Power Perpetuals

Get exponential exposure to asset prices on BitPerp

Introduction

BitPerp introduces an innovative approach to trading perpetual contracts that adjust exposure based on user-defined parameters, allowing for either squared or square root exposure to assets. This flexibility enables traders to use higher leverage while managing the typical volatility associated with such trades. Whether you're looking to amplify potential gains on volatile assets or temper the risks with more stable ones, BitPerp provides the tools to customize your trading strategy effectively.

Perpetual Contracts on BitPerp

BitPerp enhances the traditional perpetual contract by incorporating power-based exposure mechanisms. Here’s a quick overview of what this means:

• Standard Perpetual Contract: A traditional perpetual contract tracks an underlying asset's index price and adjusts positions with funding payments based on the difference between the current traded price (mark) and the target price (index).

• Power Perpetual Contract: Unique to BitPerp, these contracts allow traders to either increase (power > 1) or decrease (power < 1) the impact of price movements by raising the index price to a specified power. This can either be squared (e.g., index^2) or square root (e.g., index^0.5) depending on the desired exposure level. If the price of ETH doubles, the ETH^2 power perp 4Xs, the ETH^3 power perp 8Xs, and the ETH^5 power perp 32Xs.

Price of ETH^2 compared to ETH (example)

Trading with Enhanced Leverage Options

BitPerp's platform is particularly versatile, catering to both ends of the market volatility spectrum:

• Quadratic Exposure (Power > 1): This setting is optimal for those who wish to capitalize on the high volatility of an asset, potentially enhancing returns when market movements are significant.

• Sublinear Exposure (Power <1): Conversely, this setting is designed for traders looking to engage with less volatile assets but still want to utilize higher leverage, effectively increasing their exposure without a proportional increase in risk.

Operational Mechanics

1. Trading Dynamics: Traders can enter long positions by purchasing or short positions by selling these power perpetuals.

2. Maintaining Collateral Ratio: The collateral ratio, crucial for maintaining account health and preventing liquidation, is calculated as follows:

   \text{Collateral Ratio} = \frac{\text{(Collateral Quantity × Collateral Price)}}{\text{(Perpetual Quantity × (Index Asset Price)^p)}}

   Keeping this ratio above a certain level ensures that the account remains secure against market volatility.

3. Funding Adjustments: The funding rate is dynamically adjusted based on the mark price relative to the power-adjusted index price, ensuring fair compensation between longs and shorts depending on market conditions.

Benefits of BitPerp

• Customizable Exposure: Traders can tailor the level of exposure to suit their risk tolerance and trading style, making complex strategies more accessible.

• Advanced Trading Strategies: The power adjustment feature allows for sophisticated strategies that can capitalize on specific market conditions, opening up new possibilities for risk management and profit.

• Controlled Risk: Trading with the power of exposure enables traders to manage risk more effectively, allowing for the use of high leverage while maintaining control over potential volatility.