Q: What is a leveraged ETF?
A: Leveraged ETF is a kind of financial derivative that are very popular in traditional financial markets. It is a trading product that tracks the increase/decrease amount of the underlying asset (such as BTC) with certain times (such as 2 times, 3 times, or -1 times, -2 times). If the BTC price increases by 1%, the corresponding 2x and 3x leveraged ETF products will increase by 2% and 3%; while the corresponding -1x and -2x products will fall by -1% and -2%. (Risk warning: if the direction is wrong, there will be a risk that the price will approach zero in extreme conditions)
Q: How does the leveraged ETF product earn benefits?
A: The leveraged ETF product is essentially a fund managed by a professional financial team. Each ETF product corresponds to a certain number of futures positions. The fund manager dynamically adjusts the futures positions to keep a fixed leverage for the product for a certain period of time. A professional team is responsible for the management and maintenance of the investment portfolio, allowing investors to easily build their own constant leveraged investment portfolio without needing to understand the specific mechanism.
Q: What can I use to buy leveraged ETF products?
A: Leveraged ETFs can be purchased by USDT.
Q: The naming rules of leveraged ETF products?
A: BTC3L stands for 3x leverage long for BTC, while BTC3S stands for 3x leverage short for BTC.
Q: There's never forced liquidation, how does it realize? What is a rebalance mechanism?
A: We usually rebalance the investment portfolios behind the leveraged ETF in every 24 h, in order to avoid the enlargement of the gap between portfolio's leverage ratio and the agreed ratio. When there is a sharp fluctuation and the underlying asset’s fluctuation range exceeds a given threshold compared to the previous rebalance point (initially we set the threshold for 3x leverage short and long as 15%. In the future, if other leverages available, the threshold may be adjusted.), we will perform temporary rebalancing to control the risk of the investment portfolio. The rebalancing is only for the party that has lost money in the volatile market. For example, if the BTC rises by 15%, we will rebalance the BTC3S product, and will not adjust other products. (Risk warning: if the direction is wrong, there will be a risk that the price will approach zero in extreme conditions)
Q: What are the similarities and differences between leveraged ETF products and futures contract products?
A: Similar to futures contract products, leveraged ETF products are derivatives with leverage effects, which can amplify investors' returns and become a useful risk hedging tool. However, compared to futures contracts, leveraged ETF products have the following unique characteristics:
- No margin required and no risk of liquidation (risk warning: if the direction is wrong, there will be a risk that the price will approach zero in extreme conditions). For investors who don't have much time to keep an eye on the market, buying leveraged ETF products can save a lot of time and energy.
- Fixed leverage times. For futures holders, as asset prices change, the leverage of contract positions may change, which deviates from the original intention of investors. For example, investors have established a low leveraged short futures position. When asset prices rise sharply, the investor's position leverage ratio will become very high, which deviates from the investor's original risk appetite. The leveraged product leverage ratio is basically constant, which allows investors to better comply with their investment plans.
Q: What are the similarities and differences between leveraged ETF products and leveraged spot trading?
A: Compared with leveraged spot trading, leveraged ETF products also do not require margin, and there is no risk of being liquidated. At the same time, compared to leveraged spot trading funds, the holding rate of leveraged ETF products is lower.
Q: What is the rate of leveraged ETF products?
A: The transaction fee for trading leveraged ETF products at BiKi is 0.15%. At the same time, we will charge a daily management fee (usually the management fee rate is 0.1%, it may be adjusted based on the market performance) each leverage to pay the necessary fees such as the fund rate and transaction fee. The management fee will be reflected in the change in net worth and will only be charged at 00:00 Singapore time. If you do not hold the product at that point in time, no fees will be incurred.
Q: What is unit net worth? What is the difference between unit net worth and price?
A: As a fund product, each unit of leveraged ETF product corresponds to the corresponding share of the fund. The dynamic actual value of this share is the unit net value of the leveraged ETF product. Since the product is actively trading in the secondary trading market, the latest transaction price may deviate from the unit's net value. We also list the unit's net value and the latest transaction price at the same time. I hope investors can realize that the price you buy / sell should not be higher than the unit. There is a large deviation in the net value, otherwise in theory you will suffer a corresponding loss.
Q: What kind of investors are more suitable for leveraged ETF products?
A: As a product that has been tested in traditional financial markets, leveraged ETF products are suitable for most investors. However, this product is particularly suitable for investors who believe that asset prices will trend and investors who do not want to assume the risk of liquidation. Due to the existence of management fees and the inherent characteristics of leveraged ETF products, the product will suffer greater losses under repeated market fluctuations.
Take the three times long on BTC as an example to see more products. If the daily trend of BTC is + 10%, + 10%, + 10%, + 10%, then the 4-day yield of this product is 185%, which is higher than 3 times 44% of the 4th spot income; if the daily trend of BTC is -10%, -10%, -10%, -10%, then the 4-day loss of the product is 76%, which is less than the 4-day spot loss 3 times 35%; if the daily trend of BTC is + 10%, -10%, + 10%, -10%, then the product's 4-day yield is -17%, which is underperforming the 4-day spot yield -3% of 2%.
Q: How to buy leveraged ETF products?
A: Currently, leveraged ETF product trading pairs are located in the innovation zone. You can easily buy related products in the innovation zone just like other digital assets.
Q: How to calculate the rise and fall?
A: Please check the picture below.
Disclaimer: Leveraged ETFs are emerging financial derivatives. The above does not constitute investment advice. Please pay attention to risk control. Leveraged ETFs greatly reduce the risk of strong liquidation, but in extreme conditions, there will be risks of approaching zeroing and liquidation. Please pay attention to the difference between net value and price to avoid suffering losses.