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Align your qi, with leveraged QI exposure

· 5 min read
Qi launch

The qi in BENQI, is pronounced “key”, but the qi in QI is pronounced “chi”. With that knowledge, the pun in the headline works.

We just shipped a QI market.

QI is the governance token of Avalanche native liquidity market, BENQI.

By TVL, BENQI is the second biggest native protocol on Avalanche, with a TVL that’s more than 10xed in the last six months.

Now you can get leveraged exposure to QI, in Float Capital, without worrying about getting liquidated or putting down a debt position.

That’s a huge deal.

Leveraged QI exposure#

Users who want to predict QI price movements can open QI long or short positions in Float Capital with 2x leverage.

Say a bull mints a 2x long position, and the price goes up 10%. Under optimal conditions, that bull will get a 20% gain on their position.

In the same vein, if a bear opens a short and the price drops, then the gains will be equally awesome.

But you can get way more advanced than just trying to predict price graphs.

Currently you can supply QI liquidity in BENQI.

But, unlike other supplied tokens, borrowing for QI is disabled.

Instead, your QI is used as liquidity for token buybacks, which in turn help support the price of QI.

It kinda functions like single-sided staking, with you locking in your QI for insane rewards, split between QI and AVAX.

With the existence of a short facility, now degen QI suppliers can go delta neutral.

Delta neutral QI#

Delta neutral is a degen trading term. In DeFi, it means removing your exposure to price movements.

In this case it means supplying QI, and opening a proportional short in Float Capital.

Price of QI goes up, short value goes down but QI position goes up.

Price of QI goes down, short value goes up, but QI position goes down.

But the whole time you’re still earning that awesome APY on supplying QI, without worrying about the value of your portfolio.

If you wanna get even more degen, you can use the QI you supply as collateral to borrow more DAI to make more plays in Float Capital.

Just remember to manage the health of your position to avoid liquidation.

Since the market is 2x leveraged, under optimal conditions, you could hedge a full QI supply with a short position in Float only half its size.

Remember that since the exposure in Float Capital ‘floats’, the actual calculation can be a bit more complicated.

Understanding floating exposure#

To remove the need for liquidations or debt positions, our protocol uses a novel mechanism called floating exposure.

This means that your price exposure ‘floats’ with the balance between the long and short sides of the market.

In a perfectly balanced market both sides have 100% exposure.

As one side accumulates more capital it becomes overbalanced, and the other becomes underbalanced.

When a market becomes overbalanced, to avoid liquidating positions on the other side, its exposure drops linearly from 100%, in line with the imbalance.

To calculate a hedge position, you multiply the exposure in the market by the leverage of the market to get the ‘true exposure’.

At 100% in a 2x leveraged market, a position would have 200% true exposure.

At 50% with 2x leverage, a position would have 100% exposure.

Still not making sense? Don’t stress. Copy this sheet and punch in the numbers.

To incentivize market balance, as the exposure on one side drops, the protocol scales up the incentives on the other side to encourage new positions to balance the market.

There are three incentives that accomplish this:

Yield from both sides of the market gets increasingly sent to the underbalanced side.

A funding rate kicks in, where the overbalanced side pays the underbalanced. This varies in intensity based on the underlying asset and the demand for certain positions.

The aFLT multiplier increases for the underbalanced side, meaning that the share of governance tokens earned from staking is increased.

Stacking alphaFLT#

Float Capital doesn’t have a token yet. In the meantime, our users can earn alphaFLT.

AlphaFLT, or aFLT, is the alpha version of our token. It gets issued to users in the protocol, and scales up with market imbalances to incentivise balance.

You currently can’t trade aFLT, BUT, when we ship the final version of the FLT token we’ll allow you to redeem aFLT for FLT at a really nice rate.

So jump in and stack those bags.


This piece is obviously not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To mint a position in our QI market go here.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton.

We found the missing link. It was LINK.

· 4 min read
link launch

LINK just got a magic internet asset.

Now you can get long and short exposure to LINK, at 2x leverage, in a matter of seconds.

This market is powered by a Chainlink price feed, with a heartbeat of 27 seconds, meaning that your positions will get minted and confirmed in 27 seconds or less.

Not bad, right?

New trading opportunities for LINK#

LINK has really sexy price action, making it an attractive market for performance based traders, who want to try and make gains by calling price movements.

Convinced the price is going to rocket up? Mint a 2x leveraged long and earn up to 200% on all upwards price movements. Sure it’s going to drop? Lock in a 2x leveraged short and win off the dip.

You can also build LINK exposure in Float into a number of trading strategies.

Worried about price drops? Open a LINK short and go delta neutral. Whether LINK goes up or down, your portfolio won’t lose value AND you’ll earn sweet rewards.

With LINK staking on the horizon you’ll soon be able to lock up your LINK in exchange for dope APY. A LINK stake and a short in Float would have you earning pretty substantial yields in two places.

Plus, for Chainlink node operators, being able to gain non-overcollateralized short exposure to LINK means a reduced risk return from the network fees earned via staked LINK.

How Float works#

Float creates magic internet assets around degen crypto assets, allowing you to get easy exposure without worrying about debt positions or liquidations.

What is a magic internet asset?

Think of it as a tokenised perpetual swap pool.

In smooth brain terms, we take a price feed for an underlying asset, in this case LINK.

Then we create two pools of capital – a long side and a short side.

You enter the market by minting a position on one side using a stablecoin.

The protocol tokenises that position and issues an amount of either Long LINK or Short LINK to the user’s wallet.

As the price moves, capital in the market moves between the two sides accordingly.

Price go up means value moves to the long side. Price go down means value moves short.

To remove the need for liquidations or debt positions, our protocol uses a novel mechanism called floating exposure.

What this means is that your price exposure ‘floats’ in line with the balance between the long and short sides of the market.

In a perfectly balanced market both sides would have 100% exposure. As one side becomes overbalanced its exposure drops linearly from 100% to 0%.

The exposure level is displayed in the app for each market.

Remember that to get the real exposure of a position multiply the floating exposure by the leverage.

A 2x leveraged position with 100% exposure means real exposure of 200%. A 2x leveraged position with only 50% exposure has 100% real exposure.

Stack alphaFLT#

Float Capital doesn’t have a token yet. In the meantime, our users can earn alphaFLT.

AlphaFLT, or aFLT, is the alpha version of our token. It gets issued to users in the protocol, and scales up with market imbalances to incentivise users to take underbalanced positions.

You currently can’t trade aFLT, BUT, when we ship the final version of the FLT token we’ll allow you to redeem aFLT for FLT at a favourable rate.


This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To mint a position in our LINK market go here.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton and Woo Sung Dong.

Markets unpredictable? Trade volatility.

· 3 min read
cvi launch

This is huge.

We just shipped a CVI market. Now you can long and short volatility itself.

The CVI, or Crypto Volatility Index, tracks the volatility of crypto markets. Lots of price movement = index go up. Price stagnation = index go down.

In Float Capital, a long position would appreciate from increased volatility in the markets, and shorts would appreciate from decreasing volatility.

But more than just minting a position to try and predict volatility, the CVI can add a lot of value to a DeFi portfolio. Here’s how.

Building strats around CVI#

There are some power ways you can build CVI exposure into your DeFi strat.

Say you’re sitting on a whole bunch of staked positions, or just have a big holding of volatile assets, and you’re worried about a big price drop or bear market.

You could open a long on the CVI. Price drops = more volatility, which means a long position benefits.

Or say you’re day trading ETH in our 3x leveraged ETH market. To get real value out of day trading, you’re gonna need a lot of volatility.

An advanced degen could hedge their day trading chaos by shorting CVI, so that if the markets don’t have much movement, they can still potentially have a winning position.

Now let’s say you’re running a delta neutral strat in our OHM, AXS or JOE market. You’re effectively covered against price volatility, but you’re worried that you’re going to miss out on a big bull run.

Boom. Long CVI.

Reduced risk delta neutral rewards roll in, and your long CVI position gets big and green when the price moves.

Not bad, hey?

Big opportunities for CVI arbitrage#

Our CVI market isn’t the first such market on-chain.

Credit for building this on-chain index goes to the team at CVI / COTI.

They identified the need for an on-chain volatility index, and helped Chainlink build the CVI price feed that powers our market.

Originally they were the only platform on-chain that allowed for CVI exposure. Now we have one too.

That’s a good thing for everyone.

Institutional investors, the big dogs, with fat stacks of cash, like having multiple options.

Multiple CVI markets will help investors go delta neutral on the market, offsetting long exposure in one protocol with short exposure in another, allowing for reduced risk mining of rewards and incentives.

The CVI is the blockchain equivalent of one of TradFi’s most degen indexes, the VIX.

The index draws on data from mainstream exchanges, using the prices from 30 day options.

These options create an index that tracks the perceived volatility of the crypto markets in the near future.


This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To mint a position in our CVI market go here.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton, Jon Jon Clark and Denham Preen.

Go delta neutral on JOE for dank APR

· 4 min read
float joe

“Have you heard of JOE?”

“Joe who?”

“JOE mama lmao.”

Excerpt from the funniest conversation ever, 2021.

We just shipped a JOE magic internet asset in Float Capital.

Now users can mint a position and get long and short exposure to JOE at 2x leverage.

Or, JOE stakers can come across and go delta neutral. That means opening a short position equivalent to the long exposure of their stake.

By shorting your own stake, you can reduce your price exposure, sit back and mine JOE staking APY, with way less risk. Think of it as JOE farming, with protection from price drops.

The biggest DEX on Avalanche#

Trader Joe is one of the core protocols in the Avalanche ecosystem, facilitating swaps, pools and farms, and most recently lending, through their recent Banker Joe launch.

The DEX is powered by the JOE governance token.

Staked JOE earns a neat ~40% APY in the protocol, which can be tapped for another ~25% APY by lending the XJOE you get through Banker Joe.

It’s an incredible strat, if the user isn’t worried about price exposure.

But with a delta neutral strat, a degen staker can reduce that risk.

Here’s how.

Going delta neutral#

Going delta neutral is a super degen strategy that completely, or partially, removes exposure price movements.

In most cases, when prices only go up, price movements are great.

But in bearish markets, or when big amounts of wealth are involved, delta neutral strats can allow apes to take an element of risk out of their portfolios.

This can be super useful when staking an asset, like JOE, that has tasty rewards for users who can resist unstaking and selling.

So what would a delta neutral JOE position look like?

First, get some JOE. If you’re new to Avalanche, swap some AVAX for it on Trader Joe.

Then, head over to the staking dashboard, and check out that sweet, sweet APR.

float joe

Connect your wallet and select the amount of JOE to stake. Click stake. You’ll need to approve the app, then confirm the transaction.

By staking JOE you’ll swap your tokens for XJOE. The ratio of XJOE to JOE is constantly appreciating, so later you’ll be able to swap your XJOE into more JOE than you originally staked.

For an added layer of degeneracy, you can take your XJOE and lend it out in Banker Joe.

Now comes the delta neutral part. Head across to Float Capital’s JOE market.

You’ll need to open a short position equivalent to the value of your staked JOE. Make sure you have some DAI to mint a position.

There are two variables to take into account when calculating your position.

The first is the market’s leverage: in this case 2x.

The second is the market’s exposure level. This is shown on the market stats at the bottom of the page, on the lower right hand side.

If the short side has 100% exposure, then, because of the 2x leverage, your short will be half the dollar value of your staked JOE. If it’s less than 100%, then we need to do some math.

Remember, the exposure can change based on the balance of capital in the market, so you will need to check this and rebalance periodically.

To calculate your short you’ll need a few variables:

Your JOE stake = joeStake The short exposure = shortExposure The size of your short position = short

Putting that together we get:

short = joeStake / (2 * shortExposure)

Or, you can just make a copy of this Google Sheet and punch in your figures.

Remember to check the exposure level regularly, to make sure that your stake is adequately covered. In the future we’ll be shipping vault contracts which will manage this for you automatically.

Good luck you degen.


This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton.

AXS just got a magic internet asset

· 3 min read
float axis infinity

We’re bringing the metaverse to DeFi.

Float Capital now supports a 2x leveraged AXS market on Polygon.

Come mint a position now.

AXS, or Axie Infinity Shards, are the governance tokens from massively successful metaverse game Axie Infinity.

For the first time users on Polygon will be able to get leveraged long and short exposure to AXS, in a few clicks, with miniscule gas fees.

The best part?

To celebrate, we’re giving away a team of Axies.

Win a team of Axies

That’s right. Win Axies. A whole team.

Each of the Axies is purebred.

Zero breeds each.

One beast, one plant, and one aquatic. The perfect starter team.

Check them out here.

To win, head over to our Twitter account, and look for the pinned Tweet. Like it. Retweet it. Follow @float_capital.

We’ll announce the winners on the 21st of December.

New strategies for AXS stakers#

Earlier this year Axie Infinity launched staking for AXS.

AXS holders can stake tokens and receive APYs in the triple digits, in doing so though, they’re exposed to price movements.

The existence of a Magic Internet Asset for AXS opens up a new possibility: hedging.

Now stakers can open up shorts on their own stake, and go what the degens call delta neutral.

This means becoming completely immune to price movements, because if the price of AXS goes up, the stake goes up in value, and as the price goes down, the short goes up in value.

The whole time the hedged staker will keep earning yield on the staked assets, effectively earning rewards without worrying about price drops.

Plus at 2x leverage, under optimal conditions, an AXS stake could be hedged with a position 50% the size of the underlying stake.

Because price movements of AXS have been so aggressive in the last year, AXS shorts will likely be easily offset by long positions hoping the price will appreciate.

Getting to Float from Axie Infinity.#

Staking AXS, or even earning SLP from playing Axie Infinity requires a Ronin Wallet, connected to the Ronin Network.

Minting a position in Float Capital’s AXS market requires a Metamask, Wallet Connect, or Torus wallet, with DAI and MATIC on Polygon.

That could be a big step for a play to earn degens from Axie Infinity, but don’t worry. We’ve created a handy guide for getting across from Ronin and trading in Float Capital.

Read our delta neutral guide here.


This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton.

Hedging staked AXS with Float Capital

· 5 min read
float axis infinity

So, you’re an Axie Infinity expert.

You’ve played the game, earned your SLP, swapped it for AXS, and now you’ve got that AXS staked in Axie Infinity to earn dank rewards.

That’s an awesome strategy. But, there is one major risk to consider – price exposure. .

AXS staking rewards are paid in more AXS. Normally more AXS is a good thing, but if the price drops while you’re staking, then your stake and all the rewards earned will lose value.

There’s an easy way of reducing this risk though – going delta neutral.

Delta neutral trading strategies remove the risk of market exposure. They make sure that every point of long exposure in a trading strategy is counterbalanced by equivalent short exposure.

That means that if the price to which the positions are exposed goes up, the long position increases in value and the short decreases proportionally. When the price goes down, the short increases in value, and the long decreases proportionally.

By going delta neutral in Float Capital’s AXS market, you’re free to mine AXS rewards AND alphaFLT rewards without worrying about unfavourable price action.

Here’s how you can get started with a delta neutral AXS strategy:

Staking AXS#

Skip this if you’re an Axie expert and have a pile of AXS staked already.

To stake AXS you need a Ronin wallet.

You can create one easily. Download the app here.

Make sure to back up your private key and password somewhere secure. Sky Mavis recommends adding a hardware wallet as an additional layer of security.

Once your wallet is ready, you need AXS.

There are a few ways to get AXS. The easiest way is to play Axie Infinity. AXS is rewarded within the game, alongside Smooth Love Potion. You can then swap SLP for AXS by using Ronin’s native Katana Dex. Alternatively you can simply bridge USDC or wETH and swap it for AXS.

If you already have AXS, or other assets you want to bridge to Ronin to swap for AXS, use the Ronin bridge.

You can also buy AXS directly on Ronin from Ramp.

Once you have your AXS, head over to the staking dashboard and check out that juicy APY.

float axis infinity

Simply connect your Ronin wallet, select stake AXS, and confirm the transaction. You may need to approve the app the first time.

Once your AXS is staked, you’ll see it reflect on the dashboard, and you’re ready to go delta neutral.

Getting set up on Polygon#

Skip this if you’re a Polygon native and have bags on the chain already.

Once you have an AXS stake, head straight to Float Capital.

To mint a position you’ll need a few things.

You’ll need a wallet supported by the protocol. Currently that’s Metamask, Wallet Connect, or Torus.

Next you’ll need some DAI, to mint a position in the protocol, and some MATIC, to cover gas fees.

You can buy funds directly on Polygon using Ramp. Make sure you buy the assets on Polygon, not on Mainnet or another chain. Alternatively you can buy MATIC on an exchange like Coinbase, and send it across to your wallet.

If you have assets on Mainnet already, then you can easily bridge them across using the Polygon bridge. You can then use a Polygon exchange like Sushiswap, Quickswap or 1inch to swap your asset for the required tokens.

You can also try getting some MATIC from the Polygon faucet, but it doesn’t always work.

Once you have MATIC and DAI, head over to Float Capital and mint your position.

Minting a short in Float Capital#

It’s time to mint a magic internet asset.

Head over to our markets page to see all the markets on offer, or head straight to the AXS market.

To go delta neutral on your staked AXS, you need to mint a short position.

To figure out the size of your position, first check the exposure on the short side of the market.

Based on this you need to calculate how big a position you will need to fully hedge your AXS stake.

Remember, since the market is 2x leveraged, the ‘real’ exposure to price movements will be multiplied by two.

Hence, if the short exposure is 100%, your short position only needs to be half your AXS stake.

If the exposure is less than 100, then the position needs to be bigger than that. To calculate this we’ll use the following:

Your AXS stake = axsStake

The short exposure = shortExposure

The size of your short position = short

Putting that together we get:

short = axsStake / (2 * shortExposure)

Or, you can just make a copy of this Google Sheet and punch in your figures.

It’s that easy!


This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

To win a team of Axies, check out our AXS launch announcement.

This piece was written by Denham Preen and Campbell Easton.

BRB, going multichain.

· 4 min read
Float <> Avalanche

We’re deploying on Avalanche

BRB, our alpha is going multichain.

Float Capital is bringing Magic internet Assets to Avalanche.

We couldn’t be more stoked.

We’ll be going live with AVAX market with 2x leverage. Following that, we’ll be shipping more degen markets for Avalanche native tokens.

Now Avalanche users can trade in Float Capital, mint and switch positions, stake and mine alphaFLT tokens, and to build Float positions into existing strategies for even more degenerate effects.

The degen traders on Avalanche just got a lot more options.

To see what’s possible, check out our case study on hedging staked OHM using Float. With Olympus DAO deploying on Avalanche too, we might even look at shipping something new for Ohmies.

What’s different on Avalanche

Because our markets need liquidity to balance, we’re being very careful about relaunching markets that we’ve already deployed on Polygon.

In the next few weeks we’ll be shipping some absolutely degenerate markets for protocols running on Avalanche. These will allow users to trade, hedge, and mine rewards without leaving Avalanche.

No hints yet, but you’ll be able to open leveraged shorts on some of these assets for the very first time, and create tons of new trading and hedging opportunities.

We may even experiment with different payment tokens. Currently all our markets accept DAI, but we’re going to use Avalanche to test out some new payment tokens. Say no more for now, but we aren’t talking about stablecoins.

All of our Avalanche markets will have a 30 minute heartbeat – meaning that they receive price updates and process trades at least every 30 minutes. If the price deviation hits a certain threshold, this process will occur sooner.

As always our Avalanche markets will be powered by Chainlink price feeds. The Chainlink team has been incredible in helping us bring new feeds to Avalanche, and speeding up the existing ones for our markets. To read more about how we build our markets around Chainlink feeds, click here.

Using Float

Float Capital allows users to mint Magic Internet Assets with unbelievable ease.

Our markets track the price of an underlying asset, and allow you to get long and short exposure in a matter of clicks.

To take the pain out of trading, we’ve built a system that removes the need for collateralized debt positions or liquidations.

We use a genius set of incentives to help balance markets, by feeding additional rewards to users in underbalanced positions.

By staking your position, you can earn alphaFLT as a reward. The token issuance scales with the market balance, so underbalanced APYs get another layer of dank rewards.

If you’re a DeFi beginner looking for hands on experience, watch our tutorial series here.

Float Capital is currently in our alpha deployment. That means we’re live, with real money, but our contracts, mechanism and token aren’t final.

In the coming months, when we have a perfect model for Float we’ll ship our V1 product and our FLT token.

Until then, you’re perfectly safe to trade within Float and help us grow the protocol. In the meantime you’ll earn alphaFLT, which you’ll be able to redeem for FLT when it launches.

Start trading now at avalanche.float.capital.

Or, if you want to learn more, check out our docs, read our whitepaper, or join our Discord.

Having money in DeFi is risky. This piece should not be considered financial advice. To learn more about Float Capital and the risks you could be exposed to by using the protocol, read more here.

This piece was written by Campbell Easton, with input from JonJon Clark, Denham Preen, Woo Sung Dong and Jordyn Laurier.

Why you won’t have nightmares about volatility decay on Float Capital.

· 7 min read
Sleeping Pepe

In this blog we will explore the concept of volatility decay on leveraged assets, which often keeps investors up at night and why this won’t be the case for users on Float Capital.

What is volatility decay?#

Volatility decay is an observation made on leveraged assets, more specifically how their compounded-returns compare to those of the non-leveraged versions. The phenomena arises when a sequence of leveraged movements compound to a value that is different than the leverage multiple of non-leveraged movements, which disproves the perception that investing in leveraged assets will give you exactly leveraged returns.

At the core is the fact that the relationship between compounding of returns and compounding of linear multiples of those returns, is not linear.

Volatility decay over a period for a leveraged asset can be formalised as:

Volatility Decay = leverage * unleveraged returns - leveraged returns

For example, if no-leverage movements are 5% then -10% respectively, the net return is -5.5% (1.05 * 0.90 = 0.945).

For a 2x leveraged asset, the movements then are 10% and -20%, with net return being -12%. So volatility decay after 2 movements is 2*(-5.5%) - (-12%) = 1%, meaning someone holding a long 2x leveraged asset has underperformed the leverage multiple of a no-leverage asset by 1%.

Hence volatility decay implies the leverage, say 2x, can result in returns different to a 2x multiple of non-leveraged returns.

What does it look like on Float Capital?#

The absolute amount of volatility decay depends on certain factors:

Exposure to the price movements#

The greater the exposure to leveraged movements, the greater the [absolute] volatility decay. Our floating exposure mechanism means that the overbalanced side of a market will have a smaller degree of volatility decay experienced, as exposure will be less than 100%.

For the 2-OHM market, the exposure on the short side has been gradually decreasing, and therefore the size of absolute volatility decay has been decreasing as well – graph below.

Exposure 2-OHM

Leverage employed#

Currently our first 2 markets (Flipp3ning and 3TH) have 3x leverage, whereas our third market has 2x leverage on OHM. When it comes to leverage, there is a trade-off between capital efficiency and volatility decay.

For a user wanting to gain vanilla $1000 long exposure to OHM, it means that user has to only mint $500 on long 2-OHM (assuming exposure of 100%) to gain this exposure, allowing users to allocate their capital more efficiently.

However, the greater the leverage the greater the potential for volatility decay, and one way to find the correct balance is to observe the historical volatility decay in our markets and see whether they are at acceptable levels.

Absolute difference in price between entry and exit#

The greater the difference in underlying price of the asset ‒ from the time a user enters the market to the time that they exit ‒ the greater the [absolute] volatility decay. For example, if a user enters a market when the price of the underlying asset is $100 and then exits when the price is $200, they would experience greater volatility decay than if they exited when the price was $150. The same goes for negative price movements. Note that the volatility decay is not necessarily 0 if the user exited at the same price that they entered.

Magnitude of underlying price movements#

Float Capital updates user’s positions when the oracle price feed of the underlying asset gives a new price. The higher the change in the underlying price, the higher the volatility decay will be for any users with active positions at the time of price update. This effect is compounded when there are multiple price updates of high magnitude in the same direction, and is dampened when there are multiple price updates of high magnitude in opposite directions. For example, if there are 2 positive price movements (not necessarily consecutive) of high magnitude then the volatility decay is higher than if there was 1 positive and 1 negative of the same magnitude.

Note that the only time a user’s volatility decay is affected by large single price movements is if they hold a position in the market at the time of the price movement i.e. historical price movements do not affect new investments.

So how high is high? This is something that will be explored in detail in the next blog. But very basically: the relationship between the magnitude of a single price movement and the resulting volatility decay is linear (whose factor/gradient is dependent on the market leverage less 1), and is offset by the volatility decay before the price offset. For [a rough] example, if the current volatility decay for a user in a 2x leveraged market is 01% and the magnitude of the next price update is 10% then the resulting volatility decay is also 10% ; and in a 3x leveraged market it would be 20%). Note that this is a rough example and may not be entirely accurate.

The higher the inherent volatility of the asset, greater the potential volatility decay.

To reduce the volatility of the underlying asset as much as possible, Float uses a deviation threshold of 0.5% and a maximum heartbeat of 5 minutes (actually heartbeat for 3TH market is 27 seconds), asset by our oracle provider, Chainlink.

This means that the price feed will at least update every heartbeat, but also update sooner if the price changes by more than 0.5% from the previous price.

Volatility Decay for short side of 2-OHM market#

Vol Decay Short 2-OHM

This graph shows the cumulative returns of 2-OHM (in blue) and OHM (in red) for the short side, as well as the volatility decay so far (in green) assuming that someone had entered the market from 2 Nov 2021 when market was created.

We see that volatility decay dropped to -2% in around 5 December 2021, which means that someone holding short 2-OHM would have outperformed someone holding twice the amount in vanilla OHM by 2%.

We have observed volatility decay from the short side above – what does this look like on the long side? A similar calculation can be done for volatility decay on the long side, which does not necessarily produce an equal and opposite value to the short volatility decay.

It is also important to note that because Float Capital is a peer-to-peer market, volatility decay is not lost forever, meaning volatility decay for one side is a gain for the other side on Float Capital, unlike in TradFi where the volatility decay cannot be captured and awarded to someone else.

For example, if the long side has experienced a 0.9% volatility decay over a 7-day period, then that 0.9% is retained by the short side.

In Summary#

Volatility decay is something inevitable when it comes to leveraged assets, and the best is to put measures in place to limit its size.

In the article, we explored the mechanisms in place on Float Capital (such as floating exposure and our current practice with Chainlink) which reduce the size of volatility decay as much as possible for users.

One view that could be taken toward volatility decay is that it is the cost of using a capital efficient asset, which is achieved by employing leverage.

The amount of liquidity that did not shift as a result of volatility decay, will remain on the opposite side of the market (i.e. opposite side benefits from volatility decay on one side).

More technical deep dive coming soon for the wrinkle-brained Floatonians.

Happy leveraged trading!

If you want to learn more about Float Capital, check out our docs, read our whitepaper, or join our Discord.

This piece was written by Woo Sung Dong and Stent (Anon).

We’re shipping a funding rate. Here’s why and how.

· 5 min read
Floating SHIP

Float Capital has experienced explosive success with our OHM-USD market and our partnership with Olympus DAO. It has attracted so much capital that for a week during the last month we were the fastest growing derivatives protocol in all of DeFi.

However the success of the OHM market has raised a new challenge – the current mechanisms aren’t strong enough to incentivize better market balance between long and short positions with an asset that has a >7000% rebase APY.

Because of this the majority of the OHM market positions are short. As a result the short positions are overbalanced and receive minimal short exposure since there is not enough long liquidity to take the other side of the trade. This makes Float a less efficient tool for hedging positions.

To correct this we will be introducing a funding rate mechanism to the protocol.

Float is still in the alpha stage and constantly refining the protocol to handle any type of market and any kind of asset. Our thesis remains, build, ship, iterate. The OHM market has been an incredible experiment and has shown us our path forward so that when the protocol moves out of alpha we will be able to create any kind of Magic Internet Asset.

Funding rate

When launching the protocol we initially thought that the leveraged yield incentive (all liquidity earning yield channelled to the underbalanced side) + asymmetric alphaFLT accrual would be enough to cater for this imbalance. However (alphaFLT aside), users going long OHM in Float only receive a 60% leveraged yield from aave for being long in contrast to getting >7000% (rebase rewards) for it by staking their OHM on mainnet.

Our solution - a funding rate! A funding rate is not a concept that we invented. Many perpetuals use funding rates to bring their assets to closely track their underlying. It was ambitious that we thought we could build a protocol that didn’t need this primitive, and not all markets need it. However, the OHM market, I’m sure you will agree, NEEDS a funding rate!

What is a funding rate? A funding rate is payment made from the overbalanced side to the underbalanced side, to incentivize more balance in the market. More specifically for Float Capital there will be a constant trickle of liquidity from the overbalanced side to the underbalanced side of the market. As the markets become more imbalanced, the funding rate increases. For reference here are the funding rates for FTX.

Float funding rate implementation

How will this mechanism work? We set a maximum funding rate for the overbalanced side that would only be achieved if the market were completely imbalanced (i.e. there was no liquidity on the underbalanced side). We then scale the funding rate linearly based on the imbalance. This simple formula can be seen here. We have additional parameters that we can introduce later to adjust the shape of this curve, but we believe that the linear curve will be sufficient to create a massive impact while still remaining conservative. We are not expecting the funding rate alone to be enough to rebalance the market alone, rather it will be the second order effect of traders coming into the market to accept the high yields that rebalances the market.

What is a good initial funding rate setting for this market? It is hard to know what kind of risk tolerance the market will have to going-in on the long side of OHM.

Given our current market imbalance, an additional APY of 2,000-3,500% could be sufficient. 3,500% with 2x leverage would be equivalent to the maximum longing OHM and staking can earn: ~7,000%. 2,000% is due to the increased capital efficiency of using Float Capital, the market fragmentation of being on a different blockchain and the easy access enabled by the low gas fees of polygon.

Being sensibly conservative, the initial proposal for implementation of this funding rate is a maximum of 300% for the OHM market, which at the current exposure of ~10% would mean the short side pays an annualized funding rate of 270%, or an hourly rate 0.03%.

This would give long OHM an APY of 2,400%.

If that has an underwhelming effect on the market we will take steps to increase it by a reasonable amount the next week, and again until it has the desired effect.

If the market rebalances to 50% exposure this would reduce to a funding rate of 150% on the short side and an APY boost on the long side of 300%

A funding rate of 270%, that we expect to reduce over time, is still comfortably below some of the larger funding rates that appear on FTX (which frequently go to 800% at times).

FTX funding rates

Here is our code, which is currently in for a 3rd party audit. We’ve also written numerous tests and the design of our code means this addition is very modular and contained. There is no point in waiting longer than we need to, the plan is to ship this week (pending review).

Image of this feature being SHIPPED

We invite all plebs, apes, chads and degens to give feedback, code review, or any other help!

As always, if you have any questions or want to chat, learn, or gm, come over to our Discord.

This piece was written by Jason Smythe, with invaluable editing and input from Jonathan Clark, Michael Young, Denham Preen, Paul Freund, Campbell Easton and Woo Sung Dong.

Hedge your OHM position with Float Capital

· 7 min read
Olympus DAO OHM yes float capital

Float Capital is launching an Olympus market, providing another diversification option for all OHM holders and giving Ohmies new strategies for interacting with OHM.

The market goes live on Tuesday, the 2nd of November, at 10:00am EST. If you’re reading this after that, you can trade here.

Whether you’re an Ohmie, one of the Float Capital degen traders, or someone new to both protocols, you’re in for a treat. Here’s why it matters, and how you can get diversified exposure to OHM.

*Update: open a position in our OHM v2 market here.

Trade OHM with 2x leverage with Polygon

Now users can get exposure to OHM on Polygon, which offers lightning-fast speeds and lower transaction costs. For example, trading with Float Capital generally requires paying ~0.015 MATIC per transaction, or roughly $0.02.

The Float Capital OHM market will launch with a 2x leverage, meaning your exposure to price movement will be doubled.

For example, say you have a long position in a perfectly balanced market with 100% exposure in Float, and the price goes up by 10%. That will result in a 20% gain on your position.

Now say you’re staking $100 of OHM, and you want to open a short position to completely remove your exposure to price movements. In a 1x leveraged market, you would need to put down a full $100. In a 2x leveraged market, with 100% exposure you can fully hedge your position with just $50, or half the position you want to hedge.

Way more on this below.

If you’re new to Polygon, you can bridge your tokens across here.

Advanced Trading for OHMIES

Here’s the really cool part:

The Float Capital OHM market is enabling a whole new trading strategy for OHM stakers.

Previously, Ohmies have only had the option of staking, bonding, or, much worse, selling. But selling isn’t very (3,3) of you.

The Float Capital OHM market opens up the possibility of a new strategy that doesn’t undermine the game theory inherent to the Olympus community: going delta neutral.

This means, in addition to your OHM stake, you can hold a short position on OHM to reduce your exposure to market volatility.

This will allow users to keep earning rewards for staking OHM, hedge against downward movements in the market, and earn FLT tokens from Float’s own staking incentives.

Currently FLT is in its alpha phase, so users will earn alphaFLT when staking in Float. When FLT launches around the end of 2021, alphaFLT will be taken off the market and current holders of the token will be rewarded.

Calculating a delta neutral position

A delta neutral strategy is equivalent to having zero exposure to the price of the underlying asset, in this case the OHM token. This means having 100% exposure to the price going up (long) and having 100% exposure to the price going down (short), simultaneously.

This allows APY returns without being exposed to the price movements of the OHM token. It’s a risk averse strategy for farming rewards.

Because the exposure in our markets ‘floats’ based on the balance of capital in each market, hedging your OHM position isn’t as simple as putting in 100% of your OHM position to get 100% hedging.

To understand this, head over to the market and check the exposure.

Olympus DAO OHM exposure float capital

To explain exposure, we’ll use an example:

Let’s say Nachos has $1,000 of OHM tokens staked. This equates to 100% exposure to $1,000 of value. In order to get a delta neutral position he will need to get $1,000 value of short exposure.

Nachos would head over to Float Capital and check the exposure on the short side of the OHM market.

If that exposure is 100%, then in a 2x leveraged market, he will be able to fully hedge his position with only a $500 short position.

If the exposure is lower, say that it’s 50%, then since it’s a 2x leverage market, Nachos would go $1,000 short to get $1,000 short value exposure.

To make it easier to process, we’ve built a calculator for you in this google sheet. Just make a copy and punch in your OHM stake.

If you’re old school and have a calculator handy, here’s the math:

Firstly we start with

  • The dollar value of your OHM position ($OhmStake)
  • The short exposure on the OHM 2x Leverage market on Float Capital (%ShortExposure)

And we calculate for:

  • Dollar amount to go short in OHM market on Float Capital ($FloatPosition)

That works out to:

$FloatPosition = $OhmStake / (2 * %ShortExposure)

You can see the math in more detail here.

Once you’ve got your calculation ready, make sure that you have enough DAI in your wallet to cover that position in Float.

When you’ve done that, head across and stake your short here. You’ll get the hedge you want with all the benefits of your OHM stake, and the added benefits from the Float protocol rewards system.

Just remember – in Float Capital, your leveraged exposure floats. This means that the position needed to hedge may change as the price of OHM changes and the market shifts.

To keep your hedge you will need to check in regularly and recalculate.

Secure pricing data from Chainlink

The Float Capital OHM asset will be powered by market data supplied by a Chainlink Price Feed on the Polygon network. Each Chainlink feed draws data from a decentralized network of secure oracle nodes, each of which aggregate data from multiple premium data providers with wide market coverage.

By using a Chainlink Price Feed we ensure reliable and regular access to price data that helps protects our traders from attacks, and makes sure that the market is safe and that the movements of capital within the market accurately reflect the price of the underlying asset.

If you want to learn more about how Float integrates Chainlink feeds, click here.


Float Capital is a yield enhanced magic internet asset protocol that allows users to mint assets in a matter of clicks, without the need for over collateralisation or the risk of liquidation.

OlympusDAO aims to create a free-floating financial reserve backed by a basket of assets. By focusing on supply growth rather than price appreciation, OlympusDAO hopes that OHM, the protocol’s token, can function as a reserve asset that is able to hold its purchasing power regardless of market volatility.

Chainlink is the industry standard for building, accessing, and selling oracle services needed to power hybrid smart contracts on any blockchain. Learn more about Chainlink by visiting chain.link or read the documentation at docs.chain.link. To discuss an integration, reach out to an expert.

This piece isn’t financial advice. Trading carries risks and should be taken seriously. If you want to be more informed about the risks of trading with Float Capital, read more here.

If you’re a seasoned investor doing due diligence on the protocol, or a Web3 newcomer just starting out, hop over to our Discord, and meet the team here.

This piece was written by Campbell Easton, with input from Denham Preen, Paul Freund, Jonathan van der Merwe, and Woo Sung Dong.