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BTC2x-FLI

BTC 2x Flexible Leverage Index

BTC Flexible Leverage Index (BTC2x-FLI) leverages a collateralized debt position on BTC by targeting a long 2x exposure to BTC.

About

Overview

Flexible Leverage Indices implement a collateralized debt position in a controlled and efficient way to achieve leveraged returns and, by abstracting its management into a simple index, make leverage strategies broadly accessible. Debt position maintenance is automated by the index rules and a unique algorithm helps to reduce rebalancing turnover. BTC2x-FLI targets 2x price exposure to BTC.

Methodology

Specification

Initial Parameters:

  • Underlying Asset: BTC
  • Debt asset: USDC
  • DeFi Lending Protocol: Compound v2
  • Target Leverage Ratio: 2.0
  • Maximum Leverage Ratio: 2.2
  • Minimum Leverage Ratio: 1.8
  • Recentering Speed: 10%
  • Frequency: Every 24 hours

Definitions:

  • 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 net asset value of the index.
  • Current Leverage Ratio (CLR): the value of the assets currently held by the index divided by the current net asset value of 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.

Index Calculation:

Index value

FLIt = FLIt-1 * (1 + (Pricet/Pricet-1 – 1) * CLRt-1 – BorrowRatet * (CLRt-1 – 1))

Current Leverage Ratio for next epoch

CLRt+1 = max(MINLR, min(MAXLR, CLRt * (1 – RS) + TLR * RS))

Maintenance

Rebalancing 

The index rebalances every 24 hours and determines a new leverage ratio based on the above formula.

Actions

The methodologist has discretion to update any of the parameters at any time via IIP to

improve or protect the integrity of the product.

Fees

BTC2x-FLI has a 1.95% annual streaming fee. 

A 0.1% fee is charged upon minting/redemption.

Risks

The following risks may apply to this digital asset: full or partial loss of digital assets due to technical hacks, exploits, or failures that may occur at the protocol or smart contract level of a product’s infrastructure; restrictions placed on the digital assets by regulatory authorities in the end users region; loss of digital assets or loss of access to the digital assets due to decisions made by centralized providers of the underlying assets; full or partial loss of digital assets through standard product operations which can be hampered by unexpected market conditions; full or partial loss of digital assets due to changes to underlying product assets made by the originating protocols; full or partial loss of digital assets due to volatility, correlation, value at risk, and contagion risks; underperformance of digital assets due to deviation from intended methodology; full or partial loss of digital assets due to the variability of an assets price; full or partial loss of digital assets due to deviation from the proposed methodology and volatility decay incurred during rebalancing; full or partial loss of digital assets due to liquidation of the position in the event of product malfunctions.

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