Bluefin
  • Bluefin Exchange
    • Introduction
    • Roadmap
    • Getting Started
      • Onboarding
      • Depositing & Set Up
      • Tutorials
      • Perpetual Swaps
    • Trading
      • Order Types
        • TP/SL Orders
      • Orderbook Design
      • Isolated Margining
      • PnL Calculation
      • Oracle and Index Price
      • Risk Engine
        • Liquidation Process
        • Insurance Fund
        • ADL
      • Funding
      • Trading Fees
      • Gas Fees
      • Contract Specs
    • Perps API Docs
    • Pre-Launch Markets
  • Bluefin Spot CLMM
    • Introduction
    • Getting Started
    • Protocol Features
      • Swap
        • Limit Orders
      • Liquidity Pools
    • BluefinX
    • Tutorials
      • Exploring the Pools
      • Adding Liquidity (Creating a Position)
      • Managing a Position and Claiming Fees/Rewards
      • Auto-Rebalancing
      • Swapping
      • Placing Limit Orders
      • Switching from Spot to Perps Account
    • Spot API Docs
    • FAQs
  • Lending on Bluefin
    • Introduction
    • Protocol Features
    • Tutorials
      • Supply and Borrow Assets
  • Bluefin Airdrop
    • Bluefin Airdrop Explained
    • Bluefin Foundation Statement
    • Claiming and Rewards Post-TGE
    • FAQs
  • Users
    • Rewards
      • Trading Rewards
      • Bluefin Vaults
      • Leagues
      • Sui Wallet on Mobile Giveaway
      • Sui Wallet Campaign
        • List of Winners
      • Walrus Campaigns
        • Walrus LP & Trading Competition
        • Walrus Trade & Earn Campaign
  • Other
    • BLUE Token
    • On-Ramping directly to Bluefin
    • Security
      • Code Audits
      • Spot Audits
    • Governance
      • Bluefin DAO
    • Bluefin Vanguard Ambassador Program
    • Terms of Use and Privacy Policy
      • Vulnerability Disclosure Policy
      • Wash Trading
      • Address Screening
      • Risk Information
    • FAQs
      • USD vs USDC
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On this page
  • Understanding USDC
  • How Bluefin Uses USDC
  • Impact of USDC Depeg on Bluefin
  • Example Scenario
  • Price Divergence and Funding Rates
  1. Other
  2. FAQs

USD vs USDC

Bluefin uses USDCeth or wUSDC (bridged USDC from Ethereum using Wormhole) as the primary collateral for the positions on the exchange. This article explains the relationship between USD-denominated instruments and wUSDC margin on Bluefin and how the risk engine functions in the event of a USDC depeg from USD. Throughout the article, USDC is assumed to mean wUSDC.

Understanding USDC

USDC is a fully collateralized stablecoin managed by Circle, a US-based company. Circle accepts USD and mints USDC in exchange at a 1:1 ratio. USDC has maintained a stable price around $1 since its inception, but it is essential to understand how Bluefin would function if the USDC price were to diverge from $1.

How Bluefin Uses USDC

Collateral on Bluefin is held as USDC, and the notional value of positions is measured in USDC. When users set their order size, the notional value of their position is calculated as (asset order size) * (asset price in USD) in units of USDC. Bluefin does not have price feeds for USDC and does not track the USDC price in USD by design.

Impact of USDC Depeg on Bluefin

In the event of a USDC depeg from USD, Bluefin will continue to function as normal. However, all user positions, collateral, funding payments, and the insurance fund will be worth less in USD, proportional to the change in the USDC-USD price. Leverage and liquidation status will not change due to USDC-USD price changes.

Example Scenario

Consider a user opening a position with an order size of 1 BTC when the price of BTC in USD is 10,000. The starting notional value of the position is 10,000 USDC. If the price of USDC falls to 0.5 USD, the position in USDC remains 1 * 10,000 USDC, but the notional value of the position in USD drops to 5,000 USD.

If the user had opened the position using 2x leverage (using 5,000 USDC as collateral), when the price of USDC in USD falls to 0.5, the value of the collateral in USD falls to 2,500 USD, and the notional value of the position in USD falls to 5,000 USD. The user remains 2x leveraged in USD and USDC terms, as USDC-USD price changes do not affect user leverage or liquidation status.

Price Divergence and Funding Rates

Bluefin uses USD price feeds as oracles, ensuring that funding rates push markets back toward USD prices. There is no fundamental reason for prices to diverge significantly, as Bluefin's perpetual market is based on the asset/USD price, with positions margined and sized in USDC.

In the event of a USDC depeg, funding rates will continue to be paid as usual, calculated based on the notional size of open positions (measured in either USD or USDC) and proportional to the divergence between the perpetual price and the oracle price.

PreviousFAQs

Last updated 5 months ago