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Seeking Regulatory Clarity For Crypto | 4/19 Newsletter
Seeking Regulatory Clarity For Crypto | 4/19 Newsletter
Does the SEC believe that ETH is a security or commodity?
4/19/2023
Index Coop
Content
Welcome to the latest edition of Index Insights! This week we’ll take a look back at a significant time in the history of DeFi, staking tokens, and icETH. Along with a walkthrough of how the FLIs and our automated products have performed in Q1 2023.
In this edition, you'll learn:
FLI products surge in 2023, amplifying ETH/BTC returns
Gensler testifies in front of Congress
Q1 Risk Automated Product Report
— The Index Coop team
FLIs Up Big in 2023
As the cryptocurrency market experiences a significant surge in interest, Ethereum (ETH) and Bitcoin (BTC) have seen remarkable year-to-date (YTD) returns. Their corresponding FLI products, ETH2x Flexible Leverage Index (ETH2x-FLI) and BTC2x Flexible Leverage Index (BTC2x-FLI), provide amplified exposure to these digital assets. Ethereum's 76% YTD return is driven by the growing popularity of decentralized finance (DeFi) and the successful Ethereum 2.0 upgrade, while its ETH2x-FLI has a YTD return of 169%.
Bitcoin, the original and largest cryptocurrency, has an 88% YTD return, bolstered by being seen as a safe haven during the recent bank closures and growing acceptance as a digital store of value. Its BTC2x-FLI outperforms with a 208% YTD return. FLI products present an attractive opportunity for traders to optimize their exposure to these leading digital assets.
Congress Seeks Regulatory Clarity From The SEC
On Tuesday, Gary Gensler, the SEC Chair, faced questions from the House Financial Services Committee about his aggressive stance on the crypto industry. Gensler defended his position, stating that he has never seen a field as non-compliant as crypto, and argued that the SEC has provided clarity on crypto custody, exchanges, and asset definitions.
Under Gensler's leadership, the SEC has issued 130 enforcement actions on crypto businesses, including a recent crackdown following the collapse of exchange FTX.
U.S. Rep. Patrick McHenry, chairman of the House Financial Services Committee, questioned Gensler on whether he views ether (ETH) as a security or commodity.
We’ll let you judge whether or not Gensler answered the question.
Q1 Automated Products Risk Report
Yield Products' icETH has shown a steady growth of 1.15% in ETH terms since February, reaching 1.05 ETH per icETH. The supply cap, a global limit on the total units of icETH, currently stands at 69% utilization, with 10.4K units in circulation.
No parameter updates have been made recently, but an update to the supply cap is anticipated in the coming months as the circulating supply approaches 80%. Meanwhile, the stETH:ETH price has remained relatively stable, with liquidity on the Curve stETH:ETH pool increasing by over 50% to almost $1.5B.
ETH2x-FLI has experienced a 25% growth since February, with a price rise of 19% for ETH. The current supply cap for ETH2x-FLI is at 58% utilization, with 1.44M units in circulation.
No parameter updates have been made in this period, and ETH2x-FLI relies on the UniV3 ETH:USDC pool for daily rebalancing. The price impact for rebalancing trades has been less than 0.1%, and the NAV vs DEX premium has remained between -4% to 4%.
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FAQs
Index Coop yield tokens simplify earning yield in DeFi by automating complex strategies and diversifying across protocols. They are user-friendly and cost-efficient, appealing to both new and seasoned DeFi users.
Leverage tokens automate a leveraged position by utilizing onchain money markets like Aave or Morpho to borrow funds, amplifying a user's exposure to an asset without requiring manual management. The token's smart contracts autonomously handle the borrowing, lending, and rebalancing of assets, maintaining a consistent leverage ratio despite market fluctuations. This automation eliminates the complexities of collateral management and liquidation risks, while also charging low, transparent fees that avoid expensive funding rates often charged by perps.
Index Coop is a decentralized autonomous organization (DAO) that specializes in creating and maintaining onchain structured products. Index Coop aims to democratize access to the crypto market, empowering everyone to participate in the growing digital asset ecosystem with ease.
No, yield automatically compounds and accrues to the token price. The value of the tokens you hold in your wallet will simply go up over time without the need to claim or compound rewards.
Index Coop products protect you from liquidation with automated risk management that rebalances assets to maintain a target leverage ratio that avoids liquidation.
INDEX is the ERC-20 governance token on Ethereum for Index Coop. INDEX empowers its holders to participate in decision-making processes that shape the future of Index Coop.
Yes, all Index Coop products are instantly redeemable for their underlying value at all times.
Yes, all Index Coop smart contracts have been audited by leading independent security firms such as OpenZeppelin, ABDK, Isosiro, & more. There is also an active bug bounty program through ImmuneFi. Audit information is published in the docs here.
Streaming fees (an annual fee paid continuously block-by-block), mint and redeem fees (only on leverage tokens), and borrow costs (interest paid to borrow funds from onchain markets when using leverage).