Whenever a 10% price movement happens, the latest trading price becomes the new standard price. Therefore, the leverage level is restored to 3x.

1. Let's say it's UTC 0 and the BTC price is 10,000. BTCUP price is 100, BTCDOWN price is 100.

Therefore at UTC 0:00:00,

both the trading price and the standard price of BTC are 10,000.

Both the trading price and standard price of BTCUP are 100.

Both the trading price and standard price of BTCDOWN are 100.

In next 4 hours, BTC price will raise from 10,000 to 14,000. Therefore a 40% movement.

2. In the first hour, the BTC moves up 300, or 3% of its latest standard price. Now it is trading at 10,300.

At this point, the standard price does not meet any conditions that trigger a refrsh, the standard price of BTC is still 10,000.

BTCUP & BTCDOWN, too. Their standard price are still 100。

BTCUP trading price 100 * (1 + 3% * 3) = 109

BTCDOWN trades at 100 * (1-3% * 3) = 91

3. Next hour, BTC is up another 700. That's 7% of the standard price of 10,000. Cumulative increase of (3% + 7%) = 10%.

As mentioned above, 10% is the shreshold for the system to jump to a new standard price and therefore restore the leverage level back to 3x.

Now, both of the trading price and the standard price for BTC are 11,000.

Both the trading price and the standard price for BTCUP are 100 * (1 + 10% * 3) = 130.

Both the trading price and the standard price for BTCDOWN are 100 * (1 - 10% * 3) = 70

- Again, next hour, BTC raises to 12,000. If the standard price is still 10,000, then the 10% threshold will be triggered again, but since the standard price has been rebalanced to 11,000, the real increase here is calculated as 12,000 / 11,000 = 9.0909% .

At this point,

BTC is trading at 12,000, and the standard price is 11,000.

BTCUP standard price 130

BTCDOWN standard price 70

BTCUP is trading at 130 * (1 + 9.0909% * 3) = 165.45

BTCDOWN is trading at 70 * (1 - 9.0909% * 3) = 50.91

4. One more hour later, the price of BTC raises to 13,000. The previous standard price is rebalanced to 11000 * (1 + 10%) = 12100.

BTCUP = 130 * (1 + 10% * 3) = 169

BTCDOWN = 70 * (1 - 10% * 3) = 49

The price continued to rise to 13,000 after the rebalance (12100).

The price move is 13,000/12,100 - 1 = 7.4380%.

At this point, BTC is trading at 13,000, the standard price for a BTC is 121,000.

BTCUP standard price 169

BTCDOWN standard price 49

BTCUP is trading at 169 * (1 + 7.4380% * 3) = 206.71

BTCDOWN is trading at 49 * (1 - 7.4380% * 3) = 38.07

5. An hour later, the price of BTC finally raises to 14,000. Before this final price, again, a rebalance happens when price is 121,000 * 1.1 = 13,310.

Here

BTCUP standard price 169

BTCDOWN standard priceE 49

BTCUP is trading at 169 * (1 + 10% * 3) = 219.7

BTCDOWN is trading at 49 * (1 - 10% * 3) = 34.3

Then the price goes up another 690 to 14,000. Up 690/13,310 - 1 = 5.1841% .

Since then, the standard price has been rebalanced three times.

It Trades at 14,000, the standard price for a BTC is 13,310.

BTCUP STANDARD PRICE 169

BTCDOWN STANDARD PRICE 49

BTCUP =219.7 * (1 +5.1841% * 3) = 253.87

BTCDOWN =34.3 * (1 -5.1841% * 3) = 28.97

When the BTC price moves up 40% in one day,

BTCUP gains 253.87 / 100 - 1 = 153.87%

BTCDOWN gains 28.97 / 100 - 1 = -71.03%

If BTC drops 40% in one day? Just switch them.

If BTC drops 40% in one day, then BTCUP goes down 71.03% and BTCDOWN goes up 153.87%.

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