The market is quite volatile right now, and the topics of leverage and stablecoin yields have been pretty hot.

Many people look at @protocol_fx and split it into two parts—one side doing ETH/BTC leverage, the other side doing stablecoin yields.

Looking at it this way isn't wrong, but it's easy to miss what truly determines how big the protocol can become—Long, Short, and the Stability Pool actually share the same pool of liquidity and feed each other.

When Long opens an xPOSITION, the protocol mints fxUSD based on the target leverage, increasing supply. Short uses fxUSD as collateral to borrow wstETH to open a position, putting fxUSD into real trading demand. One is responsible for minting coins, the other for circulating them, and the Stability Pool in the middle catches liquidity when either side needs it.

Users deposit USDC or fxUSD, or enter through fxSAVE, providing a buffer for pegging and the Liquidation Brake. Currently, the Stability Pool is about $52 million, fxSAVE is around $51 million, with APY around 4.7% to 4.8%. These yields come from staking of collateral assets, position fees, and FXN emissions—not fixed interest, and they change with the demand from both sides.

The fxUSD supply is now around $49.8 million, with reserve assets of about $72.2 million, so there's still an overcollateralization safety cushion. When Long demand weakens, new fxUSD issuance slows down; when Short weakens, usage and fees drop. If the Stability Pool sees large-scale withdrawals, peg and rebalancing room shrink.

So I prefer to see f(x) as a two-sided market. TVL, APY, leverage multiples—these are just current snapshots. Whether the three types of capital can continue to provide capacity for each other determines how big this system can eventually grow.

What's more worth watching next is: will leverage demand grow first, or will the real-world use of fxUSD expand first? What do you think?