⚖️Index Rebalancing

Rebalancing the ALP Index

The fees associated with the minting, burning, or swapping of ALP are contingent upon the extent to which the underlying asset balance is positively or negatively impacted. For instance, an action that increases the proportion of ETH held within the index will be accompanied by a higher fee, while a reduction in the amount of ETH will carry a lower fee.

Token index weights, which can be accessed via the Dashboard, are calibrated to offer ALP holders a hedge based on the positions taken by traders. Consequently, in the event that traders are predominantly long on ETH, the token weight assigned to ETH would be higher, and vice-versa for stablecoins in the case of traders being short. If token prices surge, the value of ALP will appreciate in tandem, irrespective of the long positions assumed by traders.

The component reserved for long positions can be deemed stable in terms of its USD value, given that any upswing in prices will generate returns that can be channeled towards traders, and any downturn will maintain the value of the reserve portion.

On the other hand, if traders are short and larger token weights are assigned to stablecoins, ALP holders will acquire a synthetic exposure to the tokens being shorted. Therefore, if the price of ETH decreases due to shorting, the value of ALP will also decrease, and conversely, the value of ALP will increase as a result of the losses incurred from the short positions if the price of ETH rises. Assets contained within ALP may be adjusted as needed. ALP is rebalanced every 7 days, or once weekly.

Cooling Period

Users are restricted from redeeming underlying collateral assets within 24 hours upon minting ALP, known as a cooling period. After 24 hours, the ALP minter may redeem his or her underlying collateral.