A Beginner’s Guide to The Index Coop Leverage Suite

Video Transcript

Welcome back to the channel. Today we're diving into something powerful: The Index Coop Leverage Suite.

The Leverage Suite helps users multiply their exposure to different assets on chain and has been designed to deliver a leverage experience that's simpler, safer, and much more cost effective than other options on the market.

In this video, we'll be diving into what these tokens are, how they work, and what sets them apart from other options like perps. Let's jump in. These tokens are my go-to example for explaining tokenization to newcomers because they clearly illustrate how money legos can be put together in DeFi to unlock new possibilities. At the core of the suite is an automated strategy that simplifies the process of managing a collateralized debt position. Traditionally, leveraging ETH would involve a multi-step process supplying ETH to Aave, borrowing USDC against it, swapping that USDC on a DEX for more ETH and repeating this process until you reach your desired leverage ratio. Then, you'd have to go continuously monitor and rebalance the position when necessary.

But with the Leverage Suite all of this is automated: users simply purchase a leverage token with the preferred leverage ratio 2x, 3x or inverse and the entire process from borrowing to rebalancing is automated. This means you can get the leverage exposure you want by simply holding the token. Once you have the token in your wallet, you're set. All you need to do from there is hold it. Behind the scenes, that token will be continuously monitoring the market, rebalancing when necessary to maintain the right leverage ratio.

In general, users can expect tokens to perform proportionally against the underlying asset. If the price of ETH increases by 10%, a 3x long ETH token would increase in value by 30%, a 2x long ETH token by 20%, and an inverse token would fall by 10%. These percentage changes correspond to the Leverage factor of each token. That said, it's important to note that several factors can impact this expected performance. One key factor to be aware of is volatility drift: the tendency of leverage products to lose value over time relative to their benchmark in volatile markets even if the underlying index they track ends up flat. If you're interested in a deeper dive on volatility drift and how it works index Coop has published some excellent resources which we'll link in the description.

Let's walk through the primary benefits that the Leverage Suite unlocks for traders. First is ease of use. Traditional leverage can often be complex and time consuming, but leverage tokens simplify this process by removing a ton of that complexity. Second is liquidation protection. The range-bound automation behind these tokens continuously monitors and rebalances your positions when necessary which helps keep you a safe distance from liquidation. Third there's the cost advantage. Take a look at the options on the market for leverage and you'll realize that the costs can be surprisingly hard to find and even harder to track once you do. Leverage tokens offer a more predictable cost structure which tends to be substantially lower than the fees you'll find  on comparable alternatives.

These tokens are powerful examples of what can be built on the blockchain. They simplify leverage trading and provide built-in production against liquidations; this makes leverage more accessible. However, it's important to remember that with leverage always comes increased risk. Please trade responsibly, respect the markets, and never put in anything you can't afford to lose.

The Leverage Suite is currently available on Arbitrum, Base and Ethereum mainnet. If you want to try the Leverage Suite yourself you can get started today at app.indexcoop.com. If you want to learn more about the suite, we'll link additional resources in the description below. Please be sure to read through all of our disclaimers at the end of this video. Thank you for watching!

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