Flippening Index Proposal

Hi there!

I’ll start by saying that I am a huge fan of the work that the co-op has been doing. Between ETF-like instruments like DPI and MVI and more exotic instruments like the 2x ETH leveraged index, the products you have been pumping out are a lifeline for investors in this high fee environment. This brings me to my idea: The Flippening index.

Summary:

Create a leveraged long ETH - short BTC index.

Abstract:

Create a leveraged long ETH - short BTC index using Compound or Aave to give investors a one-click way to bet on the relative success of ETH vs BTC. Using ETH as collateral, the index would borrow WBTC and sell it for more ETH.

Motivation:

Some might be familiar with the Flippening theory, but for those who are not, it’s basically the theory that ETH will, in the medium to long term, flip BTC as the top crypto by market cap due to many factors such as ETH 2.0, the rise of DeFi and NFTs, scalability solutions, etc. This doesn’t necessarily mean that BTC will go to zero (in fact it will probably keep rising in value substantially thanks to the “store of value” narrative which might see BTC play a similar role in the future to the role that gold historically played in the markets). What the flippening theory argues is that the value of ETH relative to the value of BTC will increase substantially (looking at the market caps of both BTC and ETH, is the Bitcoin network really worth four times more than the Ethereum network?).

Specification:

This could be achieved by borrowing WBTC on Compound or Aave with ETH as collateral and sell the borrowed WBTC to get some leverage on ETH. The fact that both assets are still very correlated, combined with the low borrowing rate for WBTC (compared to the borrowing rate of stablecoins) means that the risk of liquidation could be even lower than the FLI index (more research would probably be needed to confirm this hypothesis). In short, this would be the perfect index for investors betting on the relative success of ETH relative to BTC.

I am curious to hear your thoughts on this idea.

Cheers!

Edit: formatting to follow proposal template

3 Likes

Very very much in.

Literally call it the FLI-ppening Index.

Potentially co-launch it with the opposite (short ETH - long ETH index) and enable both sides of the trade.
(Udi Index would be a fun name for the other one).

4 Likes

@KeyserSoze please DM me on the Discord [TrotNixonLine in the Discord] working on a formal IIP for this.

Index Cooperative’s FLI product line is proving very appealing thus far to the active trading segment of DeFi users. Getting all the top long and short versions variations launched could really send AUM skyrocketing. I support this product moving to a formal proposal so that we can dig in further.

4 Likes

Great product idea. My first few months in crypto were the height of the Eth flipping craze.

Some really interesting opportunities for marketing around this @DevOnDeFi and @LemonadeAlpha.

“FLIppening… Choose your side”
Image of eth / bull on one side, btc / bear on the other.

Not sure how well that translates in a forum post haha, but @codemathics and @Martin would love to bounce some ideas around with you guys as this product develops.

4 Likes

This has been proposed as a draft IIP over at IIP-40