Definition of Leverage Token
Leveraged tokens, 3BBULL and 3BBEAR are ERC20 tokens. Represents a digital asset with a leveraged position, and the corresponding income is 3 times or -3 times the income of Bitcoin.
Unlike traditional leveraged transactions, users do not need to pay any margin when trading leveraged tokens, and they can achieve the purpose of trading leverage through simple trading.
It mainly involves two concepts: net worth and bottom position. For example, for a 3BBULL (3x long BTC leveraged token) valued at $ 100, the bottom holding is a BTC perpetual contract position worth $ 300. $ 100 is the net value (NAV) of this 3BBULL, and the perpetual contract of BTC worth $ 300 is the bottom position of this 3BBULL.
Among them, the supply and demand relationship in the secondary market affects the currency price. In theory, the currency price will be anchored in the net value of the token. For example, take 3BBULL tokens as an example. Every time BTC rises 1%, 3BBULL rises 3%, and every BTC declines 1%, 3BBULL falls 3%.
What is the underlying asset?
From the name of the leveraged tokens, we can see the currency that the underlying asset refers to. For example: 3BBULL and 3BBEAR ’s underlying asset is BTC.
How can leveraged Tokens expand earnings?
Leverage ETF products expand the gains and losses through leverage to expand earnings. For example, after adjusting positions, BTC increased by 5%, BTC tripled the net value of 3BBULL and rose 15%, and BTC tripled the net value of 3BBEAR and the net value decreased by 15%.
What is the difference between leveraged ETF products and perpetual contracts?
- No margin required, no risk of liquidation.
- Fixed leverage multiples: The actual leverage multiples in perpetual contracts will change as the position value fluctuates. The leveraged ETF products can be adjusted daily at a time, and the leverage ratio can basically be fixed at 3 times.
Why don't ETF products burst?
Fund managers will dynamically adjust futures positions so that leveraged ETF products can maintain a fixed leverage multiple for a certain period of time. Leveraged ETF products will automatically increase positions after adjusting positions when they are profitable. When a loss occurs, the position will be automatically reduced after the adjustment of the position, thereby avoiding the risk of being liquidated.
When is the rebalancing time?
The ETF leveraged tokens 3BBULL and 3BBEAR managed by BEE NETWORK FOUNDATION will be rebalanced daily at UTC00: 00 (Hong Kong time 08:00).
Why charge management fees?
Leveraged ETF products need to hedge risks in perpetual contracts, which is inherently costly. The 0.3% daily management fee of the leveraged ETF product already includes all costs, including contract market handling fees and capital rates, as well as the loss of opening position differences.
About Temporary Rebalance
In the event of a big ups and downs, in order to prevent the underlying contract from hedging and bursting, the ETF leverage token will trigger a temporary rebalance adjustment mechanism. The system will use the price fluctuation of 15% compared to the previous adjustment point as the temporary adjustment threshold. The temporary rebalancing is only for the party that has suffered a loss due to this fluctuation, that is, if BTC rises by 15%, we will rebalance the ETF leveraged token at -3 times, and will not adjust other products. Please note that if the market trend continues after triggering irregular rebalancing, the user's loss will become smaller, but if the market trend reverses immediately after the trigger, the speed of the product's rebound will also be weakened due to the rebalancing of the position.
- None of the above descriptions constitute investment advice. Leverage tokens are highly volatile and are high-risk products. Before trading, you need to thoroughly read the product information and understand the basic working principle of the product. The product may bring substantial gains or losses within a single day.
- Leverage tokens greatly reduce the risk of liquidation of liquidation, but cannot be completely avoided; please pay attention to the difference between net value and price to avoid losses.