Limit of Followers' Equity in a Strategy

Initial Follower's Equity cap

There is a limit to how much total Initial Equity can follow any particular Strategy.

Large Equity volumes following the same trading Strategy bear multiple market risks. The 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 Initial Followers’ Equity and is based on the Grade of a Strategy.

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

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

Examples of Initial Follower's Equity:

Let's consider the following examples of a Grade 4 Strategy capped at 20 BTC:

1. The Strategy has 100 Followers with a total Initial Followers’ Equity 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 Initial Followers’ Equity 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 Initial Followers’ Equity 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 Initial Followers’ Equity 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 Initial Followers’ Equity is 17.1 BTC from 90 active followings:

  • New Followers can follow the Strategy until the Initial Followers’ Equity reaches 20 BTC.

  • A Follower with 2 BTC can now start a new Following, because the Initial Followers’ Equity 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 initial Following Equity 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 initial Following Equity 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 9 available Strategy Grades* based on the amount of Equity locked by a Strategy Manager:

Strategy Grade

Manager's Equity

locked

Initial Follower's Equity cap

1 (default)

0.1 BTC

5 BTC

2

0.5 BTC

7 BTC

3

1 BTC

10 BTC

4

2 BTC

20 BTC

5

3 BTC

30 BTC

6

5 BTC

50 BTC

7

10 BTC

100 BTC

8

20 BTC

200 BTC

9

30 BTC

300 BTC

* Strategy Grades and their corresponding conditions are subject to change

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 Grade 1. This means that:

  • The Manager's Equity is locked at 0.1 BTC;

  • Initial Follower's Equity cap is set at 5 BTC;

If a Manager wants to upgrade a Strategy to increase Initial Follower's Equity cap, they should follow the procedure below.

Currently, changing a Strategy's Grade requires manual processing by the PrimeXBT team (subject to change in future updates).

Upgrading a Strategy

If you're a Manager and you want to increase the Grade of your Strategy, 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 support@help.primexbt.com 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 Initial Follower’s Equity 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 support@help.primexbt.com regarding the desired Grade;

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

  3. If Initial Followers’ Equity exceeds the cap of the newly selected Grade, the locked Equity will remain locked until followers stop their followings and the Initial Follower’s Equity drops to or below the current cap.

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 Initial Follower's Equity is equal to or below the current cap).

Examples of Strategy Grades:

1. A Manager allocates and locks 5 BTC in a Strategy:

  • The Strategy’s Grade is set to 6 and the Initial Follower’s Equity cap is now 50 BTC.

2. The Manager makes a 10% profit. This leads to the Strategy’s Equity increasing from 5 BTC to 5.5 BTC:

  • The Manager withdraws 0.5 BTC. The remaining 5 BTC is locked Equity;

  • Any amount of funds that would decrease the Strategy’s Equity below 5 BTC cannot be withdrawn.

3. At this point, Initial Follower’s Equity is 40 BTC. The Manager now wants to withdraw 3 BTC from the Strategy and requests the Strategy's Grade to be decreased to 6:

  • Initial Followers’ Equity cap is decreased to 20 BTC;

  • Manager's Equity will remain locked at 5 BTC until Initial Followers’ Equity drops below 20 BTC due to Followers stopping their followings;

  • New Followings cannot be started as well for this Strategy until Initial Followers’ Equity drops below 20 BTC;

4. Some followers now decide to close their followings and Initial Follower's Equity drops from 40 BTC to 20 BTC:

  • The Manager is now able to withdraw 3 BTC from the Strategy

  • 2 BTC remains locked in order to maintain Grade 6 for the Strategy.

To change a Strategy's Grade, simply contact our support team via 24/7 live chat or by email at support@help.primexbt.com