The Bear Inverse Token tracks the inverse return of the underlying index through DEX perpetual futures contract exposures. It allows hedging and speculation against market downturns with great capital efficiency, without the need for a collateralized debt position.
The engine behind The Bear is IndexZoo’s Habitat Protocol. It manages a margin trading account instead of a collateralized debt position to achieve accurately targeted leverage. When a user mints a Bear Token, they send USDC/USDT to the Habitat Protocol, which opens a perpetual futures position on a Decentralized Exchange that constructs the exposure to the token's mandated leverage ratio (-1x, -3x, or -5x). The Bear Token tracks the underlying index price down to the seconds.
The Habitat Protocol's Rebalancing Module actively manages its short position by closing/adding to its position when the targeted leverage ratio diverts. This is a low-latency trading process done through DEX's API. Users can monitor the Protocol's underlying exposures, accuracy, and risks. For more information, read ZOO docs.
The Bear Inverse Token does not use a collateralized debt position to generate leverage but uses a margin account instead. The margin account will be subjected to liquidation when the maintenance margin requirement ratio is not met. Therefore, Habitat's Rebalancing Module maintains a safe margin that generally aims for 10x the margin requirement ratio (for example: if dYdX’sliquidation is 6.25%, our protocol maintains a 62.5% margin at all times).
Also, the protocol has a dedicated risk management module designed to arbitrarily exit positions when severe market conditions occur and the Rebalancing Module fails to execute trades as planned. The specific criteria are discussed in ZOO docs.
Users pay a 1.5% streaming fee and a 0.1% fee when minting/redeeming.