In a nutshell, what is a Perpetual x5 Leveraged Token?
It’s a derivative offering you leveraged exposure to price changes of assets like BTC, ETH, MATIC or LINK. Users also refer to them as ‘x5s’.
Are x5s collateralized?
Yes, all CompliFi derivatives are100% collateralized at all times. In the case of x5s, the collateral is $USDC. Moreover, all derivatives can be sold back to the protocol at any time.
How does the “perpetual” part work?
Regular, fixed maturity derivatives go through settlement at the end of their life, and require the user to withdraw and reinvest their winnings in order to maintain their position. CompliFi automates this process through “rollovers”, where settlement proceeds are automatically reinvested into the next cycle of the same derivative, every 24h in the case of x5s.
Just entered the dapp, why are all x5s priced between $0 and $2?
The goal is to make all x5s easy to interpret and comparable - whether ETHx5 or BTCx5, they all start at $1 and evolve based on % changes in underlying asset prices.
Each x5 Up + Down pair is collateralised by 2 USDC, and their combined value always equals that amount. For instance, if ETHx5 Up has the value of $1.50, then Down will be $0.50. Their values will move in opposite directions, but both will remain fully backed by USDC.
How does the value of x5s evolve?
CompliFi relies on Chainlink oracles to measure price movements of underlying assets, like BTC and ETH. Based on those movements, on-chain smart contracts recalculate the price of derivatives.
Example: +1% in spot BTC leads to +5% in BTCx5 Up value (up to the max of $2) and -5% in BTCx5 Down.
What are Rollovers?
A rollover is an event where a derivative goes through settlement (i.e. collateral is divided up between traders and the pool), and then traders’ winnings are automatically used to purchase positions in the next cycle of the same derivative, minus a small fee.
Is there a funding rate for x5s?
No, CompliFi does not have a funding rate on any of its derivatives
How is it possible that x5s can’t get liquidated?
Liquidations are a tool used by protocols to avoid situations where a trader ends up owing them money due to poor performance of a derivative position. There is no risk of this ever happening in CompliFi, because the upfront price you pay for a derivative already covers all possible contingencies - you will never be asked to pay more, or be liquidated.
Despite no liquidation risks, can I still lose money?
Yes, no trading is risk-free. The value of your x5 position could go to zero if the underlying asset price moves by at least 20% against you.
So, how is trading x5s better than a regular x5 leverage on Binance or FTX?
When using typical leverage on exchanges, once the market moves against you, you can get liquidated on a 1min wick and your whole position is lost. On CompliFi, you can be down 100% for hours, be immune to flash wicks and still make a profitable trade when the trend moves back in your favour.
What’s the highest possible gain I can make with CompliFi’s x5?
CompliFi’s x5 derivatives work in 24h cycles, with derivative values starting off at about $1. At the end of a cycle, the value can end up anywhere between zero and $2, meaning that you could be up 100%.
However, as prices fluctuate throughout the cycle, you could buy a derivative for less than $1, and still end up settling it at $2. In the extreme, you could buy in at $0.15 and make 12x your original investment in 24h.