Why Borrow?

A common question is, "If I can already get leverage through perps, why would I need to borrow?" Here are the answers.

1. Buy yield bearing spot with leverage.

2. Use crypto (e.g. BTC, ETH, etc.) as collateral to trade perps. This usually requires borrowing USDM to settle the unrealized PnL of the perps.

3. In many jurisdictions, selling your crypto is a taxable event. Using your crypto as collateral to borrow USD, and trading with the USD may not be a taxable event. Not financial advice, look it up.

4. Lending rates for an asset are often more favorable than perps rates. For example, if you are leveraged long ETH on Hyperliquid, it usually costs 10.9%, whereas it may only cost 6% to borrow USD to buy ETH.

5. Historically, there has been a very large difference in the rates described above. That difference allows for arbitrage, such as The Bullish Leveraged Basis Trade.

6. Borrowing enables portfolio leverage for portfolios containing a mix of positions and assets.

7. Users get the option between paying a fixed rate for leverage and a variable rate for leverage.