# 2. Amplified Gains and Softened Losses

<figure><img src="https://2233563400-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F4QVUTXNT2DoXwFJ1BBcp%2Fuploads%2FYQrADpgadN8o9lE6JxnK%2Fopt%202.png?alt=media&#x26;token=9627d516-94df-433c-a393-2a5aec2deed6" alt=""><figcaption></figcaption></figure>

Power perpetuals exhibit positive convexity, meaning favourable price movements yield greater positive returns compared to the absolute negative returns from equally sized unfavourable moves.&#x20;

For example, let’s compare the risk-return profile of 5x leverage with BTC⁵, a power derivative on Genie DEX:&#x20;

Refer to the SquaredLabs [whitepaper](https://frontend-web-resources.s3.amazonaws.com/SquaredLabs+-+Whitepaper+v1.0.pdf) on calculating the return on power derivatives.

### Scenario 1: The Price of BTC Increases by 20% <a href="#b04c" id="b04c"></a>

* **5x Leverage**: 100% profit
* **BTC⁵**: approx. 148% profit

<figure><img src="https://2233563400-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F4QVUTXNT2DoXwFJ1BBcp%2Fuploads%2FHfkvpFbksXyYeYcgXuV0%2FPOSITIVE.png?alt=media&#x26;token=aee13deb-cc4c-4b63-bb82-418d2a2ec6e3" alt=""><figcaption><p>The price of BTC increases by 20%</p></figcaption></figure>

### Scenario 2: The Price of BTC Decreases by 20% <a href="#id-62ca" id="id-62ca"></a>

* **5x Leverage**: 100% loss (leading to liquidation)
* **BTC⁵**: approx. 67% loss

<figure><img src="https://2233563400-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F4QVUTXNT2DoXwFJ1BBcp%2Fuploads%2FfL7psGIZahIMS7xr7dXC%2FNWGATIVE.png?alt=media&#x26;token=44c17801-ee30-48b5-ada1-852a4771c1c9" alt=""><figcaption><p>The price of BTC decreases by 20%</p></figcaption></figure>

In conclusion:

* a 20% increase in the underlying asset price (BTC) results in a 148% return
* a 20% decrease in the underlying asset price (BTC) results in a 67% loss

Read this [article](https://medium.com/squaredlab/amplified-gains-and-softened-losses-the-power-of-positive-convexity-bb7de202fa7a) and our [whitepaper](https://frontend-web-resources.s3.amazonaws.com/SquaredLabs+-+Whitepaper+v1.0.pdf) to understand how amplified gains and softened losses compare to traditional leverage.