Case Study

To provide a practical understanding of Multiply’s implications, this section presents detailed scenarios with the following parameters:

Initial SOL Price: $140
Maximum Leverage Multiplier: 2X
Initial Deposit: 5 SOL (valued at $700) for long positions or $700 USDC for short positions
Borrowing Costs: 5% annual percentage yield (APY) on USDC, 10% APY on SOL

Long Position

Scenario 1: Long Position with SOL Price Rising to $150

Initial Position: Deposit 5 SOL ($700), borrow $700 USDC, and purchase an additional 5 SOL, resulting in 10 SOL total exposure.
Price Increase Outcome: At $150 per SOL, the 10 SOL position is valued at $1,500. Repay the $700 USDC debt by selling approximately 4.67 SOL ($700 ÷ $150), leaving 5.33 SOL valued at $799.50.
Net Profit: $799.50 - $700 = $99.50, compared to a $50 gain ($750 - $700) in an unleveraged position holding 5 SOL.
Analysis: The 2X leverage nearly doubles the profit, demonstrating the amplifying effect of the long strategy.

Scenario 2: Long Position with SOL Price Dropping to $130

Initial Position: Same as Scenario 1 (10 SOL total exposure).
Price Decrease Outcome: At $130 per SOL, the 10 SOL position is worth $1,300. Repay $700 USDC by selling approximately 5.38 SOL ($700 ÷ $130), leaving 4.62 SOL valued at $600.60.
Net Loss: $600.60 - $700 = -$99.40, compared to a $50 loss ($650 - $700) in an unleveraged position.
Analysis: Leverage doubles the loss magnitude, underscoring the heightened risk in adverse conditions.

Short Position

Scenario 3: Short Position with SOL Price Dropping to $130

Initial Position: Deposit $700 USDC, borrow 5 SOL, and sell them for $700 USDC, yielding a total of $1,400 USDC.
Price Decrease Outcome: At $130 per SOL, repurchase 5 SOL for $650, repay the debt, and retain $750 USDC ($1,400 - $650).
Net Profit: $750 - $700 = $50, compared to no profit in an unleveraged position holding USDC.
Analysis: The short position leverages the price drop to generate returns unavailable without borrowing.

Scenario 4: Short Position with SOL Price Rising to $150

Initial Position: Same as Scenario 2 ($1,400 USDC total).
Price Increase Outcome: At $150 per SOL, repurchase 5 SOL for $750, repay the debt, and retain $650 USDC ($1,400 - $750).
Net Loss: $650 - $700 = -$50, compared to no loss in an unleveraged USDC position.
Analysis: The short position incurs a loss proportional to the leverage when the market moves unfavorably.

Key Takeaway: The 2X multiplier consistently doubles the financial impact—whether profit or loss—relative to an unleveraged baseline, highlighting the dual-edged nature of leverage.

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Long Position

Scenario 1: Long Position with SOL Price Rising to $150

Initial Position: Deposit 5 SOL ($700), borrow $700 USDC, and purchase an additional 5 SOL, resulting in 10 SOL total exposure.

Price Increase Outcome: At $150 per SOL, the 10 SOL position is valued at $1,500. Repay the $700 USDC debt by selling approximately 4.67 SOL ($700 ÷ $150), leaving 5.33 SOL valued at $799.50.

Net Profit: $799.50 - $700 = $99.50, compared to a $50 gain ($750 - $700) in an unleveraged position holding 5 SOL.

Analysis: The 2X leverage nearly doubles the profit, demonstrating the amplifying effect of the long strategy.

Scenario 2: Long Position with SOL Price Dropping to $130

Initial Position: Same as Scenario 1 (10 SOL total exposure).

Price Decrease Outcome: At $130 per SOL, the 10 SOL position is worth $1,300. Repay $700 USDC by selling approximately 5.38 SOL ($700 ÷ $130), leaving 4.62 SOL valued at $600.60.

Net Loss: $600.60 - $700 = -$99.40, compared to a $50 loss ($650 - $700) in an unleveraged position.

Analysis: Leverage doubles the loss magnitude, underscoring the heightened risk in adverse conditions.

Short Position

Scenario 3: Short Position with SOL Price Dropping to $130

Initial Position: Deposit $700 USDC, borrow 5 SOL, and sell them for $700 USDC, yielding a total of $1,400 USDC.

Price Decrease Outcome: At $130 per SOL, repurchase 5 SOL for $650, repay the debt, and retain $750 USDC ($1,400 - $650).

Net Profit: $750 - $700 = $50, compared to no profit in an unleveraged position holding USDC.

Analysis: The short position leverages the price drop to generate returns unavailable without borrowing.

Scenario 4: Short Position with SOL Price Rising to $150

Initial Position: Same as Scenario 2 ($1,400 USDC total).

Price Increase Outcome: At $150 per SOL, repurchase 5 SOL for $750, repay the debt, and retain $650 USDC ($1,400 - $750).

Net Loss: $650 - $700 = -$50, compared to no loss in an unleveraged USDC position.

Analysis: The short position incurs a loss proportional to the leverage when the market moves unfavorably.

Key Takeaway: The 2X multiplier consistently doubles the financial impact—whether profit or loss—relative to an unleveraged baseline, highlighting the dual-edged nature of leverage.