“I have two crypto accounts, one for long-term investment, the other for short-term. The long-term one is for value investment and the short-term one is for fun,” said one of the famous investment expert in China.
Admittedly when you do short-term trading, more dopamine will secrete given the large volatility of the price, and dopamine is a kind of chemical that makes people feel happy. As a result, people are easy to fell into the trading fanatic. Leveraged ETF is the kind of product that designed to meet the demand of higher-risk-and-higher-return investors.
A few days ago, MXC Exchange launched a leveraged ETF product – the 3x leverage Exchange Traded Fund (ETF) for BTC, ETH and EOS where both long and short are available, and there will never be forced liquidation. When discussing this product with crypto investors, they say “this is a product that will help users magnify their returns.”
According to stats, most retail crypto investors have only small positions on major currencies in their investment portfolios in that major currencies are typically less volatile than altcoins. Instead, some small projects with high potentials are more popular among retail investors because their price are more volatile which attracts people to gamble. However, such issues as small circulating amount, poor underlying technologies and market manipulation are the inherent disadvantages of some small projects. It may cause great loss for the investors. Leveraged ETF, nevertheless, solved the problem.
Leveraged ETF is a financial derivative that enable users to leverage the price variation of major currencies with certain times, so it not only meets users’ demand of large volatility, but improves the use rate of their assets. Furthermore, if users are sure about the market trend in the near future, both long and short products are available for them.
Some users may have already had some knowledge about leveraged ETF and knew how to use them. But I believe most investors are not quite understand what is leveraged ETF, and some even have never heard of it. Here we will take leveraged ETF on MXC Exchange as an example to explain what is it and how to use it.
Now leveraged ETF on MXC Exchange supports the following products:
BTC3L/USDT, BTC3S/USDT, ETH3L/USDT, ETH3S/USDT, EOS3L/USDT, EOS3S/USDT, XTZ3L/USDT, XTZ3S/USDT, ATOM3L/USDT, ATOM3S/USDT
BTC3L refers to 3-times buy (long) of BTC. The “L” here stand for “Long”. In the same sense, BTC3S refers to 3-times sell (short) of BTC. The “S” here stands for “Short”.
For example, if a user have bought BTC3L product, and the price of BTC (the underlying asset of BTC3L) now increases by 10%, then the leverage ETF product – BTC3L will correspondingly rise by 30%. On the contrary, if BTC falls by 10%, the BTC3L will also decreased by 30%.
With the example above, it is easy to understand the leveraged ETF product – BTC3S. It is a kind of reversed leveraged ETF product. For example, if the price of BTC falls by 5%, then BTC3S will rise by 15%. Instead, if the price of BTC increases by 5%, then BTC3S will falls by 15%.
Leveraged ETF is specially suitable for large bearish or bullish trends, like the halving of BTC in 2020, upgrade of Ethereum, the positive impact of EOS with the rolling out of Voice, etc. It is an effective leverage tool to magnify user’s returns.
In addition, unlike contract of high leverages, there will never be forced liquidation for leveraged ETF products. There is a rebalancing system designed by the team of MXC Exchange that will adjust the investment portfolios for the leverage ETF products periodically to ensure the generally constant leverage times. Generally, the rebalance will be carried out in every 24 hours, but under special circumstances where price of the underlying asset undergoes great fluctuation which surpass the largest setting value (that is 15% for the losing side), the team will carry out the rebalancing mechanism to control the risks of the investment portfolios.
The rebalancing mechanism are available for the losing side to protect the traders interest, that is, if the BTC rises by 15%, the rebalancing will be triggered for the trader of BTC3S product.
According to the chart provided by MXC Exchange, there is even a possibility that the user who both buys (long) and sells (short) of a same leverage ETF product can not only avoid risks but earn a little sum in some situations.
For example, suppose you spend $100 to buy BTC3L, and $100 for BTC3S. When the BTC increases by 100%, your BTC3L will increases by 300% (that’s $300), while there is still remain $5.21 of your BTC3S product. There, after deduction of the cost, you still earn $105.21. Though it is uncommon to witness the 100% gain of BTC, we cannot get rid of the possibility.
In general, when a bull market starts, investors, apart from investing major currencies, can also configure some leveraged ETF products since it will magnify user’s returns and maximize the asset use rate.
In 2019, the competition among exchanges are fiercer than ever. However, MXC Exchange has established a good reputation in the industry with its high-quality and considerate services and smooth trading experience. Besides, the innovative launch of the leveraged ETF products for major currencies like BTC, ETH, and EOS directly meets the demand of large number of users, demonstrating the advantages of the team’s deep financial background and insights.
In a word, leveraged ETF is a product that is suitable for both long-term and short-term investment of major currencies.