Introducing the BTC 2xFLI Flexible Leverage Index

The Index Coop is excited to announce the extension of its Flexible Leverage Index (FLI) suite into Bitcoin. BTC2x-FLI is a structured product in ERC20 format that enables traders to automate a target leveraged exposure in a completely decentralized manner.

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.

Four Major Benefits to using the BTC2x-FLI

• Decreased (not eliminated) risk

• Lower gas and fee burden

• Ease of use

• Composability with DeFi protocols

1. Decreased Risk

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.

2. Lower Fee Burden

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.

3. Ease of Use

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.

4. Composability

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.

Methodology 101: What’s Under the Hood?

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:

• Underlying Asset: wBTC

• Target Leverage Ratio: 2

• DeFi Lending Protocol: Compound

• Maximum Leverage Ratio: 2.2

• Minimum Leverage Ratio: 1.8

• Recentering Speed: 10%

Fees

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.

Index Formula

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))

Glossary

• Borrow Rate — the cost to borrow the asset at the DeFi Lending Protocol over the most recent epoch.

• Epoch Length — the time between rebalances.

• Target Leverage Ratio (TLR) — the long term target for the value of the assets held by the index divided by the value of the debt held by the index.

• Current Leverage Ratio (CLR) — the value of the asset currently held by the index divided by the current value of the debt held by the index.

• Maximum Leverage Ratio (MAXLR) — the highest leverage ratio the index will ever have after a rebalance.

• Minimum Leverage Ratio (MINLR) — the lowest leverage ratio the index will ever have after a rebalance.

• Re-centering Speed (RS) — the rate at which the Current Leverage Ratio is adjusted each period to return to the Target Leverage Ratio, when the index is not being adjusted back to the Maximum Leverage Ratio or the Minimum Leverage Ratio.

How to Buy BTC2xFLI

• Sushiswap

• TokenSets

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.

‍