๐Leverage
YieldX enables users to increase their exposure in Uniswap by utilizing borrowed funds to enhance their positions. By borrowing additional assets, users can amplify their exposure within liquidity pools. Typically, users can select which asset to borrow, depending on their market outlook.
For example, a user holding an ETH/USDC liquidity position, with equal portions in both Ethereum and USDC, might choose which asset to borrow depending on their prediction of the market. If no hedging strategies are in place, the selection of the borrowed asset plays a crucial role in determining the risk and potential returns of the leveraged position.
This means that the total value of the position, when converted to USDC, will rise if the price of Ethereum increases. Conversely, if Ethereum's price drops, the position's USDC value will decline accordingly. The user's profit and loss (PNL) is illustrated in the chart below.

If the user opts to leverage their position with USDC:
their profit and loss (PNL) remains unchanged. However, leveraging the Uniswap position means the user will gain more if Ethereum's price rises and will experience larger losses if the price drops. The higher the leverage, the greater the exposure to Ethereum's price fluctuations.
If the user opts to leverage their position with ETH:
If the user chooses to leverage the position with Ethereum, the profit and loss (PNL) graph will shift. Since the user is borrowing Ethereum, the debt value will rise if Ethereum's price increases and decrease if the price drops.
For example, using 2x leverage results in a position similar to the one shown in the graph below. This strategy balances the risks of both Ethereum price movements. If you expect the price to remain stable, leveraging with Ethereum might be an ideal approach for your initial position.

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