Leverage decay (volatility drag) calculator
The hidden toll of daily leverage.
Interactive: leverage decay (volatility drag)Easy
Daily-rebalanced leverage — leveraged tokens, some perp strategies, leveraged ETPs — pays a hidden toll that scales with volatility squared. Crypto volatility makes it brutal.
- Decay per day
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- Decay per year
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- 100 becomes (flat market, 1y)
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- Annualised vol of position
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Drag ≈ ½·L·(L−1)·σ² per rebalancing period — the cost of buying high and selling low every day to hold constant leverage. In a flat but choppy market, the position still bleeds.
The idea behind it
This calculator belongs to Digital Assets, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
Instruments it applies to
- Crypto Spot — Bearer assets on public ledgers — a new asset class still arguing about what it is.
- Perpetual Future — Crypto's native derivative: a future that never expires, tethered to spot by a funding rate.
- Crypto Option — Calls and puts on bitcoin and ether — vanilla mechanics, triple-digit volatility.
- Crypto ETP / ETF — Crypto without the keys: bitcoin and ether wrapped into ordinary brokerage-account securities.
- Stablecoin — A dollar that settles like crypto: the token that pegs itself to fiat and quietly became the plumbing of the entire digital-asset market.
- Staking & Liquid Staking — Earning the blockchain's own interest rate — and the token that made locked collateral liquid, basis risk included.
- Tokenised Treasury — A government bond fund with a blockchain wrapper. The yield comes from the bills; the token contributes settlement speed and a new set of failure points.
- CBDC — Central bank money in digital form, held directly by the public. Not a cryptoasset in any meaningful sense — and potentially the largest change to bank funding in a century.
More calculators from Digital Assets
- Funding-rate carry calculator — what an 0.01%/8h really costs.
- Impermanent loss — the LP's cost versus holding.
- Staking yield after commission, issuance and price — how much of it is real.