What is a Leveraged Token?

Leveraged tokens are a type of token with built-in leverage, allowing users to achieve higher returns with a smaller amount of capital. Each leveraged token represents a series of perpetual contract positions of an underlying asset (e.g., BTC, ETH) with a fixed leverage ratio (such as 3x). For example, if the underlying asset is BTC and the BTC price rises by 1%, the 3x leveraged product’s net asset value (NAV) will increase by 3%, while the -3x product’s NAV will decrease by 3%.

Leveraged tokens are perpetual products with no expiry date, and their price will never reach zero, eliminating the risk of liquidation. Investors can subscribe or redeem tokens in the primary market, or buy and sell them at any time in the secondary market without needing to pay any margin to achieve leveraged trading.

In short, leveraged tokens help you capitalize on significant market fluctuations with a small investment.

What is Net Asset Value (NAV)?

NAV refers to the value of the leveraged token, which fluctuates with the price movements in the Perpetual Contract Market.

Advantages of Leveraged Tokens:

Built-in leverage for amplified returns: Through the internal leverage effect, users can achieve higher returns with less capital.
No liquidation risk: Despite the leverage feature, leveraged tokens are spot products. No matter how the price of the underlying asset moves, liquidation will never occur.
Efficient capital utilization: No need for margin or borrowing—leveraged trading made easy.
Fast and convenient trading: Buying leveraged tokens is as simple as spot market trading. Users can buy or sell in the secondary market based on price conditions or subscribe/redeem in the primary market. However, this method is not recommended for novice traders.

How to Trade Leveraged Tokens:

Log in to your Coincall account: Ensure you have sufficient funds to purchase leveraged tokens.
Choose your token: On the trading page, find the leveraged token you want to trade (e.g., BTC3L, ETH3S).
- L stands for Long, S stands for Short.
Execute the trade: Enter the purchase amount and confirm the order to complete the trade.
Manage your position: You can track the real-time performance of your leveraged tokens and buy or sell according to market conditions.

Leveraged Token Terminology:

Example: BTC3L and BTC3S.

BTC3L refers to a leveraged token holding a 3x long position in BTCUSDT perpetual contracts. For every 1% increase in BTCUSDT price, BTC3L’s NAV increases by 3%.
BTC3S refers to a leveraged token holding a 3x short position in BTCUSDT perpetual contracts. For every 1% decrease in BTCUSDT price, BTC3S’s NAV increases by 3%.

What is the Rebalancing Mechanism?

Rebalancing adjusts the contract positions behind the leveraged tokens to maintain the leverage ratio.

What are the fees involved with Leveraged Tokens?

Leveraged token transactions involve two types of fees: transaction fees and management fees.

Trading fee: A fee is charged when buying or selling leveraged tokens in the spot market, with the fee structure the same as spot trading.
- Trading fee = Order amount × Spot trading fee rate
- Spot trading fee rate: 0.1%
Management fee: A 0.1% management fee is charged three times a day at 00:00 (UTC+8), 08:00 (UTC+8), and 16:00 (UTC+8), directly reflected in the NAV.

Who are Leveraged Tokens suitable for?

As a widely used product in the traditional financial market, Leveraged Tokens are suitable for most investors. However, they’re designed for investors who believe that the market will move in a one-sided, or those who want to avoid the risk of liquidation. Due to management fees and other features of Leveraged Token products, investors may suffer losses when facing market volatility.

Please make sure to fully understand the product mechanism before using leveraged tokens and make investment decisions based on your risk tolerance.