancing help mitigate downside risks, ensuring capital preservation and security in volatile market environments.
- No Extra Cost: Seamless does not introduce any added fees with ILMs, ensuring users are able to put more of their crypto to work.
Users who are seeking greater exposure to ETH price movements may want to consider this ILM strategy depending on their risk profile and appetite.
How is the ETH/USDC ILM different from the inaugural wstETH/ETH ILM?
So what sets the ETH/USDC ILM and the inaugural wstETH/ETH ILM apart? Aren’t they both bullish strategies?
Not quite. In the wstETH/ETH 3x Looping ILM strategy, both tokens move in tandem — when ETH rises, so does wstETH. However, in the ETH/USDC 1.5x ILM strategy, if ETH appreciates, it does so independently.
In essence, the wstETH/ETH strategy aims to increase the number of tokens per share (i.e. generating more staking fee rewards, and auto compounding these rewards back into your wstETH holdings), regardless of price fluctuations, while the ETH/USDC strategy seeks to capture 1.5 times the price movement of ETH.
Let’s illustrate this with an example: Imagine a user is holding 1 ETH versus depositing 1 ETH in the ETH/USDC strategy, and ETH’s value surges by 50%.
In the first scenario, they’d possess 1.5 ETH worth of value. In the second scenario, the strategy would initially have 1.5 ETH (from the multiplier + the deposit), and with ETH’s 50% rise, it would amount to 2.25 ETH (1.5 * 1.5). After repaying the debt of 0.5 ETH (taken on by borrowing the USDC per the ILM strategy), the user would be left with 1.75 ETH, representing a 50% increase compared to not being in the strategy.
However it is important to note, the same principle applies to downward price movements: a 50% greater loss.
Added Bonus Section! Revisiting the performance of existing ILMs
Earlier this year, Seamless debuted ILMs, with its inaugural wstETH/ETH 3x Looping Strategy. Since launch, the strategy has been performing well, with an Earnings Per Share up nearly 30%.
By auto compounding staking fee rewards back into the ILM strategy and emitting wstETH rewards to ILM participants, the inaugural ILM has been off to a great start.
Note: returns were ⚡super-charged⚡ ️through a partnership with LIDO DAO, who provided wstETH incentives to the strategy, this effect can be seen starting around April 8th.
Based on the success of ILMs thus far, the Seamless Community and Contributors are excited to roll out more and more of these strategies moving forward, helping to offer automated growth strategies for users across DeFi and Base.
Conclusion
With the ETH/USDC 1.5x Amplifier ILM, users can unlock the full potential of their Ethereum holdings, harnessing the power of automation to optimize returns and exposure within the DeFi landscape. Whether you’re a seasoned ETH enthusiast or a newcomer looking to capitalize on the potential of Ethereum, this innovative strategy offers a seamless pathway to maximize your rewards.
Stay tuned for more updates and insights as we continue to explore the transformative potential of Integrated Liquidity Markets in the world of decentralized finance!
Seamless Protocol is the first decentralized, native lending and borrowing protocol on Base. Seamless lays the foundation for Modern DeFi, focusing on lower-collateral borrowing and a better user experience to inspire the masses.
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