The 2x-FLI style of tokens target a long 2x exposure to their underlying cryptoasset. The FLI suite is built in collaboration with the team at DeFi Pulse (Pulse, Inc.) to minimize the risks and costs typically associated with maintaining collateralized debt. BTC2x is now available on TokenSets (for non-U.S. users) with an initial supply cap of 200k units.
Leverage is one of the killer use-cases for DeFi. However, legacy DeFi leverage workflows are not for the faint of heart. Users have to monitor health ratios, watch out for liquidation risk, and avoid penalties.
Recently, $10b worth of liquidations were caused during volatile Bitcoin price action. Using BTC2x-FLI is a comfortable alternative to legacy leverage offerings. The Flexible Leverage Index was created to make the use of leverage safer and easier to maintain.
Leverage is inherently risky. The BTC2x-FLI decreases some of that risk for you.
This is done by automatically maintaining target ratios to recenter over time. FLI is designed to absorb major volatility spikes, and flexibly rebalance to ensure that collateral levels stay above liquidation thresholds. The FLI also utilizes an emergency delevering mechanism to add additional safety for users in the event of a black swan event.
Another benefit of FLI which decreases risk is redeemability. The FLI series are the first fully-collateralized leverage tokens that are redeemable into their components (wBTC, USDC). Collateralization allows for a better risk profile than relying on synthetic leverage.
FLI also dampens your fee burden by utilizing a unique algorithm that increases rebalancing efficiency by an order of magnitude. Additionally, the token’s 1.95% (annualized) streaming fee is considerably less expensive than alternatives on centralized exchanges, and there is no slippage due to composable entry and exit.
Best of all, the Flexible Leverage tokens are exceedingly easy to use. Simply buy and sell on TokenSets or Sushiswap for collateralized debt management abstracted into a single token! BTC2x-FLI rebalances your leverage position for you, so the necessity to constantly monitor the threat of liquidation is eased.
One additional differentiator for BTC2x-FLI is composability which is unlocked through the use of a fully collateralized ERC-20 Set token. Because of this, BTC2x-FLI can be integrated into a number of services to broaden its use cases.
Index Coop products follow strict methodologies. Pulse, Inc. has published a detailed breakdown for the FLI: Introducing the Flexible Leverage Index and TokenSets has shared technical details here. Below is a high-level overview.
Initial parameters for the BTC2x-FLI:
BTC2x-FLI will have a streaming fee of 1.95% (195 basis points) and a 0.1% minting/redeeming fee. The revenue generated will be split 40% to DeFi Pulse and 60% to Index Coop.
FLIt = FLIt-1 * (1 + ((Pricet/Pricet-1–1) * CLRt-1 — (BorrowRatet * (CLRt-1 -1)/CLRt-1)))
Calculation of the new Current Lever Ratio for the period:
CLRt+1 = max(MINLR, min(MAXLR, TLR * (1 — RS) + CLRt * RS))
Please Note: There is a beta supply cap on BTC2x FLI at 200k units. The supply cap may be raised through Index Coop governance. Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Disclaimer: This content is for informational purposes only and is not legal, tax, investment, financial, or other advice. You should not take, or refrain from taking, any action based on any information contained herein, or any other information that we make available at any time, including blog posts, data, articles, links to third-party content, discord content, news feeds, tutorials, tweets, and videos. Before you make any financial, legal, technical, or other decisions, you should seek independent professional advice from a licensed and qualified individual in the area for which such advice would be appropriate. This information is not intended to be comprehensive or address all aspects of Index or its products. There is additional documentation on Index’s website about the functioning of Index Coop, and its ecosystem and community.
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