The recipe allows you to create a DAI short position via Maker USDC Vault in a single click without price volatility risk.
When do you use it?
This recipe is used when DAI > $1 because, if DAI is stable it doesn’t make sense to go short on it.
How do you use it?
Make sure your web3 wallet is connected to Instadapp. If you’re facing a problem in doing so, reach us out on Discord naming the wallet you’re using.
Go on to the MakerDAO dashboard on Instadapp.
Note: If you don’t have a position on MakerDAO yet, the dashboard will by default display a ETH <> DAI vault, and if you do have a vault, you’ll need to create a new vault with USDC-A as collateral.
Click “Short DAI” recipe card.
Enter the amount of USDC you’d like to deposit as collateral and click on Short DAI.
Remember to always keep an eye out on your liquidation ratio to make sure you don’t get liquidated, because that’ll be just sad.
What happens under the hood?
The “Short DAI” recipe uses an in-built flashloan to perform three transactions in to one. This is how it works in the backend:
Assuming you go 10x, started off with 10,000 USDC as initial capital, that would be a 14% return!
This means you’ll end up an extra of 1,400 USDC when DAI stabilises. It’s basically free money!
Risk and Reward?
The rewards cultivated out of this highly depend on how high the price of DAI is than it’s peg.
Assuming it’s 1.5% higher, i.e 1 DAI = 1.015 USDC, then going 12x short on DAI, could cultivate up to 18% return on assets.
Trusting DAI will come back to its peg, you can take quite the advantage of DAI being unstable. We would recommend shorting up to 10x if you want to play safe.
Note: These rewards will only be accumulated when DAI returns to its peg i.e DAI = $1. If you do close your position when DAI is at a higher price compared to when you created your position, you’ll lose some assets.
- No risk of liquidation at the moment. There might be some risk if the stability rate increases in the future.
- If you close your position when DAI is at a higher price compared to when you created your position, you’ll lose some assets.