The Risk Protocol → Devcon 🇮🇳

We are in Mumbai for Devcon this week.

We are building the Risk Layer of Crypto, starting with SMART Tokens.

SMART Tokens use options to transform BTC and ETH into novel payoff profiles while being fully collateralized, with no liquidations, margin calls or funding: docs.riskprotocol.io

Market maker, LP, trader, or just curious about risk? We would love to meet in person.

Hit us up on Telegram: t.me/j4jeswin

The Fed held rates yesterday, as expected, but two of its twelve members wanted a hike. BTC and ETH rose after the decision, then gave it all back overnight.

The week’s second big event is tomorrow, when more than $10b of BTC options expire on Deribit, about a third of all the BTC options open there. Traders are still leaning in: as BTC and ETH slipped over the past week, futures traders added to their positions.

Nobody knows how the market will take the expiry, but a rush of repositioning around it could move prices fast, and fast moves are what turn leverage into liquidations.

Weeks like this are what RiskOFF and RiskON are built for. Our new epoch opened on Monday with its floor 5% below the opening price as usual and its cap about 5% above. Between those strikes, both tokens track the underlying. Beyond them, RiskOFF stops at its floor or its cap, while RiskON keeps going at about 2x, with no funding, margin calls, or liquidations. The image shows what that looks like if BTC moves 20% up or down this epoch.

It played out in the last epoch that settled on Monday: ETH fell 13%, RiskOFF ETH stopped at its 5% floor, and RiskON ETH fell 21%.

So a week like this does not have to be a bet on one outcome. Someone wary of the expiry could hold RiskOFF through it, with its floor limiting the fall, and could look at RiskON if the market comes through well and climbs toward the cap. Timing that switch is hard, so it may be worth practicing before it counts.

That is what our testnet is for.

In our Trading Competition, you trade RiskON and RiskOFF on BTC and ETH. You are scored on profit and risk control, and the top 100 earn RISK Points.

In our Risk Mode Contest, you call RiskON or RiskOFF Mode on BTC and ETH every day. The longest streak of correct calls wins.

Both run until 13 November, so there is still time to make it count.

app.riskprotocol.io/dashboard

ETH broke the floor. RiskOFF held its ground.

ETH has fallen about 11% since our current RiskON/RiskOFF epoch opened on 26 September, as US spot ETH funds saw more than $1 billion in net outflows in October, already their heaviest month of outflows this year. Over the same stretch, RiskOFF ETH is down a little under 5%, and RiskON ETH is down about 18%. Both were split from the same ETH on the same day, so the gap between them shows exactly what each half is built to do.

RiskOFF is the low-risk half, with a built-in floor 5% below where the epoch opens and a cap about 6% above it this epoch. ETH first slipped through that floor at $2,557 on 7 October, has stayed below it since 12 October, and has now spent almost half the epoch’s hours under it. Once ETH is below the floor, RiskOFF stops following it down, and its loss holds at 5%.

RiskON is the leveraged half, and it carries the fall that RiskOFF does not, at about 2x beyond the floor. That is the trade it signs up for, because it also keeps about 2x of every move above the cap. Neither half is better than the other; they are two halves of the same ETH, built for two different views of where it goes next.

This epoch settles on Monday at 00:00 UTC. Unless ETH rallies about 7% from here to get back above $2,557, RiskOFF ETH settles at its floor, 5% down, and Deribit activity puts the odds of ETH finishing below the floor at about 90%. A new epoch then opens with fresh strikes around Monday’s price, and both tokens start again at half the value of ETH each.

So the question for ETH holders is how to hold it into the next epoch. If you expect more of this selling, RiskOFF keeps you in with a floor 5% below Monday’s open. If you think the selling has run its course, RiskON gives you about 2x beyond the new cap, with no funding, margin calls, or liquidations. If you cannot tell yet, hold RiskOFF through the uncertain part and rotate into RiskON as ETH climbs toward the cap.

Test your hypothesis on app.riskprotocol.io and learn to use a new primitive before trading with real money as we build toward our mainnet launch.