Liquidity Management for Synthetic Stocks
The Fedz issues two synthetic stock tokens:
FTSLA — long exposure to TSLA
sFTSLA — inverse (short) exposure to TSLA
Both tokens trade against FUSD inside their own liquidity pools:
FTSLA–FUSD Pool
sFTSLA–FUSD Pool
Because The Fedz is both the issuer and the primary liquidity provider, we have a unique ability—and responsibility—to manage systemic exposure without distorting fair prices or introducing hidden mechanics.
This section explains how we use AMM liquidity as a soft, transparent stability tool across both the long and short synthetic markets.
1. FTSLA: A Synthetic Asset With Long-Term Exposure
FTSLA tracks the real-world price of TSLA. At the moment FTSLA is minted, The Fedz effectively takes the other side of that exposure. If TSLA rises over time, FTSLA holders gain value.
This gain represents outstanding long-term debt—a liability for the protocol that increases as TSLA appreciates. It is not an immediate loss. But it is a risk that accumulates over time.
If the ecosystem becomes long-heavy (too many FTSLA outstanding), and TSLA trends upward, the protocol absorbs a growing unrealized liability. That is the core structural exposure of issuing long synthetic assets.
We cannot eliminate this, but we can manage it using liquidity.
2. Using Liquidity to Guide Exposure
Prices are always correct. FTSLA always tracks TSLA. We never manipulate these formulas.
What we can adjust is the shape of liquidity around those prices.
Since The Fedz contributes most of the liquidity to the FTSLA–FUSD pool, we can subtly control:
depth near the active price
how easy it is to take large long positions
how quickly long exposure grows
how much slippage forms when large trades occur
This is the safest and most transparent way to guide the system back toward balanced exposure without interfering with fair pricing.
3. Why sFTSLA Exists: Completing the Exposure Picture
To avoid remaining permanently long TSLA as a protocol, we issue sFTSLA, which tracks the inverse return of TSLA.
sFTSLA does not eliminate long exposure by itself—but it gives the ecosystem the option to generate offsetting short exposure. When traders mint or buy sFTSLA, the system naturally gains the opposite risk of FTSLA.
This lets The Fedz approach delta neutrality:
As FTSLA exposure grows, sFTSLA exposure can offset it. As sFTSLA exposure grows, FTSLA offsets it.
But demand rarely balances itself perfectly. That is why liquidity becomes the coordinating mechanism.
4. Coordinated Liquidity: Managing FTSLA and sFTSLA Together
We track a simple imbalance measure between long and short exposure. Depending on which side dominates, we adjust the liquidity in each pool:
A. When the system is long-heavy
Too much FTSLA outstanding → growing long-term TSLA liability.
We adjust:
FTSLA–FUSD pool → becomes shallower Large long trades experience more slippage. New long exposure grows more slowly.
sFTSLA–FUSD pool → becomes deeper Short exposure becomes easier to take. Market naturally shifts toward balance.
B. When the system is short-heavy
Too much sFTSLA outstanding → growing inverse TSLA liability.
We adjust:
sFTSLA–FUSD pool → becomes shallower Excessive short exposure slows down.
FTSLA–FUSD pool → becomes deeper Long exposure is gently encouraged.
C. When the system is balanced
Both pools operate with normal, concentrated liquidity. Trading is efficient and symmetric. Exposure remains healthy.
5. What We Never Touch
To maintain long-term trust and predictability:
We never adjust token formulas
We never change prices artificially
We never impose hidden fees
We never block trades or restrict users
All liquidity changes are on-chain and transparent
Liquidity is the only intervention layer.
6. Why This Works
Liquidity management creates a soft, market-driven feedback loop:
When exposure becomes dangerous, the pool becomes shallower.
When exposure needs support, the pool deepens.
When everything is balanced, we step back.
Users always trade at the correct price. What shifts is how the market absorbs size— a gentle, permissionless incentive that nudges the system toward stability.
This is the decentralized equivalent of open-market operations: steering liquidity rather than intervening in price.
7. Our Priorities
We do not chase short-term performance. We do not optimize for maximum trading volume. We do not guess the market’s direction.
We prioritize long-term stability over short-term outcomes.
This means:
Fair, formula-based prices that users can rely on
Transparent liquidity adjustments that protect solvency
A balanced ecosystem where long and short exposures coexist responsibly
Sustainable growth of the synthetic marketplace
Liquidity management lets us uphold these priorities without sacrificing open access or market fairness.
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