Power Derivatives: Derivatives With No Liquidations on Genie DEX
Have you ever had a brief moment of volatility wipe out your position when trading cryptocurrency derivatives?
According to Coinglass, 67,390 traders were liquidated in the past 24 hours. Long positions lost approximately $196 Million while short positions lost approximately $33 Million.
Traders using leverage get liquidated when their margin falls below a certain level. Traders are susceptible to getting liquidated especially during periods of high volatility.
What if you could trade with leverage but without liquidation risk? Power Derivatives gives traders access to the benefits of trading with leverage without the associated liquidation risk.
What are Power Derivatives?
Power derivatives are perpetual derivatives indexed to the power of the price of an underlying instrument (such as BTC). Perpetual traders can use power derivatives to trade with maximum leverage while eliminating liquidation risk.
- BTC² is an example of a power derivative that tracks the price of BTC.
- USDT³² is another example of a power derivative that tracks the price of USDT.
Stay tuned for more Power Derivatives with multiple assets and varied powers (from 2 to 32).
Features of Power Derivatives
The key features of power derivatives include no liquidations, amplified gains and softened losses, no strikes or expiration dates, the launch of low-cost pools in under a minute, and trading simple and composite pools.
1. No Liquidations
Traders gain access to leveraged exposure without liquidations with power derivatives. Power derivatives maintain value during extreme market volatility through smoothed oracle price feeds and a unique liquidity provisioning mechanism.
Longs maintain value even during periods of extreme market volatility:
- Longs have 0 value only if the underlying asset price is 0
- Shorts have 0 value only if the underlying asset price is infinity
If the price reverts from 0 or infinity, tokens representing the position will have a positive value, therefore, the positions are not liquidated.
2. Amplified Gains and Softened Losses
Power derivatives exhibit positive convexity, meaning favourable price movements yield greater positive returns when compared to the absolute negative returns from equally sized unfavourable moves.
For a trader investing in BTC²:
- a 10% increase in the underlying asset’s price (BTC) results in a 21% return
- a 10%decrease in the underlying asset’s price (BTC) results in a -19% loss
Read our whitepaper to learn more about how to calculate power derivatives returns.
3. No Strikes or Expirations
Crypto options markets are fragmented across multiple strike prices and expiration dates. Power derivatives address this issue by providing continuous exposure without an expiration date. This helps consolidate liquidity from the fragmented options market into a single, efficient instrument.
4. Create and Launch Low-cost Pools in Under a Minute
Users can create low-cost pools in under a minute on Genie DEX. Power Pools enable liquidity providers to create and manage power derivative liquidity pools in a permissionless environment.
5. Trade Simple and Composite Pools
Users can trade power pools such as:
- Single-Asset Pool: Simple pools with a single power perpetual asset. (Eg: BTC²)
- Composite Pool: Offers a variety of convexity options for multiple assets within a single pool. (Eg: BTC², BTC³, etc.)
6. No Impermanent Loss for LPs(Liquidity providers)
Single asset and composite pools help Liquidity Providers avoid impermanent loss (the loss associated with providing liquidity). LPs must deposit only one asset in the LP pool instead of a pair of assets. This helps LPs allocate capital efficiently while avoiding impermanent loss.
About Us
Genie DEX facilitates trading power derivative pools without liquidation, collateral, order book, strikes, or expirations. Genie DEX is built on Potentia, a protocol that facilitates the creation and management of power derivatives, enabling users to launch derivatives for any underlying asset without needing market makers.
Get involved with Genie DEX by joining Discord, following us on Twitter, and reviewing our Docs.
