Multiply

Overview

Multiply positions carry amplified risks compared to standard borrowing due to the leveraged nature of the strategy. While leverage can enhance returns, it equally magnifies potential losses and increases exposure to market movements.

Pike's Multiply strategies use highly correlated assets within E-mode categories (e.g., stablecoins with stablecoins, or pegged assets), which significantly reduces the risk of large price divergences between collateral and borrowed assets.

Key Risk Factors:

• Leverage Amplification: Higher multipliers increase both gains and losses proportionally

• Liquidation Sensitivity: Leveraged positions have less tolerance for price fluctuations, position safety is sensitive to market movement

• Rate Exposure: Interest rate changes have magnified impact on profitability

Understanding these risks is essential for managing Multiply positions effectively.

Liquidation Risk

Liquidation risk is significantly amplified in Multiply positions due to leverage. A price movement in your collateral can have a much larger impact on your health factor compared to standard borrowing. Higher multipliers mean less buffer for market volatility before liquidation occurs.

Interest Rate Risk

Interest rate changes directly impact the profitability and sustainability of Multiply positions.

Interest rate changes have a magnified impact on Multiply profitability. Your Leverage APY depends on the spread between Supply APY and Borrow APY, when this spread narrows or turns negative, positions can be unprofitable.