Limit of Followers' Equity in a Strategy

Individual Limit on the Following Equity in a Strategy

There is a limit on how much Initial Equity a Follower may have in one Strategy.

Currently, one Follower may allocate up to 0.1 BTC of initial capital to any separate Strategy. It can be one Following of 0.1 BTC as well as multiple Followings of the same Strategy, not exceeding 0.1 BTC in total.

There is no limit on how many different Strategies a Covesting user can follow with a maximum of 0.1 BTC for each separate Strategy.

The Individual Limit is intended to reduce exposure of Covesting users to specific Strategies, thus minimizing overall risks by diversifying their Portfolio. At the same time, it opens an opportunity for more Followers to join successful Strategies and benefit from their performance, by preventing such Strategies from being completely occupied by a few large Followers leaving no room for other Covesting users to join.

Max IFE (initial followers' equity cap)

One of the key characteristics of a Strategy is its Followers Equity and Initial Follower’s Equity (IFE). Followers’ Equity is the current total value of all active followings of the Strategy, before profit distribution.

IFE (Initial Followers’ Equity) is the total initial amount of all active followings of the Strategy. There is a limit to how much total IFE can follow any particular Strategy. Let's take a more detailed look at IFE and how it works.

Large Equity volumes following the same trading Strategy bear multiple market risks. The IFE cap (initial followers' equity cap) is intended to address them:

  • Reduce risks of market volatility and drastic price changes induced by larger trading volumes;

  • Limit possible losses in Strategies whose managers do not implement proper risk and money management;

  • Encourage Covesting users to diversify their portfolios and risks.

The cap is imposed on total IFE and is based on the Grade of a Strategy.

The Followers' Equity cap means that if current IFE of a Strategy is equal to or exceeds the cap, no new Followings can be started for that Strategy.

If total IFE falls below the cap due to followers stopping their followings of the Strategy, new followers can then begin following that Strategy until the IFE reaches the cap.

📝 Examples of IFE:

Let's consider the following examples of a Grade 5 Strategy capped at 20 BTC:

1. The Strategy has 100 Followers with a total IFE of 19 BTC:

  • A Follower with 1 BTC can start a new Following of the Strategy;

  • A Follower with 2 BTC cannot start a new Following, because IFE would exceed 20 BTC if they started the following.

2. The Manager made a 20% profit in the Strategy. This led to a Followers’ Equity increase from 19 to 22.8 BTC. However, the IFE is still 19 BTC, because Followers didn’t stop or start new Followings:

  • The Followings that started before this will continue following the Strategy. A Follower can stop their following at any time;

  • A Follower with 1 BTC can still start a new Following of the Strategy;

  • A Follower with 2 BTC cannot start a new Following, because IFE would exceed 20 BTC if they started the following.

3. Some Followers decided to book their profits and stopped following the Strategy.

A total Equity of 2.28 BTC in 10 followings was stopped, the profits and success fees were distributed to the Followers, the Manager, and the platform. The remaining current Followers’ Equity is now 20.52 BTC and the remaining IFE is 17.1 BTC from 90 active followings:

  • New Followers can follow the Strategy until the IFE reaches 20 BTC.

  • A Follower with 2 BTC can now start a new Following, because the IFE would then be 19.1 BTC and would not exceed 20 BTC if they started the following.

Strategy Grades

Strategy Grades reflect a Strategy's current IFE cap, based on the amount of personal Equity locked in a Strategy by the Manager. In essence – the more personal capital a Manager has at stake in their Strategy, the higher their IFE cap will be.

Strategy grading is intended to ensure that Managers exercise caution and responsibility towards Following Equity. It prevents the appearance of a huge gap between a Manager's own capital in a Strategy and the Followers' Equity. It makes it impossible for Managers to have hundreds of thousands of dollars in Followers' Equity while risking only a few hundred dollars of their own capital.

There are 11 available Strategy Grades* based on the amount of Equity locked by a Strategy Manager:

Strategy Grade

Initial Follower's Equity (IFE) cap

Manager's Equity

locked**

Default ('0')

0.2 BTC

5 ETH

10,000 USDT/USDC

0.01 BTC

0.25 ETH

500 USDT/USDC

1

1 BTC

25 ETH

50,000 USDT/USDC

0.05 BTC

1.25 ETH

2,500 USDT/USDC

2

3 BTC

75 ETH

150,000 USDT/USDC

0.1 BTC

2.5 ETH

5,000 USDT/USDC

3

7 BTC

175 ETH

350,000 USDT/USDC

0.3 BTC

7.5 ETH

15,000 USDT/USDC

4

15 BTC

375 ETH

750,000 USDT/USDC

0.5 BTC

12.5 ETH

25,000 USDT/USDC

5

20 BTC

500 ETH

1,000,000 USDT/USDC

1 BTC

25 ETH

50,000 USDT/USDC

6

40 BTC

1,000 ETH

2,000,000 USDT/USDC

2 BTC

50 ETH

100,000 USDT/USDC

7

60 BTC

1,500 ETH

3,000,000 USDT/USDC

3 BTC

75 ETH

150,000 USDT/USDC

8

80 BTC

2,000 ETH

4,000,000 USDT/USDC

5 BTC

125 ETH

250,000 USDT/USDC

9

110 BTC

2,750 ETH

5,500,000 USDT/USDC

10 BTC

250 ETH

500,000 USDT/USDC

10

230 BTC

5,750 ETH

11,500,000 USDT/USDC

20 BTC

500 ETH

1,000,000 USDT/USDC

11

320 BTC

8,000 ETH

16,000,000 USDT/USDC

30 BTC

750 ETH

1,500,000 USDT/USDC

* Strategy Grades and their corresponding conditions are subject to change. ** Manager's Equity may be locked at a higher withdrawal limit if the current Followers' Equity exceeds a certain amount.

PrimeXBT reserves the right to request a manager to pass additional verification, including but not limited to a KYC check and providing proofs of relevant experience for assessment, prior to changing a Strategy's Grade/Equity limits.

🏁 Initial Grade of a Strategy

Upon creation of a Strategy, it is assigned Default ('0') Grade. This means that for a Strategy in a respective currency:

  • The Manager's Equity is locked at 0.01 BTC / 0.25 ETH / 500 USDT / 500 USDC;

  • IFE is set at 0.2 BTC / 5 ETH / 10,000 USDT / 10,000 USDC respectively, depending on the Strategy's currency;

A Strategy's grade will be automatically upgraded to Grades 1, 2, 3 and 4 should the Manager's Equity reach the corresponding amounts (see table above).

Changing a Strategy's Grade to 5 or higher requires manual processing by the PrimeXBT team (subject to change in future updates). If a Manager wants to upgrade a Strategy to Grade 5 or higher to increase IFE cap accordingly, they should follow the procedure below.

🔒 Manager’s Equity Locked in a Strategy

In order to align the interests of Followers and Strategy Managers in the best possible way, an additional restriction on Manager’s Equity is applied in relation to the total Followers’ Equity in a Strategy:

  • If the current Followers’ Equity in a Strategy increases due to the Strategy’s performance and exceeds the IFE cap corresponding to a higher Strategy grade, the amount of Manager’s Equity in a Strategy will be automatically locked at a higher Grade withdrawal limit.

  • However, the Strategy’s Grade does not increase automatically. This means that the IFE will remain limited to the original Strategy’s grade unless a Manager upgrades their Strategy. To extend the IFE cap, a Manager should contact our support team via live chat or email [email protected] and request a Strategy upgrade.

  • If the Followers’ Equity decreases below the new cap afterwards, the newly imposed restriction on the Manager’s Equity withdrawals will not be reduced and will remain in place. To release the Manager's Equity locked in a Strategy, a Manager should follow the Strategy downgrade procedure.

Strategy upgrades to Grades 1, 2, 3 and 4 are performed automatically should the Manager's Equity reach the corresponding amounts (see table above), and do not require manual processing. Decreasing a Strategy's grade always requires manual processing, regardless of the current Grade of the Strategy.

The restriction on Manager's withdrawals is intended to motivate Managers of successful Strategies to upgrade their Strategies, pass an account verification (KYC) procedure, apply proper risk management techniques, and prevent the appearance of a huge gap between a Manager's own capital in a Strategy and the Followers' Equity.

The currently locked Equity in a Strategy is reflected on the Manage Strategy page:

⬆️ Upgrading a Strategy to Grade 5 or higher

A Strategy is automatically upgraded to Grades 1, 2, 3 and 4. If you're a Manager and you want to increase the Grade of your Strategy to level 5 or higher, the corresponding amount of the Manager’s Equity must first be locked in the Strategy. To do this:

  1. Ensure that the Manager's Equity of the Strategy is sufficient for the new Grade (see the table above). Deposit additional funds if necessary;

  2. Contact our support team via live chat or email [email protected] regarding the desired Grade and amount of Equity that you wish to lock in your Strategy;

  3. After the Equity has been locked in your Strategy, you will receive a Strategy Grade and the IFE cap for your Strategy will increase accordingly.

⬇️ Downgrading a Strategy

If you're a manager and want to decrease the Grade of your Strategy (downgrade) to partially unlock the Manager's Equity for withdrawals:

  1. Contact our support team via live chat or email [email protected] regarding the desired Grade;

  2. After the Strategy’s Grade has been lowered, your IFE cap will decrease accordingly;

  3. If IFE or current Followers’ Equity exceed the cap of the newly selected Grade, the locked Equity will remain locked until both the IFE and current Followers' Equity drop to or below the current cap.

  4. As soon as both IFE and current Followers’ Equity drop to or below the cap in the respective grade, the Manager's Equity will be unlocked for withdrawals.

  5. To downgrade a Strategy to Grade 3 or lower, you will need to additionally specify the amount of Manager's Equity that you want withdrawn - the requested amount will then be withdrawn from your Strategy to your Wallet and the Strategy's Grade will be decreased. (This additional step is required in order to prevent a Strategy from automatically upgrading to Grades 1, 2, 3 or 4 in case of sufficient Manager's Equity)

Locked Equity cannot be immediately withdrawn. It can be withdrawn only after the Strategy's Grade has been decreased and the locked Equity has been unlocked (i.e. when current Followers' Equity and IFE are equal to or below the current cap).

📝 Examples of Strategy Grades:

1. A Manager allocates and locks 3 BTC in a Strategy:

  • The Strategy’s Grade is set to 7 and the IFE cap is now 60 BTC.

2. The Manager makes a 10% profit afterwards, and the Manager's Equity increases from 3 BTC to 3.3 BTC:

  • The Manager withdraws 0.3 BTC. The remaining 3 BTC is locked Equity;

  • Any amount of funds that would decrease the Strategy’s Equity below 3 BTC cannot be withdrawn.

3. At this point, IFE is 40 BTC. The Manager now wants to withdraw 2 BTC from the Strategy and requests the Strategy's Grade to be decreased to 5:

  • IFE cap is decreased to 20 BTC;

  • Manager's Equity will remain locked at 3 BTC until both IFE and current Followers' Equity drop below 20 BTC due to Followers stopping their followings;

  • New Followings cannot be started as well for this Strategy until IFE drops below 20 BTC;

4. Some followers now decide to close their followings and both IFE and current Followers' Equity drop below 20 BTC:

  • The Manager is now able to withdraw 2 BTC from the Strategy

  • 1 BTC remains locked in order to maintain Grade 5 for the Strategy.

📝 Examples of Manager's Equity Lock:

A Manager starts a Grade 2 Strategy, putting in and locking 0.1 BTC of their own funds, with the IFE capped at 3 BTC.

1. If the Followers' Equity increases to 7 BTC due to the Strategy's performance:

  • The Manager's Equity lock will be automatically elevated to 0.3 BTC;

  • The Strategy will remain at Grade 2 - unless the Manager increases their own Equity in the Strategy to 0.3 BTC or more, in which case the Strategy will be automatically upgraded to Grade 3;

  • IFE cap remains at 3 BTC: new followings cannot be started unless the Strategy is upgraded.

2. If the Followers' Equity decreases back to 3 BTC afterwards due to the Strategy's performance:

  • The Manager's Equity lock will remain at 0.3 BTC;

  • If the Manager would like to unlock their Equity, they should contact the support team with a request. The Manager's Equity will be unlocked if both IFE and current Followers' Equity are 3 BTC or less as required by Grade 2.

To change a Strategy's Grade, simply contact our support team via 24/7 live chat or by email at [email protected]