Meet the Index Coop's new 2x Leverage Tokens

Note to existing ETH2x-FLI or BTC2x FLI users: You are not required to take any action at this time. If you would like to unwrap or exit your ETH2x-FLI or BTC2x-FLI position, you can see detailed instructions here.

The Index Coop is pleased to announce the launch of new ETH2x and BTC2x leveraged tokens on Ethereum mainnet! These fully collateralized tokens enable amplified exposure to ETH and BTC by tracking a target leverage ratio of 2.0x and automatically rebalancing as prices change. ETH2x and BTC2x are meant to replace the legacy FLI tokens and utilize more modern Index Protocol and Aave v3 infrastructure.

In addition to the time-tested features of the legacy FLI tokens–liquidation protection, automated rebalancing, persistent leverage–these new 2x tokens are more gas-efficient to issue and redeem and have upgraded risk automation.

Liquidation Protection

Both ETH2x and BTC2x tokens feature built-in liquidation protection, automatically rebalancing the underlying collateralized debt positions in Aave v3 to avoid liquidation during volatile periods. Redundant keeper systems monitor the current leverage ratio at all times and trigger a rebalance if it exceeds the maximum leverage ratio, or 2.3x for ETH2x and 2.2x for BTC2x. Another layer of protection is enabled by the ripcord system, which allows anyone to trigger a rebalance if the current leverage ratio exceeds 3.0x for ETH2x or 2.7x for BTC2x; there is also a 1 ETH reward for anyone that triggers a ripcord rebalance. Compared to the legacy FLIs on Compound V2, higher liquidation thresholds in Aave v3 also contribute to lower liquidation risk.

Automated Rebalancing

ETH2x and BTC2x both target a leverage ratio of 2.0x, meaning that token holders have approximately twice the exposure to short-term price movements of ETH and BTC. The leverage ratio for both tokens is allowed to float within a safe range: 1.7x - 2.3x for ETH2x, 1.8x - 2.2x for BTC2x. This range-bound methodology minimizes volatility decay over time and reduces rebalancing costs (which are covered by the Index Coop). Whenever the real leverage ratio moves outside the target range, a rebalance is automatically triggered, recentering the product back toward the target leverage ratio. As a result, token holders do not need to actively monitor or manage their leverage positions!

Persistent Leverage

Unlike most leverage solutions, ETH2x and BTC2x allow the holder to maintain persistent leverage exposure to ETH or BTC. Because the products actively track a ~2x ratio, holders get consistent leverage exposure regardless of how much ETH or BTC prices change in a given period. So if the price of ETH increases by 20% in five days, ETH2x holders still have ~2x exposure to ETH on the fifth day. Other offerings require users to pick a leverage ratio at a point in time without any automatic rebalancing or target tracking; in the same scenario, someone with a static leverage position would see their exposure ratio decline over those five days and miss out on the progressive price action. If prices fall, the leverage ratio for a static position would increase and approach liquidation, whereas persistent leverage will continue to track the target leverage ratio and rebalance safely.

Reduced Costs

ETH2x and BTC2x token holders also benefit from lower carrying and issuance costs compared to the legacy FLI tokens. For the legacy FLIs, the cost to borrow USDC from Compound v2 steadily increased as the protocol was gradually deprecated, resulting in higher carrying costs (or the difference between the yield earned on collateral minus the cost to maintain debt). The new leverage tokens built on Aave v3 benefit from lower USDC borrowing costs and more sustainable funding in the future. Lower issuance and redemption costs for the new 2x tokens can also be attributed to Aave v3, which is more gas-efficient than Compound v2. As always, holders do not pay any gas fees associated with rebalancing; instead, Index Coop covers and then recoups rebalancing costs with the products’ annualized streaming fee of 3.65%.

Access

Non-restricted persons may issue and redeem ETH2x and BTC2x tokens through the Index Coop app. Third parties may choose to provide liquidity for these tokens on Decentralized Exchanges (DEXs), in which case users can also swap fo through the Index Coop App or their aggregator of choice such as CoW Swap. DEX liquidity is not guaranteed, so users are encouraged to self-issue or self-redeem via the Index Coop App.

If you are a legacy FLI holder, your tokens have been rebalanced into the new Index Coop 2x tokens. If you wish to maintain leveraged exposure to ETH or BTC, no action is required! If you would like to unwrap your FLI token in exchange for the new 2x token, or otherwise exit your position, you may do so through the Index Coop App; a dedicated guide for unwrapping FLIs is also available.

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