Index Coop - ETH 2x Flexible Leverage Index

What is the Index Coop?

The Index Coop is a decentralized autonomous organization (DAO) founded by Set Labs on October 6th, 2020, with a mission to shape the future of decentralized finance (DeFi) by ensuring its inclusivity. Committed to building secure, accessible, and user-friendly DeFi products, the Index Coop brings together a dedicated community of core contributors, product holders, INDEX investors, and supporters.

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Recent Video Interview

Main points of the interview:

• Index Coop's mission to simplify crypto investing via on-chain structured products.
• Index Coop automates complex strategies into single ERC20 tokens.
• The advantages of on-chain products: 24/7 liquidity, global accessibility, and composability.
• Discussing Index Coop as pivotal in tokenizing assets for broader market access.

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What are Flexible Leverage Indices (FLI)?

The Flexible Leverage Indices (FLI) represent a groundbreaking approach to collateralized debt management, abstracted into simple indices and reproducible as ERC-20 tokens on the Set Protocol. FLI tokens facilitate leveraged exposure to specific assets, such as Ethereum, without the need for users to manage collateralized debt positions or monitor liquidation risks.

ETH 2x Flexible Leverage Index (ETH2x-FLI)

The ETH 2x Flexible Leverage Index offers leveraged exposure to Ether through collateralized debt, eliminating the complexities associated with traditional leveraged trading. With a methodology that ensures effortless leverage, the ETH2x-FLI provides advantages such as no continuous monitoring, no downtime, zero slippage, emergency deleveraging during extreme market events, and reduced maintenance costs through a unique index algorithm.

Leveraged Products and Volatility Drift

Leveraged products, like FLI, allow users to borrow against their capital, increasing their investment size. However, these products come with risks and rewards. The FLI products, while providing leveraged returns on assets like Ethereum and Bitcoin, are sensitive to market volatility. Investors should be aware of volatility drift, where over time, the valuation of leveraged assets may deviate from expected returns, impacting the risk associated with holding FLI.

Ten Key Parameters of Flexible Leverage Index (FLI) Products

To ensure the functionality and safety of FLI products, there are ten key parameters that users need to understand. These parameters, managed by the Leverage Indices Pod within the Index Coop, include Targeted Leverage Ratio, Leverage Ratio Range, Recentering Speed, Max Trade Size, Supply Cap, TWAP Cooldown Period, Ripcord Parameters, Decentralized Exchange, Borrowing and Lending Protocols, and cTokens.

Performance and Technical Risks of FLI Products

Performance Risks

Difference in Performance: FLI tokens may not precisely track the returns of a simple leveraged position. Predictability: FLI tokens may perform less predictably during choppy markets. Value Loss: FLI tokens can lose significant value during a major market correction. Liquidation: While FLI tokens cannot be liquidated, the underlying position in ETH or BTC may face this risk during extreme market crashes.

Technical Risks

Price Deviation from NAV: The price of FLI tokens may deviate from Net Asset Value on secondary markets. Smart Contract Risk: While FLI smart contracts have undergone audits, there is always a risk of bugs or exploits. Dependency Risks: FLI tokens depend on other decentralized protocols, and failure in any of them poses a risk. USDC Centralization Risk: USDC, a centralized token, presents regulatory and blacklisting risks.

Investors

The Index Coop is proud to be backed by some of the most innovative investors and venture capitalists in DeFi, namely Node, Collider, Wintermute, White Star Capital, Sequoia, Galaxy Digital, DeFiance Capital, Assembly Capital Partners, and more.

Project Development

On January 12th, the Index Coop conducted its inaugural public auction rebalance of dsETH, followed by a gtcETH rebalance a week later. These auctions marked a significant shift, reducing trading costs for index constituents and transforming indexes into liquidity makers rather than takers. The Dutch auction mechanism, employed for the first time, allows swaps to be executed profitably for any ecosystem participant, enhancing performance for product holders and relieving the Index Coop of gas costs associated with rebalancing transactions.

Previously, onchain structured index products faced suboptimal rebalancing drag due to inefficient trades with specified DEX pools. Thin liquidity in these pools caused price impact, slippage, and swap fees, eroding the net asset value (NAV) over time. The new rebalancing module, utilizing Dutch auctions, overcomes this challenge by enabling liquidity providers to trade directly with an index, eliminating intermediary DEX dependencies and reducing rebalancing drag.

In the dsETH auction, a known participant increased NAV by 0.01%, while in the gtcETH auction, an unknown arbitrage bot outpaced a known participant, showcasing the advantages of open finance. Future plans involve attracting more arbitrageurs and bots, integrating liquidity into aggregators like CoWSwap, and rebalancing all products on Index Protocol using the Auction Rebalance module.

Index Coop - ETH 2x Flexible Leverage Index Price Analysis

As of November 24 2024 Index Coop - ETH 2x Flexible Leverage Index has a marketcap of $21M. This is {{percentagefromath}} from its all time high of $751.65. In terms of its tokenomics, there's a total supply of 957K with 100% currently outstanding. Keep in mind Index Coop - ETH 2x Flexible Leverage Index has a fully diluted value of $21M which many investors might interpret as overvalued.

Of course, don’t trust price predictions alone, always check the Coinrotator token screener to follow the trending market.