We’re excited to share that the Bitcoin.com Exchange is listing four new leveraged tokens (BTC3L, BTC3S, ETH3L, ETH3S) by Amun on June 25th, 10:00 UTC. To celebrate the launch of the new Amun 3x Leveraged Tokens, enjoy fee-free trading in the leveraged tokens for a limited time starting on Thursday, June 25th 10:00 UTC ending on Sunday, June 28th, 2020 23:59 UTC. Find more details about the fee-free trading here.
The pairs that we are launching which allow you to enjoy increased leverage without risk of liquidation:
- BTC3L/USDT (Bitcoin 3x Daily Long)
- BTC3S/USDT (Bitcoin 3x Daily Short)
- ETH3L/USDT (Ether 3x Daily Long)
- ETH3S/USDT (Ether 3x Daily Short)
Let’s learn a bit more about leveraged tokens, shall we?
What are leveraged tokens?
Leveraged tokens are innovative ERC20 assets that can give you leveraged exposure to cryptocurrency markets, without having to deal with margin trade, liquidation, collateral, funding rates. With these tokens, you have the chance to take advantage of market volatility without having to risk your market margin!
It should be said that leverage tokens can lose significant value in a sideways market, and are not intended for long term holding. Before exposing yourself to any financial risks, make sure you understand the mechanisms of these tokens.
Since leveraged tokens are on a blockchain, they allow similar functionality as other tokens. Meaning that you can buy, store, and transfer them like any other token.
How do leveraged tokens work?
The BTC3L and ETH3L tokens maintain notional exposure to 3x of the daily returns of Bitcoin/Ether and the BTC3S and ETH3S tokens maintain notional exposure to -3x of the daily returns of Bitcoin and Ether.
For example, for every 1% BTC goes up in a day, BTC3L (Bitcoin 3x Daily Long) goes up 3%; for every 1% BTC goes down, BTC3L goes down 3%.
The inverse of the BTC3L token is the BTC3S token, which represents a 3x short exposure to the price of Bitcoin and the same for ETH3L and ETH3S which represent the price of Ether.
As such, if the price of Bitcoin goes down 1%, the BTC3S token goes up 3%, while if Bitcoin goes up 1%, BTC3S goes down 3%.
Why should you use leveraged tokens?
Leveraged tokens are managing risks and margins at the same time. These ERC20 tokens will automatically reinvest profits into Bitcoin or Ether. If your leveraged token position makes money, the tokens will automatically put on 3x leveraged positions with that.
On the other hand, leveraged tokens will automatically reduce risk if they lose money. If you put on a 3x long BTC position and over the course of a month BTC falls 33%, your position when margin will be liquidated and you will have nothing left.
Although, if you buy BTC3L, the leveraged token will automatically sell off some of its BTC as markets go down, avoiding liquidation so that it still has assets left even after a 33% down move.
Leveraged tokens can provide some peace of mind if a trader doesn’t want to worry about liquidation on positions so stay tuned and get ready to trade these tokens fee-free from Thursday, June 25th, 10:00 AM. Learn more about the fee-free trading here.
Q & A
Why BTC3L has different price on Bitcoin.com Exchange and other exchanges?
It means there’s an arbitrage opportunity. You can buy it on the exchange which is cheaper and then sell on the more expensive exchange.
At what time exactly do they reset back to BTC/ETH’s price?
They don’t “reset” they rebalance at 5 PM CET. This means they adjust their exposure to ensure that they always track 3x or -3x of BTC or ETH’s DAILY returns. For example, if BTC goes up 5% then BTC3L will go up 15% on day 1, but then it will need to be rebalanced as the increase in price would mean the token is overexposed to BTC’s movement.
So if BTC is 100 and it becomes 20 over 7 days. Would BTC3S become 500?
No, it gets complicated over multiple days and the tokens should only be held for a maximum of one day. So if BTC is 100 and goes to 50, that’s a 50% decrease so BTC3S should increase by 150%. Since on the backend, the platform uses perpetual swap futures to maintain 3x daily exposure.
What exactly does rebalancing do though?
The rebalancing changes how much the backend is exposed to perpetual swaps. In order to adjust the exposure of each token. Since if BTC3S increases by 150% and there’s no rebalance it would mean that the token would be more than 3x exposed to BTC’s daily returns on day 2. A bit like how with a compounding bank account the interest is applied to a larger amount each day. If there was no rebalancing then the returns of BTC3L would be exposed to the incorrect amount on day 2.
So could I sell my tokens and buy new ones before 5pm CET when it rebalances? Or would the rebalancing still affect it somehow?
A day is defined by 5 pm CET – 5 pm CET the next day. There are trading strategies you could do where you sell at the end of the day (5 PM) and the buy after the rebalance. The best way to do this is probably through Bitcoin.com Exchange or tokens.amun.com
- This article is not investment advice.
- Users of Bitcoin.com Exchange should trade leveraged tokens at their own risk.