Downside bet

How to benefit from the downside of an asset with one single transaction

Alice believes that the Bitcoin price will drop from its current level of $37’000. Shorting an asset the traditional way is pretty cumbersome as it involves four steps: 1) borrow BTC, 2) sell it for USD, 3) buy BTC back (at hopefully lower prices), and 4) give back BTC to the lender plus some interest. Alice wants a simple way to participate in the downside of BTC.

Alice could use the DIVA App to create short positions with one of the below example shapes.

Example payoff profiles of short positions on BTC/USD

⚙️ Pool configuration

The example configuration for the above three patterns

Short position on BTC/USD with a linear short position payoff profile

Short position on BTC/USD with a rug short position payoff profile

Short position on BTC/USD with a binary short position payoff profile

🤝Sell long position tokens

After the creation of the pool, Alex would sell the long position tokens and keep the short position tokens.