NAV, decay & funding

A leveraged tracker is not a stock at 5×. Three forces separate it from the naive multiple, and all three are worth understanding before you rely on one as a floor.

NAV

A tracker's NAV is the equity of its perpetual position divided by its supply. It is posted on chain and readable by anyone, and mint and redeem are open at it — which is the arbitrage that keeps the traded price and the NAV together.

Everything the platform quotes in dollars for a bonded coin passes through NAV. It is the one number that turns "so many trackers" into "so many dollars".

Equities trade venue hours. Outside them the position cannot move and the NAV is the last mark; it catches up, in one step, when the pair reopens.

Volatility decay

A constant-leverage tracker rebalances to keep its multiple. That is what makes the multiple hold day to day, and it is also what makes it lose ground on a round trip.

Take an underlying that falls 10% and then rises back, against a 5× tracker:

underlying:   100 → 90 → 100          net  0%
5× tracker:   100 → 50 → 77.8         net −22%

The stock is unchanged. The tracker is down 22%. Nothing malfunctioned — this is the arithmetic of constant leverage, and it applies to every leveraged product that has ever existed. A lower multiple decays less; at 1× there is no rebalancing and no decay.

A tracker is not a long-term store of value. The more the underlying chops, the more it costs. If you are holding a bonded coin because you like where the stock is going, that thesis has a clock on it.

Funding and fees

The position lives on Avantis, and the venue charges it three ways. All three are paid out of the position itself — so they show up as drag on the NAV, not as a charge on your swap.

• Funding — a per-pair rate that accrues continuously against whichever side the market is crowded on.
• Rollover — a borrow fee for keeping the position open, accruing over time on the notional.
• Opening and closing fees — in the order of 0.045% to 0.1% of notional per side, set per pair (openFeeP / closeFeeP in the venue's catalogue at https://prod-api.avantisfi.com/data/v2/trading). The keeper pays them whenever it opens, closes or resizes the position, which it does when backing arrives or leaves and when leverage drifts out of band.

At 5×, all of it is levered: a rate that looks negligible on a spot position is five times that against the margin behind a tracker.

What this means for a coin's floor

The backing behind a bonded coin is a leveraged position, and it moves like one. It can be worth much more than the dollars that went in, and it can be worth much less. It is not a stablecoin reserve and nothing here pretends otherwise.

What it is, is real, on a venue you can query, at a size you can read, held by the tracker's own vault. See the hedge book.