I use aave to borrow usdt against my collateral and buy more eth and btc with my borrow usdt. In a way im shorting USDT here, since the collapse of usdt would make the loan I have to pay back minimal. Of all the top stables that can collapse, i’d say tether is the most likely. If USDT doesnt collapse, well then its ok cuz its just a normal loan then. This is why I went with this game plan of mine.
I am now realizing tho that the variable apy of borrowing aave can increase RAPIDLY. It’s at 19% as I type this. That being said it make me wonder if this game plan of mine really isnt shorting usdt at all. Lets say USDT price falls to 0.9 USD. People will pull out their deposited USDT on AAVE, the APY of USDT borrowing will increase drastically since supply has gone down, and maybe it will hit 50%, or 100%, or 300%, or 1000%. I have no idea.
I’m writing to ask the experienced experts on here. Is the game plan of borrowing USDT on aave to short it useless since the variable APY will just screw you as USDT price falls (if that ever happens). Thank you!
Note: if it is, I’d rather just borrow in DAI or USDC to avoid the high borrow APY