Swap one currency with another in one click
Borrow from other users to amplify profits but also losses
Enjoy up to 5X leveraged trading with Gate.io Leveraged ETF Tokens
Complete large transactions quickly
Earn
Earn interest on your idle funds. Principal and return are guaranteed with always over 100% collateral from your counterparties.
A one stop investment center with a variety of products.
Pre-packed products that include assets linked to interest and derivatives
One-click investment, flexible portfolio, redeemable and changeable anytime
Earn regardless of price action
Loan
Language
Exchange Rate Switch
Theme
Start-End Time of the Change
Rise/fall colour
0.00 USD
0.00 USD
Log Out
Leveraged ETF products have advantages in one-sided markets. There are more frictional expenses in two-sided markets. Let's take BTC3L as an example to observe the profitability of leveraged ETF products under different market conditions:*3xBTC refers to conventional 3-time leveraged BTC_USDT perpetual futures
In the "one way up" scenario, leveraged ETF products perform better than conventional 3-time leveraged perpetual futures (3xBTC). Below is how the profit is calculated: On the first day, the price for one BTC rises from $200 to $210, the fluctuation rate is +5%. The NAV (net asset value) of BTC3L becomes $200(1+5%× 3)=$230; On the second day, the price for one BTC rises from $210 to $220, the fluctuation rate is +4.76%. The NAV of BTC3L becomes $230× (1+4.76%× 3)=$262.84; In conclusion, the fluctuation rate in these 2 days is ($262.84 - $200)/$200×100% = 31.4%, which is greater than 30%.
In the "one way down" scenario, the loss incurred from trading leveraged ETF products is less than from futures trading. Below is how the loss is calculated: The price of BTC falls by 5% on the first day. The NAV of BTC3L becomes: $200 (1-5%×3)=$170; The price falls again on the second day and the fluctuation rate is -5.26%. The NAV of BTC3L becomes $170 (1-5.26%×3)=$143.17; The overall fluctuation rate in these 2 days is ($143.17 - $200)/ $200×100%= -28.4%, which is greater than -30%.
If the price of BTC first rises, then falls back to the same level, then leveraged ETF products do not hold any advantages over perpetual futures. On the first day, the price for one BTC rises from $200 to $210, the fluctuation rate is +5%. The NAV of BTC3L becomes $200(1+5%× 3)=$230; On the second day, the price falls from $210 back to $200, the fluctuation rate is -4.76%. The NAV of BTC3L becomes $230(1-4.76%× 3)=$197.16; The overall fluctuation rate in these 2 days is ($197.16 - $200)/ $200× 100%=-1.42%, which is less than 0%.
Same as the scenario described above, if the price first goes down, then goes up to exactly the same level, leveraged ETF products are not an ideal investment. On the first day, the price of BTC falls by 5%. The NAV of BTC3L becomes $200 (1-5%×3)=$170; On the second day, the price rises back from $190 to $200. The fluctuation rate is +5.26%. The NAV of BTC3L becomes $170 (1+5.26%× 3)=$196.83; The overall fluctuation rate in these 2 days is ($196.83- $200)/ $200× 100%=-1.59%, which is less than 0%.
Please be warned:
Leveraged ETF products are financial derivatives with high risks. This article should only be considered a
brief analysis instead of any investment advice. Users must have a thorough understanding of the products
and their risks before trading.
Gate.io reserves the final right to interpret the product.