The Bitcoin 2X Leveraged Index Token - Explained 😂

About

The Bitcoin Flexible Leverage Index lets you leverage a collateralized debt position in a safe and efficient way, by abstracting its management into a simple index. It enables market participants to take on leverage while minimizing the transaction costs and risks associated with maintaining collateralized debt.

Objective

The Bitcoin Flexible Leverage Index (BTC2X-FLI) makes leverage effortless. The end user does not have to worry about:

• Monitoring their leveraged loan 24/7, having to always be ready to act.

• High fees, transactions not being included fast enough or the relative UIs being unresponsive during times of high volatility.

• Paying for overpriced stablecoins to deleverage on time or panic trading to save their positions.

BTC2X-FLI has several key advantages over Legacy Leveraged Tokens:

• Zero slippage via composable entry and exit.

• Unique Index algorithm reduces rebalancing needs by an order of magnitude.

• Emergency deleveraging possible during Black Swan events for additional fund safety.

View the explanation here.

Initial Parameters:

• Underlying Asset: WBTC

• Target Leverage Ratio: 2

• DeFi Lending Protocol: Compound

• Maximum Leverage Ratio: 2.2

• Minimum Leverage Ratio: 1.8

• Recentering Speed: 10%

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 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.
• 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 Price:

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))

Battle tested product after the recent dip. The most liquidity is on the SushiSwap WBTC/BTC2X-FLI Pool.