Know THIS or get REKT using Liquid Loans for Passive Income
While Liquid Loans is a fantastic tool for making use of PLS tokens to generate passive income, if you do not set your vaults collateral ratio to a safe level, you may find yourself losing your beloved PLS tokens. Today we are going to look at how much you need to place in a vault to not get absolutely REKT and lose your PLS.
As a quick recap, Liquid Loans is a fully decentralized lending protocol that issues a stable coin called USDL as a loan when users place their PLS as collateral in a vault. While Liquid Loans currently exists on only the Pulsechain testnet as we await the launch of Pulsechain Mainnet, the protocol allows users to take advantage of one of two pools in the system to earn passive income on their USDL. For a technical overview, please click ***here*** to dive into the meat and potatoes of Liquid Loans. The protocol requires a minimum collateral ratio of 110% in PLS tokes to take out a minimum of $2000 in USDL tokens, but by taking a loan at this collateral ratio you are at risk of being liquidated if the price of PLS moves down at all. A few questions need to be asked to figure out what collateral ratio is best for you.
- What are the average price drops that we see in a bull market vs a bear market?
- How long do these price drops take to full occur?
- How much of a price drop can a given collateral ratio take before it gets liquidated?
Now, let's dissect the data that we have at our disposal and answer the questions we outlined above.