Traders can now enter short positions for Bitcoin and Ether on the Synthetix-based decentralized exchange Kwenta. The interest rate for borrowing assets is dependent on the skew of positions on Synthetix, which means that short sellers can currently borrow for zero interest.
ICYMI: Short Selling is now live on Kwenta! 🥂
The OG bears can now make themselves at home in #DeFi.
— Kwenta (@kwenta_io) March 11, 2021
How It Works
Trading on Kwenta is exclusively realized using the synthetic assets implemented by Synthetix. Short sellers on Kwenta need to deposit collateral in the form of sUSD. Kwenta has released a web interface through which users can borrow sBTC or sETH on their collateral, which is then automatically sold for sUSD.
The advantage of this method, compared to buying inverse synthetic assets is that short-sellers retain the sUSD proceeds from the sale and can use them on other DeFi protocols, trade them for a different Synth, or collateralize them once more to increase the leverage on their short position.
Synthetix Adds Incentives to Shorting
Synthetix tries to reduce the long skew on their sBTC and sETH debt pools. This means that short-selling does not accrue any interest while there are longer than short positions. To further reduce the skew, Synthetix offers a weekly reward of 8000 SNX (~160.000 USD) for shorters on each of the two debt pools.
In total, Kwenta currently offers zero slippage on trading thanks to the partnership with Synthetix, zero interest for borrowing on short positions, additional yield or leverage on short sales, and incentive rewards for shorting on top of that.