Here are some quick facts on Rebalance that we hope would come in handy when you need it.
What is Rebalance?
Rebalance is a mechanism built inside the Tranchess protocol that resets the NAVs of Token QUEEN, BISHOP and ROOK back to 1.
When will Rebalance be triggered?
Rebalance is triggered when the underlying asset’s NAV(ROOK)/NAV(BISHOP) moves below 0.5 or over 2. Given the embedded leverage ROOK has, Rebalance is time agnostic; It can happen when the market has a sharp rise or drop within 24 hours or if the market has been continuously rising or falling for days.
Why did Tranchess design Rebalance?
Rebalance was designed to restore and maintain the internal leverage built inside Tranchess tokens. When the underlying asset price continues to rise, the leverage ratio of ROOK decreases, and Rebalance helps restore the 2x leverage ratio for ROOK so ROOK holders can continue to benefit from the bullish trend.
When the underlying asset price continues to drop, the leverage ratio of ROOK increases, which simultaneously accelerates the losses of ROOK holders. Rebalance, in this case, restores leverage to 2, i.e., NAV back to 1, for Rook. The number of tokens on hand is reduced simultaneously to allow Rook holders to hold on to their leveraged position and at the same time protect the interest of market-neutral Bishop holders.
Does Rebalance of a particular fund affect the other funds?
No. The NAVs of all three funds are calculated individually, so is Rebalance.
What happens exactly during Rebalance?
The NAVs of all three tokens, QUEEN, BISHOP and ROOK, would be reset to 1. The number of tokens would be adjusted accordingly to make sure the total value of users’ tokens remains the same when rebalance is triggered.
Let’s look at two past Rebalance events as examples, focusing on the BTCB fund. The following images are the pop-up notices post-Rebalance; Each of the notices indicated exactly how the number of the Q/B/R tokens under each wallet might have changed.
For a more in-depth understanding of the calculation, please refer to the information in Tranchess Docs.
Where can I find the complete record of all history Rebalances?
We kept the history of all Tranchess Rebalance events under Tranchess Docs. You would be able to find it as a sub-category under “Rebalance.”
Is there anything I should do after Rebalance?
Yes. Two things specifically:
- Re-enroll for Boosting after Rebalance.
- If you have any outstanding post-only orders, you would need to cancel the old ones and place new ones after Rebalance.
Why do I need to re-enroll for boosting post Rebalance?
Rebalance resets your “staking balance.” Enrolling after Rebalance recalculates your staking balance, making the account eligible for boosting again.
