Crypto is largely a one dimensional market which leads to extreme unidirectional outlier risk which can cause systemic collapses. These collapses are amplified by hyper-correlated pricing moves of sectors that do not inherently overlap. This leads to broad market stagnation and promotes both cyclical and prolonged periods of one directional markets, which are a barrier to both broader adoption and innovation throughout financial instruments.

Ethereal’s 50+ synthetic portfolio theory assets (SPTA) allow capital to be deployed in a manner that does not require price appreciation or depreciation of an underlying asset. By allowing both long and short positions on volume changes, capital inflows/outflows, changes in broad market volatility, and more, we allow extended capital utilization that does not over leverage a particular market direction. As such, SPTAs allow for sophisticated hedges on traditional crypto portfolios.

Our on-demand option chains allow for multi-legged, multi-expiry, and multi-type positions to be established to offer a true full scale derivative experience. Our option pricing model also removes the double extrinsic value traditional pricing models derive, which allows for higher notional value to be commanded by a given contract, which in itself allows for cross protocol arbitrage opportunities. These two principles allow for protocols to effectively hedge themselves with their broader investor community, while providing new ways to generate yields. This system will help prevent systemic collapses due to over-leverage and decouple the hyper intra-market class correlations that allow for extreme volatility events to occur. This effectively implements two dimensional trading to all areas of crypto, which helps bolster liquidity during volatile times at a market level and over time will help dampen the frequency of these events.