/biz/ - Business & Finance

[Anonymous No.15941008]

Does law of diminishing returns kick in with this scenario?

>margin trading on Binance, with 3x Leverage, trading the LINK/BTC pair
>plan is to trade the pair and when I cash out, take profit which will be in BTC and dump it into LINK, increasing my LINK stack size
>buy in at 10,000 sats with 1 BTC, giving me 30k LINK position size
>since 3x leverage every 3333 sats gain on LINK/BTC price (3333 sats is 33% of initial deposit) nets me 1 BTC profit, equivalent to my initial deposit
>now theoretically, let's say LINK price goes to 0.01
>expected profit is 297 BTC, represented as (0.01 [current LINK price] - 0.0001 [initial buy in price]) / 0.00003333 = 297
> 297 BTC / 0.01 (LINK price) = 29,702 LINK

However, when I do the same for a LINK price of 0.1 using the same equation before, I only get a profit of 29,702 LINK. Despite the BTC profit at 0.1 per LINK being an expected 2,997 BTC.

This is because law of diminishing returns kicks in right? Because BTC is essentially becoming worth less and less over time compared to LINK, that it will result in a smaller amount of LINK being added to my stack once I cash out and dump my BTC profit into LINK. So two questions:

>Do I have this right?
>How to find the optimal profit target to ensure I get near maximum potential profit without having law of diminishing return kick in