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 its backing — the equity of its edgeX account, plus the USDC sitting in its vault, plus any USDC on its way between the two — divided by its supply. The keeper computes it, signs it, and posts it on chain, where anyone can read it; 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".

The contracts refuse a stale NAV rather than act on it: if no fresh post has landed for 15 minutes (NAVOracle.maxStaleness, 900 seconds), minting and redeeming that tracker stop until one does. The keeper posts at least every 4 minutes, and sooner when NAV moves by 0.05%. Before a tracker has bonded, its NAV is pinned at exactly 1.0 and the oracle is not read at all.

The markets behind the trackers are listed around the clock on edgeX, so NAV keeps moving on nights and weekends. While the underlying stock market is closed, edgeX lets the mark move only gradually (at most 0.5% every 3 seconds) and only accepts orders inside a band around the last close, so the position can be adjusted less freely — and the price can still jump when the underlying market 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.

The keeper does not rebalance on every tick: it lets leverage drift within a band of 20% around the target (4× to 6× for a 5× tracker) before trading back, which trades less often at the cost of a looser multiple.

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 edgeX, and the venue charges it several ways. All of them are paid out of the tracker's own account — so they show up as drag on the NAV, not as a charge on your swap.

• Funding — settled every 4 hours between longs and shorts on the same market, at the rate edgeX publishes for that market (its public ticker shows the current rate and the next settlement time). When longs pay shorts, a long tracker pays and a short tracker earns; the other way round when the rate is negative.
• Trading fees — the keeper only sends orders that fill immediately, which pay edgeX's taker fee of 0.045% of notional (4.5 bps at the default tier; resting maker orders would pay 0.04%). It trades whenever backing arrives or leaves and whenever leverage drifts out of band.
• Moving money — deposits from Arc carry no edgeX fee, only Arc gas (a few cents of USDC for an approve and a deposit). A withdrawal back to the vault pays the fee edgeX quotes for it (its published settings range from 0 to 1 USDC); its minimum is 2 USDC.
• Liquidation — if an account were liquidated, edgeX charges a 1% liquidation fee on top of the loss. The keeper's job is to de-lever long before that.

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.

The tracker vaults themselves charge nothing today: mint, redeem and management fees are all zero at creation. The vault owner can set them, within hard caps written in the contract (5% on a mint or a redeem, 5% a year of management fee); any change is an on-chain event.

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 with public prices, sized from dollars you can trace on Arc leaving the tracker's vault and coming back to it. See the hedge book.