BSX Multi-Collateral
Get max capital efficiency using your spot portfolio as leverage on BSX
What is Multi-Collateral?
Multi-collateral empowers traders on BSX to use a variety of assets as margin, significantly enhancing their trading capabilities and capital efficiency. Unlike most DeFi perpetual exchanges that limit collateral to stablecoins like USDC, BSX’s multi-collateral feature allows users to leverage additional tokens they hold, such as wETH, USDT, and cbBTC on Base. This increased flexibility enables traders to maximize their asset potential and trading power, with more assets to be added soon.
BSX Multi-Collateral Features
Asset Variety: BSX initially supports wETH, cbBTC, and USDT as collateral, with plans to include other highly liquid assets like stETH and various stablecoins in the future. If you have an asset you’d like to use as collateral, let us know in Discord!
Natively Cross-Margining: BSX features native cross-margining, allowing users to share their margin balances across multiple positions. This enhances portfolio management and capital efficiency, enabling traders to leverage their assets without needing to liquidate or convert them.
Risk Management: Each asset has a collateral haircut—a multiplier that reduces its notional value to account for market volatility. For instance, the risk factor for ETH at launch is conservatively set at 75%, ensuring the platform maintains a buffer against sudden market fluctuations. Below we've outlined the haircut by asset.
| Asset | Weight |
|---|---|
USDC | 100% |
USDT | 90% |
wETH | 75% |
cbBTC | 75% |
Benefits of Multi-Collateral for BSX Users
The multi-collateral feature on BSX offers several key advantages:
Enhanced Capital Efficiency: By allowing multiple assets as collateral, users can leverage their holdings more effectively without needing to convert to stablecoins. This flexibility enables users to maintain exposure to appreciated assets while actively trading.
Broader Trading Strategies: Users can implement diverse trading strategies, such as carry trades and max long strategies. For instance, using ETH to long ETH positions allows traders to capitalize on market conditions without liquidating their assets.
Seamless Onboarding and Risk Management: At launch, all deposited assets will automatically serve as collateral, reducing friction and boosting users' account equity and trading power. Additionally, users can opt for isolated portfolios to manage specific risks. Each asset has a collateral haircut to account for market volatility, ensuring a buffer against sudden market fluctuations.
Effective Liquidation Strategies: In the event of unfavorable market movements, BSX will implement an off-chain liquidation process using Automated Market Makers (AMMs) like Aerodrome or Uniswap. Understanding these mechanics helps users make informed decisions regarding their positions.
Risk Management
Monitor Margin Health: Make sure your margin health stays above 0% to ensure that you don’t get liquidated. Monitoring your account equity to your portfolio maintenance margin is critical to trading when leveraging multiple assets.
Example Scenario: Alice's Multi-Collateral Trading on BSX
Initial Setup:
Alice deposits 2 wETH valued at $2,900 and $500 USDT. Here wETH is weighted at 75%
Alice Account Equity: $2,675 ($2,900*0.75 + $500)
Trading Positions and Margin Requirements:
Alice opens a $10,000 long position on BTC making her Account leverage ~3.7x
Initial Margin Requirement (IMR): $500 (5% of total position size)
Maintenance Margin Requirement (MMR): $333 (3.3% of total position size)
In the above situation Alice needs to ensure that her account equity does not fall below $333, or she will be liquidated. To monitor her portfolios health, she can monitor her liquidation risk which looks at her Maintenance Margin over her Account Equity. As this number approaches 100% her risk of liquidation goes up.
Conclusion
The multi-collateral feature on BSX significantly enhances user capabilities, allowing for greater flexibility, improved capital efficiency, and an expanded array of trading strategies. As the DeFi space continues to grow, users can leverage these advancements to maximize their trading potential, maintain exposure to valued assets, and ultimately achieve better returns on their investments.
By embracing multi-collateral, BSX users are not just trading—they're optimizing their entire portfolio for success in a dynamic market environment.
You can start trading with multi-collateral here: https://app.bsx.exchange/trade
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