In the past few months, the blockchain industry as a whole was a one-sided upward movement, and users sentiment was overall bullish, which resulted in significant imbalance in the ETFs long-to-shot ratio. As Gate.io ETFs are hedged on perpetual contract markets, the rising funding rate and the increased slippage following increasing ETF volume caused the ETF management fees to rapidly increase. According to the data in the past two months (December 15,2020-February 15,2021), Gate.io users gained a total of 33 million USD from ETFs products, while Gate.io provided over 1.5 million USD to subsidize the hedging cost. The current management fee rate is not sustainable in the existing market trend.
As a result, we will increase daily ETF management fees for long ETFs (for both 3L and 5L) from 0.1% to 0.2%, effective on Feb 18, 0:00 UTC+8. The daily management fees for short ETFs remain the same. Please be aware of the change and adjust your position accordingly. If in the future, the hedging cost rises further, we may adjust the management fees further. In the case the market reverses or the long-to-short ratio is balanced again, we will restore to the original management fees. As always, we will do our best to provide the best products and control their cost in the interest of our users. Thank you for your understanding and continued support.
Moreover, as the ETFs volume and users positions increase, it is hard to find a single time point to rebalance positions for all users as that will result in large slippage. we will optimize the ETF rebalancing rules to control the block trade hedging cost. More details will be announced in the later announcement.
About Leveraged ETF
The leveraged ETF product re-balances to a target leverage if a certain criterion is triggered. When it re-balances, profit will be used to expand the position while the loss will lead to decrease of the position. When trading with ETFs, you do not have to pay a margin. You can simply buy and sell it to enjoy increased exposure like you are trading with leverage. ETF products are managed and hedged in the perpetual contract market. We charge a management fee daily to compensate for the funding payment and trading fee which is incurred at perpetual contract markets. No extra funding fee is charged. By optimizing the fund management, the cost and risks for you to get leveraged exposure are significantly reduced.
Risk Warning
Digital currency prices are susceptible to high volatility, which is even more tangible for the leveraged ETF products. Therefore there is a risk to suffer amplified loss. Please fully understand the product and risks involved before trading. Furthermore, the change of an ETF product is not always about the target times of the underlying asset over a certain time span as the result of scheduled or irregular re-balancing. An ETF product is hedged in a perpetual contract market, the profit will expand the position and the loss will decrease the position, which will incur greater friction in a swinging market. Due to the rebalancing mechanism and the holding cost, the ETF is not suitable for long term holding. It has greater fluctuation and higher risk. Please be cautious. For more details, please read instructions about Leveraged ETFs at our Help Center.
Gate.io is an established exchange that holds integrity, transparency, and fairness to a very high standard. We charge zero listing fees and only choose quality and promising projects. Our exchange consists only of 100% real trading volume. Thanks to everyone who has joined us in our journey. We always intend to improve and innovate to reward our users for their continuous support.
Gate.io Team
February 15, 2021
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