Papertrade's launch-day open interest ran at 41 to 67 times its pre-deposits

Add the two markets together and Papertrade carried $5.66 billion of open interest on its first day ^[17]. Crypto Briefing put pre-deposits at an estimated $85 million to $138 million ^[6]. Against that, the open interest works out to between 41 and 67 dollars of open position for every dollar sent in before launch ^[18]. Both headline figures are notional. They count the full size of a leveraged bet, not the cash posted against it ^[15]. At the 1,000x ceiling, the whole $5.66 billion would need just $5.66 million of margin ^[19]. Deposits made after the open would pull true average leverage below that 41x-to-67x range, and idle balances would push it above.

Volume ran ahead of positions. The $14.4 billion is about 2.5 times the combined open interest ^[20], and it counts every position opened and closed within seconds ^[15]. The cash came in small amounts. Spread across more than 11,000 addresses ^[6], the pre-deposits average no more than about $7,700 to $12,500 each ^[21].

Papertrade put no capital of its own on the other side of these trades. Its house pool started at zero and grows only as traders lose ^[9]. At 1,000x, a 0.1% move against a position erases its margin ^[26], and the model leans on those losses, or on delayed settlement, to fund payouts ^[10]. Winners are the harder case. A 1% move in favor of one position at the $10 million cap is a $100,000 gain ^[22]. If the $1 billion per-side limit caps the house's net exposure, a 1% move against a full side is $10 million ^[23]. Crypto Briefing reported that combined trader balances and house liquidity are not all available to pay winning trades ^[10].

What Papertrade did build for launch is a token minted from losses. PAPER started with no supply and is created only when traders realize losses. While the pool holds under $2 million it mints 100 tokens per dollar lost, and the rate falls as the pool grows ^[11]. Suppose every lost dollar went into the pool and none went out to winners. Then the first $2 million of losses would mint 200 million PAPER ^[24]. For now the token can only be moved for staking ^[12].

In our view, the $85 million to $138 million is a better measure of what Papertrade holds than the $3 billion of Bitcoin open interest ^[2]. The house can pay winners only as fast as that money is lost ^[9]. The case against us is the leverage itself. Positions at the ceiling are wiped out by 0.1% moves ^[26], so aggregate losses may fill the pool well before winners can drain it. Crypto Briefing's assessment is that the model is fine when traders lose in aggregate ^[14]. Our view would be wrong if a sharp one-way move in Bitcoin or Ether were settled in full and on time, because that would show the house can pay more than its starting balance suggests.